ReneSola Ltd (NYSE:SOL) Q3 2023 Earnings Call Transcript

ReneSola Ltd (NYSE:SOL) Q3 2023 Earnings Call Transcript November 21, 2023

ReneSola Ltd misses on earnings expectations. Reported EPS is $0.01 EPS, expectations were $0.07.

Operator: Hello, ladies and gentlemen. Thank you for standing by for Emeren’s Group Limited Third Quarter 2023 Earnings Conference Call. Please note we are recording today’s conference call. I will now turn the call over to Mr. Yujia Zhai, Managing Director of Blueshirt Group. Please go ahead, Mr. Zhai.

Yujia Zhai: Thanks, operator, and hello, everyone. Thank you for joining us today to discuss our third quarter of 2023 results. We released our shareholder letter after the market closed today, and it’s available on our website at ir.emeren.com. We also provided a supplemental presentation that’s posted on our IR website that we will reference during our prepared remarks. On the call with me today are Mr. Yumin Liu, Chief Executive Officer; and Mr. Ke Chen, Chief Financial Officer. Before we continue, please turn to slide two. Let me remind you that remarks made during this call may include predictions, estimates, and other information that might be considered forward-looking. These forward-looking statements represent Emeren Group’s current judgment for the future.

However, they are subject to risks and uncertainties that could cause actual results of differ materials. Those risks are described under risk factors and elsewhere in Emeren Group’s filings with SEC. Please do not place undue reliance on these forward-looking statements, which reflect Emeren Group’s opinions only as of the date of this call. Emeren Group is not obligated to update you on any revisions to these forward-looking statements. Also, please note that unless otherwise stated, all figures mentioned during the conference call are in U.S. dollars. With that, let me now turn the call over to Mr. Yumin Liu. Yumin?

Yumin Liu: Thank you, Yujia. Thank you everyone for joining our call today. I will start by giving you a big picture look at how we perform in the third quarter of 2023. Then I’ll delve into our project pipeline and our guidance. Following that, Ke will provide a detailed rundown of our financial results for Q3. We closed Q3 with revenue of $13.9 million, gross margin of 40.8%, and net loss of $9.4 million. Our revenue was below our guidance, mainly due to the timing of our final government approval for our 53 megawatt solar NTP product portfolio in Hungary. We expected to receive the approval based on the government official processing timeline before mid-August. Had we received approval within their standard timeline? Our revenue would have been near the low-end of our guidance range.

The good news is that we received government approval yesterday on November 20, 2023, and we will recognize the revenue in Q4. Our Q3 results were further impacted by several one-time non-cash expenses. First, we recorded a $4.8 million foreign exchange loss as a result of a strong dollar. Second, we recorded a $4.5 million one-time expense from impairment and write-off of assets of several pending projects as a result of permitting challenges. In addition, we expensed $1.3 million of development costs related to our pretier projects that previously would have been capitalized under our old tiering system. Excluding these items, our bottom line performance would have been breakeven. Of our $13.9 million revenue for the quarter, we continued to benefit from our IPP assets, particularly our U.K. 50 megawatt Branston project and our China 156 megawatt portfolio of rooftop solar assets, which combined, generated $9.4 million revenue in the quarter with strong margins.

All over in Q3, we successfully completed the grid connection of our first solar storage project in Ningbo, Zhejiang Province, China. This project has a capacity of 1.2 megawatt hour, operates behind the meter and is backed by a private local off-taker. It has been strategically designed to yield high returns through daily price arbitration, emphasizing our commitment to sustainable and financially responsible energy solutions. In addition, we have a growing portfolio of projects in the planning and execution phase in China. The total advanced-stage pipeline of such 80 megawatt hour is all similar Commercial and Industrial sized storage projects, including several under construction. Furthermore, we recently announced the successful sale of a state-of-the-art portfolio comprising five Battery Energy Storage Systems or BESS in Italy to Matrix Renewables with a total capacity of 410 megawatt.

