Q1 2025 Canadian Solar Inc Earnings Call
Ladies and gentlemen, thank you for standing by welcome to Canadian Solar first quarter 2025 earnings call. My name is Sherry and I will be your operator for today at this time all participants are in a listen only mode. Later, we will conduct a question and answer session. As a reminder, this conference is being recorded for.
Speaker Change: A replay purposes I would now like to turn the call over to win that hung head of Investor Relations at Canadian Solar. Please go ahead.
Winnie Hung: Thank you operator, and welcome everyone to Canadian Solar first quarter of 2025 Conference call. Please note that today's conference call as the company's with slides, which are available on Canadian solar Investor Relations website within the events and presentations section.
Gupta: Joining us today are Gupta of Shaanxi, <unk>, Chairman and CEO, Ron <unk> President of Canadian Solar subsidiary CSI, So that it's not as good a L E T.
Winnie Hung: He is president of Canadian solar subsidiaries, the current energy and gymboree.
Winnie Hung: And your VP and CFO.
Winnie Hung: All company executives to participate in the Q&A session after management's formal remarks.
Winnie Hung: On this call Shawn will go over some key messages for the quarter one of the smaller with the business highlights for CSI.
Speaker Change: Energy, respectively, and symbol will go through the financial results.
Speaker Change: I will conclude the prepared remarks with the business outlook after which we will have time for questions.
Speaker Change: Before we begin I would like to remind listeners that management's prepared remarks today. It was their answers to questions 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 matching that.
Speaker Change: 85.
Speaker Change: Actual results may differ from management's current expectations any projections of the company's future performance represent managements estimates as of today can.
Speaker Change: Canadian Solar assumes no obligation to update these projections in the future.
Speaker Change: Otherwise required by applicable law.
Speaker Change: More detailed discussion of risks and uncertainties can be found in the company I will report on form 20-F filed with the Securities and Exchange Commission.
Speaker Change: Management's prepared remarks will be presented within the requirements of SEC regulation G regarding generally accepted accounting principles or GAAP.
Speaker Change: Some financial information presented during the call. We're excited on both a GAAP and non-GAAP basis.
Speaker Change: But I just flipping 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: Management uses non-GAAP measures to better assess operating performance and to establish operational goals non-GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP.
Speaker Change: And now I would like to turn the call over to Canadian Solar is chairman and CEO, Dr. Shawn Qu.
Speaker Change: Shawn Please go ahead.
Speaker Change: John your line might be muted.
Speaker Change: Thank you thanks, Joe and thank you all for John.
Speaker Change: John you all our first quarter earnings call. Please turn to slide three we began the year with solid performance module shipments reached 6.9 gigawatt.
Speaker Change: Today about our guidance.
Speaker Change: Revenue totaled $1 $2 billion to stay high and all of our range well gross margin.
Speaker Change: A lot of that 0.7% nowadays.
Speaker Change: All of this study exceeded expectations.
Speaker Change: Profitability was impacted by lower contributions from storage.
Speaker Change: And terrorists recurrence ongoing transformation and intercompany eliminations.
Speaker Change: This resulted in.
Speaker Change: The law school shareholders.
Speaker Change: $34 million or 69.
Speaker Change: Per diluted shares.
Speaker Change: Turning to identify will face many of the same challenges that's defined junior pool.
Speaker Change: Well, Matt well near term headwinds remain.
Speaker Change: We are confident in the long term opportunities and well continue to invest in that please turn to slide four.
Speaker Change: In the near term, we're now tackling challenges not cost us both operationally and financially structural overcapacity across the solar Ikea hi, it's prolonged market downturn put him Preshow Oh Wow.
Speaker Change: With your pricing.
Speaker Change: Being almost in most global market.
Speaker Change: In addition to fierce competition terrorists and shifting policy.
Speaker Change: Racine costs.
Speaker Change: Great margins.
Speaker Change: Obligate. These challenges we are maintaining our profit focused approach to our modules business, California mandated volumes.
Speaker Change: Volumes in less profitable markets library.
Speaker Change: <unk>.
Speaker Change: Supply chain strategy and offering Bongo styles tolerate.
Speaker Change: Tolerate continues to be a key differentiator and profit driver. We are also regular real estate managing operating expenses and capital expenditures to support our bottom line and cash flow.
Speaker Change: Recently, we held our internal how home agent.
Speaker Change: I posted a question on behalf of the broader renewable sectors.
Speaker Change: Sectors.
Speaker Change: Gosh this industry still have a bright future.
Speaker Change: My answer is a resounding yes.
Speaker Change: Global electricity demand is growing.
Speaker Change: Its fastest pace in years under Rai yourself.
Speaker Change: And other energy intensive applications ask why didn't you.
Speaker Change: Yeah.
Speaker Change: Solar power clean affordable and easy to deploy quickly.
Speaker Change: Quickly meet its demand, especially when paired with storage.
Speaker Change: Canadian Solar has a proven track record of navigating policy shifts and market cycles, demonstrating our technology leadership and resilience.
Speaker Change: Challenging times.
Speaker Change: Well, our operating environment continue to evolve our culture, one constant yes, our commitment to R&D and leadership through innovation. Please.
Speaker Change: Please turn to slide five.
Speaker Change: Over the past two months, we have announced several new products showcasing our leadership across both solar and storage technology.
Speaker Change: In solar we completed our first department of Canadian Solar has made him I N T L.
Speaker Change: Technology in Australia. This technology protects solar panels from severe weather, whereas our dedications to deliberate durable high performance solutions.
Speaker Change: Even the most demanding environment.
Speaker Change: We also introduced our new anti high power pop call Gen. Two modules for your tenant taste scale on the C&I system.
Speaker Change: The user on our latest top column salad validated these molecules deliver a maximum power output of up to 606, there watch and a conversion efficiency I'll hop to trying to four 4%.
Speaker Change: But at advancing our solar attack Nowadays, we help customers lower their level is the cost of energy and improve project economics reinforcing solar has one of the most cost effective energy generation options.
Speaker Change: On the storage Franck.
Speaker Change: We achieved key milestones in both attended their scale and their rest of their niche offerings into solar in Munich.
Speaker Change: Officially launch the hour so Bang 3.0, plus.
Speaker Change: The enhancements to the lithium iron phosphate battery cell manufacturers.
Speaker Change: <unk> elevate its performance beyond the already successful so bank through a pause there.
Speaker Change: This solution offers a 25 year life span near zero degradation for the first of four years.
Speaker Change: And up to 12000 cycles at 95% round trip efficiency.
Speaker Change: So banks 3.0, plus can significantly reduce our customers' operational costs by boosting overall lifetime I need you threw out.
Speaker Change: Throughput by over 13%.
Speaker Change: We are also products that all our residential I need just storage solution E P to.
Speaker Change: <unk> received the prestigious trying to you're trying to five yes.
Speaker Change: Word and gold.
Speaker Change: You're trying to you're trying to fly.
Speaker Change: Design how worse.
Speaker Change: Killed combines O S.
Speaker Change: Tactically piece and design important to homeowners.
Speaker Change: Functional advantages like easy installation and flexible capacity options.
Speaker Change: It continues to gain strong traction in global markets.
Yan: What is that I will now turn the call over to Yan, who will provide more details on our CSI solar busy yes, yes. Please go ahead.
Yan: Thank you Sean.
Speaker Change: Please turn to slide six.
Speaker Change: In the first quarter of 2025.
Speaker Change: Shipments increased by nine 4% year over year to six nine gigawatts.
Speaker Change: We slightly exceeded our module shipment guidance.
Speaker Change: Driven by incremental shipments to China.
Speaker Change: The industry rushed to complete installations ahead of some new policies taking effect on July 1st.
Speaker Change: Storage deliveries aligned with guidance totaling 849 megawatt hours.
Speaker Change: Revenue reached one two.
Speaker Change: $2 billion.
Speaker Change: And our gross margin declined by 640 basis points quarter over quarter to 13, 4%.
Speaker Change: Primarily due to lower energy start shipments.
While costs rose slightly partly from non refundable the chance in China in fact last December and slightly higher manufacturing costs in southeast Asia.
Speaker Change: <unk> supply chain strategy.
Speaker Change: Average selling prices improved.
Speaker Change: With a higher share of shipments to North America.
Speaker Change: With shipping costs declining sequentially due to softer global shipping rates.
Speaker Change: And our rigorous management to offer a pre tingly expenses, we achieved operating income of $2 million.
Speaker Change: Now turning to E storage, please refer to page seven.
Speaker Change: In effect in the first quarter, we recognized revenue from 849 megawatt hours of shifts solutions.
Speaker Change: <unk> check performance was due to contract timing and we expect a much stronger second quarter.
Speaker Change: Understandably.
Speaker Change: Ongoing U S. China tariff negotiations remain top of mind for all stakeholders.
Speaker Change: While we cannot predict final outcomes.
Speaker Change: It is critical to recognize that these U S and if your storage projects essentially for great resilience and energy dispatch ability to years of planning and a significant investment.
Speaker Change: Wow clarity may take some time the industry will work together to advance these projects.
Speaker Change: Like all markets.
Speaker Change: Cause we're navigating this certainty.
Speaker Change: Free storage the U S accounts for upwards of one third of our energy storage business.
Speaker Change: For this year.
Speaker Change: We are actively engaging with customers to mitigate risks and to ensure smooth project execution.
Speaker Change: Notably.
Speaker Change: We're well positioned with our global blended manufacturing strategy.
Speaker Change: Beyond our planned Kentucky storage facility.
Speaker Change: We have cell manufacturing capabilities and supplier partnerships that will allow us to offer our customers flexible options starting in 2026.
Speaker Change: Demand for storage is stronger than ever not just in the U S but globally.
Speaker Change: As of March 31st a record pipeline of 91 gigawatt hours, including $3 $2 billion in contracted backlog highlights the structural growth potential of energy storage worldwide.
Speaker Change: For example, we recently secured another major project conducted in America, Please turn to slide eight.
Speaker Change: Cobalt.
Speaker Change: Leading Chilean power generation company.
Speaker Change: <unk> E storage to supply our 912 megawatt hour megawatt hour battery energy storage system further thiago.
Mark: Mark will share a project in Chile.
Atacama region.
Mark: Like many in your story just global track record now.
Mark: Now exceeding 11 gigawatt hours. This project highlights the value of energy storage and stringent great reliability, Optimizes renewable energy use and the insurers secure.