Our total storage project portfolio with Matrix now has a cumulative capacity of 3.8 gigawatt hours. This portfolio is strategically located in the Italian Southern region of Apulia, significantly enhancing the regional energy infrastructure. We expect the project to achieve the Ready-To-Build status by late 2024. Since the announcement, we have been approached by several top-tier renewable energy investment funds who are interested in partnering with us on our portfolio of BESS projects. For North American in Q3, our team continued focus on our strategic goal of solar and storage [Technical Difficulty] pipeline by acquiring new project sites and advancing the development of existing project pipeline. We have grown our advanced-stage storage pipeline significantly since last quarter to 3.8 gigawatt hour, which will contribute to our overall success.

These solar storage projects are major milestones for us and represent a defining chapter in our journey towards becoming a leading global renewable energy company and storage powerhouse. As part of our strategic plan, we plan to further expand our storage portfolio under our light IPP strategy. Furthermore, we remain steadfast in our commitment to executing our storage business strategies, solidifying our dedication to sustainable and innovative energy solutions. During the quarter, we also grew our advanced-stage solar project pipeline. By the end of 2023, we anticipate an advanced-stage solar project pipeline of at least 3.5 gigawatt, of which we anticipate monetizing approximately 400 megawatt to 500 megawatt of projects in 2024 and beyond.

By the end of Q3, our advanced-stage storage project pipeline has increased to over 10 gigawatt hours. For the full-year 2023, we now anticipate revenue to be in the range of $110 million to $113 million due to project timing. We expect net income to be between $3 million to $4 million, with gross margin of approximately 25% to 28%. We expect our Q4 revenue to be between $50 million and $53 million, gross margin to be in the range of 21% to 25%, and net income to be in the range of $4 million to $5 million. Now, let me turn the call over to our CFO, Ke Chen to discuss our financial performance. Ke?

Ke Chen: Thank you, Yumin, and thanks everyone for joining us on the call today. I will now go over our financial results for the third quarter. Our revenue of $13.9 million decreased 42% year over year from Q3 2022 and 59% sequentially from Q2 2023. The lower-than-guided revenue was primarily due to extended permit approval process for a 53 megawatt NTP project in Hungary, which was elaborated by Yumin earlier. Gross profit was $5.7 million, compared to $12.7 million in Q2 2023 and $4.5 million in Q3 2022. Gross margin was 40.8%, above the high end of our guidance, recording a gross margin of 37.4% in Q2 2023 and 18.9% in Q3 2022. Operating expenses were $9.6 million, up from $7.6 million in Q2 2023 and up from $3.5 million in Q3 2022.

The year-over-year increase primarily from $4.5 million of onetime expense from impairment and write-off of assets of several pending projects as a result of permitting challenges. In addition, we expensed $1.3 million of development costs related to our pre-tier projects that previously would have been capitalized under our old tiering system. Net loss attributable to Emeren Group Ltd’s common shareholders was $9.4 million, compared to net income of $8.3 million in Q2 2023 and net loss of $1.1 million in Q3 2022. Diluted net loss attributable to Emeren Group Ltd’s common shareholders per American Depositary Share, or ADS, was $0.17, compared to diluted net income of $0.14 in Q2 2023 and diluted net loss of $0.02 in Q3 2022. Turning to our cash flow statement.

Cash used in operating activities was $4.6 million; cash provided by investing activities was $10.1 million; and cash used in financing activities was $6.7 million. In terms of cash position, cash and cash equivalents at the end of Q3 2023 were $59.2 million compared to $60.5 million in Q2 2023. Net asset value, or NAV, is approximately $5.77 per ADS. Our debt-to-asset ratio at the end of Q3 2023 was about 9.9% compared to 10.1% in Q2 2023. Furthermore, during the third quarter, we purchased approximately $4 million ADS and plan to continue to execute on the share buyback program, which has approximately $11 million remaining in authorization. With that, we would like to open up the call for any questions. Operator, please go ahead.

See also 18 Best Expat Retirement Countries in The World and 20 Top Selling Water Brands in the US.