Mark: <unk> power for industrial demand.
Speaker Change: Now, let me hand, the call over to you smell, who will provide an overview of recurrent energy Canadian solos Global project the Weston business.
Speaker Change: Please go ahead.
Speaker Change: Thank you Jeff.
Speaker Change: Please turn to slide nine.
Speaker Change: In the first quarter.
Speaker Change: We generated $125 million in revenue.
Speaker Change: Gross margin was 18, 6%.
Speaker Change: Driven by project sales in Latin America.
Speaker Change: Due to the operating costs of our platform and the ongoing scaling of our IPP portfolio, we posted an operating loss of $12 million for the quarter.
Speaker Change: Regarding our business transformation, we remain focused on execution.
Speaker Change: That really we have one two gigawatt speak of summer on one four megawatt hours of energy.
Speaker Change: Projects under construction in Europe, and the U S.
Speaker Change: In January.
Speaker Change: Our 75 megawatt speak them on telco project in Latam, Italy reached commercial operation.
Speaker Change: The PV project was constructed with Expo, we send a truck decently priced PPA.
Speaker Change: In addition, Montana. It's also one of the first co located and best projects in the Italian market the.
Speaker Change: The best portion 115 years fixed capacity payments and the public option and it is now under construction.
Speaker Change: In the U S.
Speaker Change: Secured tax equity and project finance for Ford Duncan 200 megawatt hours merchant project, most Jumpstarted project inadequate, Texas.
Speaker Change: This is testament to the strength of our projects and financing teams as well as the strong support from our capital partners in enabling innovative solutions to drive impact.
Speaker Change: Construction for Ford banking is complete and then their commissioning as we speak.
Speaker Change: In languish, our global growth strategy, we secured $460 million multi currency credit facility, which includes an accordion feature that allows for potential upsizing.
Speaker Change: This corporate facility provides flexible and scalable financing with disbursement disbursement in U S dollars euros.
Speaker Change: British Sterling and Australian dollars supporting our strategy to expand our IP portfolio across diverse markets and geographies.
Speaker Change: Given the uncertain policy environment in the U S. We are proactively implementing safeco safeguards for all major ICT projects.
Speaker Change: Clothing safe harboring equivalent.
Speaker Change: While the long term effects of studies remains to be seen and we expect very limited impact given recent progress in trade negotiations.
Speaker Change: Now please turn to slide 10 for an update on our pipeline.
Speaker Change: As of March 31st 2025, we have secured interconnections four nine gigawatts of solar on 16, Gigawatts hour social studies globally.
Speaker Change: Excluding projects already in operation.
Speaker Change: Our total project pipeline now stands at 27, Gigawatts of solar and 76 gigawatt hours so for energy storage.
Speaker Change: While we continue to expand our pipeline D availability of easy to develop land with relatively cheap interconnections is becoming increasingly scarce.
Speaker Change: We are now prioritizing our core markets the U S and Europe, while in other regions, we focused primarily on low cost Greenfield development.
Shimon: Now, let me hand, the call over to Shimon will go through our financial results in more detail.
Shimon: Please go ahead.
Speaker Change: Thank you smell.
Speaker Change: Please turn to slide 11.
Speaker Change: In the fourth quarter, we shipped 619 gigawatts of modules slight.
Speaker Change: Slightly above guidance.
Speaker Change: <unk> delivered 849 megawatt hours.
Speaker Change: And storage solutions.
Speaker Change: In line with expectations.
Speaker Change: Ron you reached one $2 billion.
Speaker Change: Hi, all our forecast.
Speaker Change: Gross margin of 11, 7% exceeded guidance.
Speaker Change: The 260 basis points sequentially decline was primarily due to lower energy star shipments.
Speaker Change: While the 730 basis point year over year decline was driven by lower module E. S. P.
Speaker Change: Operating expenses decreased 4% year over a year.
Speaker Change: Even by lower shipping costs.
Speaker Change: Last quarter's results include a nonrecurring impairment charge offs relate.
Speaker Change: Related to certain map patching and solar assets.
Speaker Change: The year over year comparison more of a flag to you all.
Speaker Change: Our ongoing operational performance.
Speaker Change: Net interest expense in the first quarter was $28 million.
Speaker Change: Compared to $9 million in the fourth quarter of 'twenty, 'twenty, four and less than $1 million in the first quarter of 'twenty nine.
Speaker Change: The current quarter reflects a more normalized interest expense.
Speaker Change: Brian.
Speaker Change: Comparative periods benefited from non recurring interest income items.
Net foreign exchange loss was $14 million, primarily due to dollar weakness I mean tariff related crashes.
Speaker Change: Total net loss was $34 million.
Speaker Change: 0.6 $9 per diluted share.
Speaker Change: These resolve.
These are positive and shall be the impact.
Speaker Change: $26 million.
Speaker Change: 0.3, $8 per ship from tax equity arrangements tied to certain U S operating projects.
Speaker Change: Now, let's turn to cash flow and the balance sheet.
Speaker Change: Turning to slides child.
Speaker Change: Okay.
Speaker Change: Net cash flow used in operating activities during the <unk>.
Speaker Change: First quarter off one time fine was $264 million.
Speaker Change: This outflow was primarily driven by increased inventories in project assets.
Speaker Change: Total assets grew to $13 $9 billion.
Speaker Change: Driven by investments in project assets and solar policy stance.
Speaker Change: Additionally, us for longer term value creation.
Speaker Change: In the first quarter, we allocated 202.
Speaker Change: $56 million in capital expenditures.
Speaker Change: Primarily to what you asked manufacturing initiated case.
Speaker Change: Our full year 2025.
Speaker Change: Luke remains unchanged.
Speaker Change: $1.2 billion.
Speaker Change: We ended the quarter here with a cash balance of 2.0 billing partners in total with that all five.
Speaker Change: $5 $7 billion.
Speaker Change: Flatting borrowings for capacity extension.
Speaker Change: Working capital.
Speaker Change: Project and operational assets.
Speaker Change: Now, let me turn the call back to Sean.
Speaker Change: I'll conclude with all the time.
Speaker Change: Business outlook.
Speaker Change: Please go ahead.
Speaker Change: Thank you Richard Moore, Please turn to slide 13.
Speaker Change: For the second quarter of kind of trying to five.
Speaker Change: Dissipated CSR soldiers module shipment will range between 758, gigawatts, including approximately 500 megawatts, okay due to our own projects. We also expect to deliver between 2.42 0.6.
Speaker Change: A lot of energy storage solutions Julien Listeria.
Speaker Change: Okay.
Speaker Change: Total second quarter revenue to be in a range of 1.9 to a two point of $1 billion with gross margin expected to be between trying to three I'm trying to 5%.
Speaker Change: I anticipate this margin improvement reflects strong and you just start just shipment and in cruise sizable margin contribution from the deconsolidation of our U S project. This deconsolidation was released previously eliminated intra company gross.
Speaker Change: Arjun.
Speaker Change: Yes, hi, its solar components installed within the project.
Speaker Change: We continue to operate in.
Speaker Change: Environment market by global pricing volatility.
Speaker Change: In polyester uncertainty, which limits our margin visibility.
Speaker Change: I used to talk about our recent assessment of market <unk>.
Speaker Change: Political development, we are updating our full year guidance as follows.
Speaker Change: For the full year of trying to 'twenty five.
Speaker Change: Update molecule volume guidance to 25 to 30, gigawatts, including approximately one gigawatt to our own project.
Speaker Change: Finally, just storage shipment we provide condition.
Speaker Change: We've provided conditional guidance between seven to nine gigawatt hours, including approximately one gigawatt hour.
Speaker Change: To our own projects.
Speaker Change: They reduce the molecule volumes, primarily reflect our strategic reduction of exposure to less profitable markets well the expected salary adjustments relate to U S volumes are factored by toy negotiations.
Speaker Change: As a result of these volume adjustment, we now expect full year revenue to be between 6.1 and $7.1 billion.
Speaker Change: What was that I would now like to open the floor for questions operator.
Speaker Change: Thank you we will now be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker.
Speaker Change: It may be necessary to pick up your handset before pressing the star T is our first question is from Colin Rusch with Oppenheimer and company. Please proceed.
Colin Rusch: Thanks, so much guys.
Speaker Change: You know, there's a lot of variables here in China, obviously, you've gone through a variety of policy shifts one element that I'd love to get a bit more detail on its around the F. E. L C.
Speaker Change: Revisions that were released in the budget I guess as you guys look at how that might evolve and get solidified.
Speaker Change: Solidified.
Speaker Change: And the budget, how does that impact your plans for U S capacity investment and how should we think about that.
Speaker Change: Some of those elements impacting.
Speaker Change: The variability in your guidance.
Speaker Change: Well, it's a nice call it and it's a good question, but also a topic that's great now the new draft off the H E O C. What's the only released two days ago by the House, where you say I mean, its community and it's only the first drop we believe.
Speaker Change: Well not to collect this uh huh.
Speaker Change: Final Bill I don't know reconsider your check bill So it's Taco comment at this moment because in the next two or three years. They all will be we believe there will be changed.
Speaker Change: Also put our opinion all suggest standards are too you know through the the.
Speaker Change: The relevant representing parents trying to time it hurts.
Speaker Change: Also to the administration, so I would not comment now because you only have two days Oh, the draught and pulling at the first stop from the house what does that mean.
Speaker Change: Got it.
Speaker Change: Perfect.
Speaker Change: I appreciate that I appreciate that answer and then just shifting gears to the balance sheet as you as you move through this year.
Speaker Change: You know it was seeing some of the long term debt increase assuming that the bulk of that is around projects. How should we think about you know target ratios for you guys from a cash flow perspective, and a leverage perspective.
Speaker Change: Yeah symbol or do you want to answer this question.
Speaker Change: Yes.
Speaker Change:
Speaker Change: From recurrent.
Speaker Change: We are still in the transition from.
Speaker Change: From the project the Hopper until Apache Itt's on a continuum.
Speaker Change: To do on projects and.
Speaker Change: [noise] nominal cost.
Speaker Change: Yeah.
Speaker Change: So the leverage off rig count will increase for our sensors solar we will maintain.
Speaker Change: These are laboratories.
Speaker Change: To finance our growth.
Speaker Change: Our capital structure.
Speaker Change: Okay. Thanks, guys I'll hop back in queue.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Our next question is from Philip Shen with Roth Capital Partners. Please proceed.