Q&A Session

Operator: Thank you. We will now conduct a Q&A session. [Operator Instructions] Our first question comes from Philip Shen from ROTH MKM.

Philip Shen: On the impairment, you had $4.5 million of a one-time expense due to our permitting challenges. Can you quantify the megawatts or gigawatts impacted? And also talk us through which continent was that driven by? More U.S. or Europe? And then also on a go-forward basis, do you think there could be more impairments as we look into Q4 and through 2024. Thanks.

Yumin Liu: Again, for the impairment, majority of those from U.S. and the write-off of the impairment about 200 megawatts, the utility projects. And at this point, we don’t expect any more write-off in Q4.

Philip Shen: Okay, thanks. What about 24? Do you think there is greater risk of permitting challenges in ‘24? And what do you attribute these challenges to? Like what were the circumstances that caused these permits to become impaired? Thanks.

Ke Chen: I think in general we look very positively in 2024. At this time, not only internally we tightened up the tier system. That is why we did a write-off and also the review in good quality of our whole pipeline. But also we do expect the tailwind from the policy front and from the execution by the team will be stretched in 2024 across the board in both U.S., Europe, and even China.

Philip Shen: Okay, got it. Thanks. Is there any way you can give us a little bit of color on what to expect for Q1 and Q2 next year? I know you haven’t provided any official guidance, but just from a qualitative standpoint on a year-over-year basis, I got to think Q1 ‘24 is meaningfully higher. Do you think it’s — do we stay at — is there some seasonality in Q1, so it’s a little bit lower, but then Q2 kind of bumps back up. How should we think about the cadence for 2024? Thanks.

Yumin Liu: Yes, we have not given any 2024 guidance, but we believe Q1 2024 will very strong because of timing of closing this project being pushed up in the first quarter. So at this moment, we’re very positive about Q1.

Ke Chen: Let me add a little down. Normally Q1 is a slow quarter in the whole four quarters of the year. But as we are pushing conservatively, although we are still working on those closings now, but we expect the — at least three closings will be pushed from Q4 this year to Q1 next year. That is why instead of a slow quarter in Q1, we expect a very strong quarter in Q1.

Philip Shen: Great, okay and then, you know, if you were to look at some of the history do you think very strong is similar to Q2 or do you think it’s not that strong? Q2 of ’22?

Ke Chen: It will be like Q2, yes.

Philip Shen: Q2 of ‘23, okay, awesome guys. Shifting to Europe PPAs there what’s the outlook? Do you expect on a go-forward basis to have a little bit less pricing power, more pricing power? You know, we’ve seen some pullback, but the price is still relatively elevated. So as we get through ‘24, do you think there’s risk that pricing power in Europe becomes weaker or stronger? Thanks.

Yumin Liu: We still see the off-take price remains to be very strong, especially in comparing the same numbers back to three or four years ago. As we know that the CapEx is going down to the level even more competitive than three, four years ago, while the off-take price is compared to three, four years ago even higher. So that gives us a better evaluation of our projects. That’s why we feel strong and more positive for the performance of 2024.

Philip Shen: Great. And as you think about your 2024 volume, I know there’s no guidance, but conceptually, think about your view of ‘24 today versus your view of 2024 two months ago. Is the view incrementally little bit worse or incrementally better or about the same?

Yumin Liu: In general, it would be a lot better. Not only because we push…

Philip Shen: And what’s driving that?

Yumin Liu: Not only because that we will push like three or even four closings from Q4 to Q1 next year. But also we see the speed of execution not only by the team, but also by all level of the governments in Europe and U.S. is picking up.

Ke Chen: And, Phil if you look at a pipeline of storage, we started monetizing this year in 2023, but we will see big increase in 2024, so that’s where our focus is.

Philip Shen: Great. Thanks for taking all the questions. I’ll pass it on.

Operator: Thank you.

Ke Chen: Thank you, Phil.

Operator: Next we have Pavel Molchanov from Raymond James & Associates. Please go ahead.

Pavel Molchanov: Yes, thanks for taking the question.

Yumin Liu: Hey, Pavel. I think we lost you.