Philip Shen: Hi, Thanks for taking my questions.
Speaker Change: In terms of the 2025.
Speaker Change: Vince you lowered your module shipments by 15%.
Speaker Change: In battery shipments Ah I think by 30, but the revenue got it only came down 10% can you walk us through again or just walk us through how how revenue is able to be down only 10% do.
Speaker Change: Do you expect pricing to go higher.
Speaker Change: I'm, sorry, if I missed some of your explanation.
Speaker Change: Yeah, maybe are we are you are.
Speaker Change: Transportation.
Speaker Change: His question.
Speaker Change: Okay.
Speaker Change: Hi.
Speaker Change: Sean.
Speaker Change: [noise] first strategy.
Speaker Change: No.
Speaker Change: Okay.
Speaker Change: [noise] market.
Speaker Change: Oh I'm sorry.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: The ongoing trade negotiations.
Speaker Change: So this is still very fluid.
Speaker Change: Why.
Speaker Change: The new guidance range.
Speaker Change: Okay. Thank you guys and as it relates to the draft a house Bill I know, Sean you talked about the seahawk.
Speaker Change: Rules and and how that might.
Speaker Change: No need to be changed or you might you expect it to be changed the heads are at.
Speaker Change: They also have new rules as it relates to the ITC and PTC.
Speaker Change: If they were to pass.
Speaker Change: Now, they're looking to get placement service requirements are instead of construction starts to secure the ITC and PTC are how would you expect that to impact your installations over the next two years do you think there would be modest to limited impacts on the recurrent.
Speaker Change: Business or do you think there might be some challenges.
Speaker Change: With that new language. Thank you.
Yes.
Speaker Change: It's also a very good question.
Speaker Change: Hum.
Speaker Change: Yeah, the I P O.
Speaker Change: It's important and the.
Speaker Change: The ITC.
Speaker Change: Scheduled installments all bear in Florida. So we are paying lots of attention to the jobs from B a way out of my community.
Speaker Change: I expect this to.
Speaker Change: Change I mean, it looks like its too far from the final law.
Speaker Change: However, the I T C.
Speaker Change: That means a lot to developers and also to manufacturers.
Speaker Change: And Canadian solar are both developers and manufacturers. So indeed, the ITC will.
Speaker Change: We will have an impact a significant and meaningful impact if it is.
Speaker Change: It went back Oh, a calculation that shows the one year. So you see quite a bit it means several hundred millions of dollars to Canadian solar alone not for me not to mention the whole industry. So it's a very important and we will put in our suggestions.
Speaker Change: And our you know.
Speaker Change: Opinions.
Speaker Change: But on the other hand, the fed up.
Speaker Change: If you remember.
Speaker Change: There has been talking of I T C. A phase out a similar time in the past the 10 15 years and I believe I T. C. It was first introduced the Joey and President Bush right.
Speaker Change: Hi, Dan.
Speaker Change: Every year every every impressive after work.
Speaker Change: And also how's that signed up.
Speaker Change: Reduce the no.
Speaker Change: Extend there yes.
Speaker Change: I T C. So, but we also have been preparing for <unk> for your thoughts.
Speaker Change: Hi.
Speaker Change: And just for recurrent I remember, Rick Colorado had.
Speaker Change:
Speaker Change:
Speaker Change: Hubbard.
Speaker Change: Joe.
Speaker Change: The equipment and some of them have live there and the path of a fifth year.
Speaker Change: Every time I D C. You've got extend yet so.
Speaker Change: But I do see it seems to have good longevity. So we'll see how it looks like this time, but.
Speaker Change: But the industry and also in recurrent plus the Canadian solar we are prepared to go through another wrong I believe to be a solar project.
Speaker Change: And I need to start our call today.
Speaker Change: You know the price is very economic.
Speaker Change: These days.
Speaker Change: And also the electric.
Speaker Change: Yes, hi, so whatever at ITC.
Speaker Change: Yes.
Speaker Change: I think the.
Speaker Change: The industry, well and to just remind us sort of what Josh and then 10.
Speaker Change: It's a world.
Speaker Change: That's fair enough.
Speaker Change: Okay. Thanks, Sean.
Speaker Change: I had a follow up question on the Q2 margin guide.
Speaker Change:
Speaker Change: And you know you gave us some detail around.
Speaker Change: The strength is due to storage and I think a deconsolidation of U S project can you share a little more color there what is.
Speaker Change: Vacation for our storage margins these days.
Speaker Change: Historically, I think you guys have talked about twentyish percent.
Speaker Change: But is it closer to mid twenty's percent or or even higher and just provide a little more detail on the deconsolidation.
Speaker Change: Provide comments on the.
Speaker Change: Storage and margin and then she boy you may want to its <unk>.
Speaker Change: The consolidation of <unk>.
Speaker Change: Solar project.
Speaker Change: Yeah.
Speaker Change: Oh, so on the storage side Q2 storage shipment happened in Q1. So it was before this tariff war and so Martin Wise I can only say is above 20 cause that.
Speaker Change: It's pretty.
Speaker Change: Healthy and and also volume wise Q2, it's going to be much higher.
Speaker Change: But that didn't seem to find 6.8 to 40 216 gigawatt hour. So it's much higher than Q1.
Speaker Change: Yeah, Let me comment the deconsolidation, we have to stop these processes.
Speaker Change: With.
Speaker Change: Fix right coal agreement.
Covering about 80% of the process.
Speaker Change: This lifetime.
Speaker Change: Moving to the accounting standard Oh, when the projects reach C O D.
Speaker Change: The majority of the risks and controls.
Speaker Change: Transfer it Chi.
Speaker Change: Hum.
Speaker Change: So according to our Congress and that we need to consolidate things.
Speaker Change: From a balance sheet and.
Speaker Change: These are the intercompany.
Speaker Change: Profit.
Speaker Change: We maintain in earlier quarters, and it's a one time event com TV being about five.
Speaker Change: 5% to 6% off gross margin next quarter.
Speaker Change: Okay. Thank you and would you expect this strength.
Speaker Change: What kind of gross margins could we see and.
Speaker Change: Q3 and four.
Speaker Change: Hum.
Speaker Change: No were not guiding this.
Speaker Change: Okay I appreciate it. Thank you guys I'll pass it on.
Speaker Change: Yeah.
Speaker Change: Our next question is from Brian Lee with Goldman Sachs. Please proceed.
Speaker Change: Hey, guys. This is Tyler bisset on for Brian Thanks for taking our questions.
Speaker Change: You guys lowered storage volume expectations due to the trade negotiations and.
Speaker Change: Can you provide some details on what sort of tariff assumptions are embedded in your guidance I know there was some recent negotiations. So just wanted to confirm what's embedded there and similarly, you mentioned offering some flexible sourcing capabilities. So can you provide some more details on kind of a pricing differential.
Speaker Change: Those of leveraging different sources versus your existing products.
Speaker Change: Yeah, Yeah do you want to handle this question.
Speaker Change: And then just storage sure guidance new guidance.
Speaker Change: Yeah.
Speaker Change: I think to the seven to mine.
Speaker Change: The gigawatt hour actually cardboard.
Speaker Change: You know that.
Speaker Change: A different circumstance already.
Speaker Change: So so that as you know that in food in the Sunny days exemption and also after that.
Speaker Change: So it can be as low as seven or as highest month.
Speaker Change: So that's our assumption.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: And any sort of deep telephone just like pricing differential from different sourcing capabilities.
Speaker Change: And actually for are the storage contracts most of the call we will have a floor protection.
Speaker Change: Some of them are like are capped.
Speaker Change: Our pricing and our.
Speaker Change: The other and others to lead a shared on.
Speaker Change: Tariff so.
Speaker Change: So even with.
Speaker Change: The different uncertainties.
Speaker Change: Think of the seven to nine gigawatt hour, we continue to have a healthy margin.
Speaker Change: Yeah.
Brian Lee: Brian just one comment.
Speaker Change: The sourcing.
Speaker Change: And flexibility will only help us in trying to you're trying to fix are the source the employee C. So let's say in flexibility.
Speaker Change: Our supplier star to deal with kind of ramp up their capacity outside of China, but most of this will only help us in trying to trying to six so turning to center fire, we have to we have.
Speaker Change: You have to deliver all of the storage project.
Speaker Change: From China, So the impact that's had the.
Speaker Change: Teradata, how about the impact.
Speaker Change: And because of that some of customers asking to push that out probably got the labor to next year and when we have.
Speaker Change: China, a battery cell option variety so that accounts for most of the.
Speaker Change: The change on the guidance.
Speaker Change: Super helpful color appreciate that and then you discussed some pull forward of demand in China, given some policy changes there do you have any sort of expectation for shipment growth next year.
Speaker Change: China.
Speaker Change: Yeah do you want to answer this question on growth in China.
Speaker Change: Yes so.
Speaker Change: You know, we're still waiting for policy clarification at provincial level wishes the action points right. So.
Speaker Change: Before that the investment decisions in China are mostly on how I'm count.
Speaker Change: However from our understanding about the market dynamics.
Speaker Change: We think you know it will have a few months of adjustment in China, but after that once the clarification. Once we have the policy clarification.
Speaker Change:
Speaker Change: Sure.
Speaker Change: Not be a disaster, but demand will start to pick up however, I think our second half will be weak.
Speaker Change: Next year we.
Speaker Change: We don't really know because there's a lot of uncertainty with SKU, we can cut the policy.
Speaker Change: Clarification however.
Speaker Change: We believe that the healthy demand for storage is going to come.
Speaker Change: Casino past Lee.
Speaker Change: Most of the storage demand in China was kind of a mandatory oh solar so.
Speaker Change: Since this is a policy change.
Speaker Change: The policy 133.
Speaker Change: I think it will be a will have a free treat market.
Speaker Change: The retreating market will add.
Speaker Change: Actually bringing a real demand for storage. So we anticipate a healthy growth of high quality storage projects coming up next year.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Perfect really appreciate the color. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question is from Alan Lau with Jefferies. Please proceed.
Speaker Change: Yeah.
Alan Lau: Thanks for taking my question a follow up question on the 6% margin contribution.
Speaker Change: This project.
Speaker Change: So I would like to know Oh, yes at Pittsburgh, Cleveland Company to push it like so based on that timing stand it yeah.
Speaker Change: We'll have to record a profit, but it fit a one off.
Speaker Change: To close out we hit a one off.
Speaker Change: That one two to one.
Speaker Change: Like how does amortize over.
Speaker Change: But the type of support from them.
Speaker Change: From a timing perspective, it's a one off.
Speaker Change: In Q2.
Speaker Change: Okay. Thank.
Speaker Change: Thank you. Thank you.
Speaker Change: So Q3 on watch unless you have other projects.
Speaker Change: That occupies holiday the otherwise, there's only one or two right.
Speaker Change: Alright.
Speaker Change: Thank you and then next question.
Speaker Change: Uh huh.
Speaker Change: What was the follow up on a U S policy a lot of them couple of lines in the past one week, what would like to check on your view because the language is actually saying that at.
Speaker Change: At least for the next two years.
Speaker Change: If a fault.
The O N E S are not happening.
Speaker Change: D. A majority stake that will be still able to get 45, just recalling from Oh all company.
Speaker Change: Yes.
Speaker Change: Canadian Oh and also.
Speaker Change: Per your understanding if not and if you ever see or what do you think about that.
Speaker Change: Canadian solar itself its Canadian one.
Speaker Change: And also you know trade data how Alaska. So they are a common shareholder so from the U S.
Speaker Change: U S stock market Canadian solar holds about a 65%.
Speaker Change: For CSI solar which trading.
Speaker Change: Treating Shanghai stockings, or you're just organized.
Speaker Change: Under the Chinese corporate law and trading.
Speaker Change: Trading Shanghai stock exchange.
Speaker Change: And then CSI solar.
Speaker Change: So that's still going to be.
Speaker Change: Facilitates the U S is proving to be a module factory in Muskie also.
Speaker Change: The sell in.
Speaker Change: Cell factory in Jefferson Hale.
Speaker Change: And a and its stars factory shut.
Speaker Change: Shepherd Bell, Kentucky.
Speaker Change: So if the current language.
Speaker Change: <unk> New draft.
Speaker Change: He has yet been oh.
Speaker Change: These three facility.
Speaker Change: It will be impacted or have to change the ownership structure.
Speaker Change: Whereas the comply with the new laws.
Speaker Change: But on other hand, I see you see that CSI cure, which is a Canadian company.
Speaker Change: Steve will hold at 65% and it's the controlling shareholder for CSI solar so.
Speaker Change: I suppose that it.
Speaker Change: It will be much easier for us to change the structural maybe too light.
Speaker Change: But third party investors.
Speaker Change: In order to make all three entities.
Speaker Change: Complying with the new rules.
Speaker Change: I also mentioned when that all 30 previous classroom problem tailored.
Speaker Change: Uh huh.
Speaker Change: We watch released by the house ways and means.
Speaker Change: T Bill days cycle, what's the only the first draft.
Speaker Change: Do you expect it to go through many changes before you become the law. So I'll address the question of how fast the reconciliation well it goes through some say it's a.
Speaker Change: Hi, all good stuff.
Speaker Change: Our research and some say, it's a September or so.
Speaker Change: Why not expert Ah <unk>, and a holiday or legislator bodies.
Speaker Change: Work.
Speaker Change: However, we are.
Speaker Change: Sending column comment and opinions.
Speaker Change: Through all our channels and so I hope the.
Speaker Change: Final bills, well consider all of that.
Speaker Change: A final bill well.
Speaker Change: Hope the final bill well tune a help.
Speaker Change: Help them too.
Speaker Change: To make a matter of fact back to that in a matter of fact try and go back to China, rather than otherwise.
Speaker Change: I hope.
Speaker Change: Let's go back to the U S sorry.
Speaker Change: Yeah. This is about U S.
Speaker Change: What I have been talking about U S is about Uh huh.
Speaker Change: So we haven't dropped off the new requirement and also I'll start.
Speaker Change: E C.
Speaker Change: Thank you. So our next question is a eight.
Speaker Change: Because I thought one a news.
Speaker Change: Mentioning a Canadian it's happening.
Speaker Change: I actually see it isolated commitment E.
Speaker Change: If the OPM, so we'd like to know what's your plan data.
Speaker Change: In terms of a bulge hills or Sandeep parikh with Cowen.
Speaker Change: Yeah, that's not true.
Speaker Change: We are there.
Speaker Change: Our business development people have no trouble around the world. So they travel to you said it will be but we haven't made any command it.
Like I like decision.
Speaker Change: Two.
Speaker Change: Any activities being it's Olivia yet.
Speaker Change: I see so there's some probably a due diligence, but not up to the stage of bringing companies like yet.
Speaker Change: Right.
Speaker Change: Hello again.
Speaker Change: Exploring options, but no there has no.
Speaker Change: We haven't committed anything.
Speaker Change: I see all right. So Oh my last question is about city.
Speaker Change: Our guidance well, let you know like the Big Guy just actually module guidance came down I would like to know if that made the difference.
Speaker Change: This last time is that mainly the U S volume.
Speaker Change: Yeah, you should you answer this question, Okay. So the U S and your volume States. So we have we don't have a new update on that.
Speaker Change: Okay.
Speaker Change: The shipment to U S is still.
Speaker Change: Still what we are.
Speaker Change: Got it did before and this volume reduction reflects.
Speaker Change: The rate action at all no.
Speaker Change: Profitable sales to other market.
Speaker Change: And that's currently a python thanks, a lot for taking my questions.
Speaker Change: Our next question is from <unk> Satish with Wells Fargo. Please proceed.
Speaker Change: Thank you good morning, just going back to the a F. P. O C draft legislation I guess the question here is on your Indiana, Kentucky facilities does it makes sense to put those on pause.
Speaker Change: You maintained your Capex guidance of $1 2 billion, but you know until you get final clarity on the rules is there a chance that maybe some of that Capex comes down you ship the projects out.
Speaker Change: Or are you confident that you know.
Speaker Change: The draft language will change with the future revisions or you see a path here.
Speaker Change: Even if it doesn't change through ownership changes, bringing in third party investors that you can comply with the rules.
Speaker Change: The Jefferson Jeffersonville.
Speaker Change: Indiana factory I assume mentioned, yes in the middle of.
Speaker Change: The building construction and also the equipment well they shipped in the face of most of the phase one equipment.
Speaker Change: And those face mining equipment, which is about two gigawatt of capacity. So that's all capacity hooks equipment a stay.
Speaker Change: Ste.
Speaker Change: Hum.
Speaker Change: Our house being Indiana, right now awaiting for the Bill with you into complete so Iowa thing all phase one of about two gigawatt.
Speaker Change: Jeffersonville facility, where you have announced the proposal and plan to reach a five gigawatt and we kind of interface, while they're in phase two so we are quite conservative.
Speaker Change: Come to Akshay to spend your money.
Speaker Change: So at this moment, our phase one equipment almost there. So we will I think we will compete.
Speaker Change: Phase one well.
Speaker Change: Two of these Asia well.
Speaker Change: Probably be made.
Speaker Change: In the summer after summer and a final decision.
Speaker Change: And so I hope.
Speaker Change: And I think that's a reconsideration.
Speaker Change: A reconciliation well come to a conclusion a final fall either before the summer or after the summer so in a way that way I'm not spending a lot of money on the Jeffersonville you know other than what we've already committed and so the sky.
Speaker Change: To yes in powerful ways.
Speaker Change: Casual of today's the reconsideration process. So yes somehow Oh, what do you think the final language will be reasonable final language about AFC Jose what would be a reasonable and but.
Speaker Change: But also I feel that we are ready to.
Speaker Change: To change a bit.
Speaker Change: Capital structural.
Speaker Change: Once the policy is clear the language is clear the legal explained everything is Korea, then well may call our existing capacity to meet with the whatever the new language, but.
Speaker Change: But with the work to come.
Completely stop so we are still continuing with you know Dubai.
Speaker Change: Final detailed thereby help their factory and also certain civil construction of war because the IRI.
Speaker Change: Yourself.
Speaker Change: May I have a few years off shelf time right.
Speaker Change: The previous original IR eight already.
Speaker Change: <unk> content.
Speaker Change: Stock after a 10 to 30 and.
Speaker Change: I think by 210 tenants like Fireeye.
Speaker Change: Right now all of the ITC and wholesale the advanced manufacturing quiet, it's how do you see that's I'll call. It a 45 day well stop so that's the goal.
Speaker Change: Only a final time so.
Speaker Change: So oney.
Speaker Change: Finite amount of time limited amount enough guy so if we did it too much.
Speaker Change: They probably got will become a high economic so well balanced spending some money to keep the construction and design work Korean and however for most of the equipment other than what we already ship again.
Speaker Change: We're probably only be able to make these Asia, let's say August September I hope by the time this.
Speaker Change: This concludes today's call.
Speaker Change: Already complete yet.
Speaker Change: Okay.
Helpful and maybe one more on the recurrent business here. So you know at least in the U S. PPA.
Speaker Change: PPA prices are going up and we're seeing.
Speaker Change: On the gas side for C. C G T.
Speaker Change: Cost and prices are going up a lot with data center demand. So is that giving you more headroom on the solar and storage side to increase PPA prices and absorb a lot of the cost increases that we're seeing from all the trade and policy uncertainty.
Speaker Change: And then are you any more inclined for long term ownership.
Speaker Change: Assets versus monetization in the current environment.
Bill: Yes, Bill this is.
Speaker Change: A question for you.
Speaker Change: Thank you Sean Thanks for the question.
Speaker Change: We see the market in a similar way, yes, you do.
Speaker Change: We are experiencing the same.
Speaker Change: The same things you are referring to.
Speaker Change: In general with a captive.
Speaker Change: So we have a we have.
Speaker Change: Limited capability to hold is helping them on and off projects.
Speaker Change: We are continuously assessing every time that project reaches their attitude your status, whether we should sell it or we should keep it in operation. So how many projects we keeping operation is no decisions taken based on the amount of money we have available.
Speaker Change: On the status of the project, which had a bit of a stolen better too.
Speaker Change: Yourself.
Speaker Change: But the market for me, but it's like this this is what we are seeing both in the U S and Europe.
Speaker Change: Got it okay. Thank you.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to management for closing remarks.
Speaker Change: Thank you and thank you all for joining us today and for your continued support if you have any questions or was it like to set up a call.
Speaker Change: Contact.
Speaker Change: In your Investor Relations team and take care and have a great day.
Speaker Change: Yeah.
Speaker Change: This concludes today's conference you may disconnect your lines at this time and thank you for your participation.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Mhm.
Speaker Change: [music].