Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Emeren Group Ltd (SOL, Financial) achieved $30.1 million in revenue for Q2 2024, doubling quarter over quarter.
- Gross profit for Q2 2024 was $9.4 million, with a robust gross margin of 31.2%.
- The company signed over 2 gigawatts worth of projects with eight DSA partners in Europe, expected to generate over $60 million in revenue over the next two to three years.
- Emeren Group Ltd (SOL) has a strong presence in Europe and China with 67 megawatts of IPP assets generating recurring revenue.
- The company is well-positioned in fast-growing solar markets, supported by rising clean energy demand and favorable government policies.
Negative Points
- Net income was reduced by around $2 million write-offs related to canceled projects and an unrealized foreign exchange loss of $0.8 million.
- Revenue declined 11% year over year, primarily due to reduced RTB sales in Europe.
- Operating expenses increased to $6.4 million in Q2 2024, up from $5.5 million in Q1 2024.
- Cash and cash equivalents decreased to $50.8 million at the end of Q2 2024, down from $55.1 million in Q1 2024.
- The company faces challenges in the approval process from the government in Spain, leading to the cancellation of some projects.
Q & A Highlights
Q: Hi, good afternoon, and thanks for taking the questions. First one, just on the early-stage pipeline, looks like Spain was revised down by about 1.3 gigawatts versus Q1. Just wondering what the reason was for that.
A: We have been facing some challenges in the approval process from the government in Spain, especially in some regions we have activities. Balancing the risk and reward, the company decided to slow down or even cancel projects in some regions. That is the reason we lowered our early-stage pipeline in Spain. Literally, we canceled those projects. - Yumin Liu, CEO
Q: For my follow-up, I guess, kind of a two-parter on the DSA sales. First one, just looking at the second half forecast of $20 million, I was wondering what the quarterly cadence is there. And then, looking at the contracted versus negotiated, it looks like you've got 2 gigawatts in kind of each bucket, but it looks like contracted is for $60 million versus negotiated $100 million. So was wondering if those -- that are still in negotiation are a bit more involved or later-stage projects. Just wondering why the difference in size there.
A: We do expect $20 million revenue coming out of DSA in the second half, and I will say half, more than 50% has already contracted. In terms of quarter-over-quarter, I think we could expect evenly distributed in the next two quarters. Our existing DSAs mainly come from the Italy market. In the following months, we have over 2 gigawatts of contracts or DSA contracts we target to close on a global scale, both on solar and storage, including four to five countries in Europe and the US. That portfolio of 2 gigawatts also includes not only early-stage but also some middle or even more advanced-stage projects. - Ke Chen, CFO & Yumin Liu, CEO
Q: Your implied Q4 revenue ramp is pretty high, about $84 million. And so, wanted to understand how confident you feel in that implied Q4, given you reiterated your full-year revenue number. And so, what's the confidence level? How much conservatism is baked in? And what are the risks that you miss the target?
A: As the teams across the board have been working on those expected closings, literally speaking, as early as two, three months ago, even for the closings to be expected in Q4 or sometime may happen late Q3, that is where our confidence comes from. We are going in the direction, closing the deals with the ones negotiating with the partners starting from as early as two to three months ago. Bunch of deals to be closed are under the due diligence process and bunch of them are on an exclusive basis with some targeted buyers. - Yumin Liu, CEO
Q: You talked about having $100 million of cash by the end of '24 in the past and being positive operating cash flow for the remaining of the year or at least certain quarters of this year. Can you share if you think $100 million is reasonable still by year-end '24? Or if not, what's the burn that you expect? And how much cash do you think you could have by year-end?
A: Based on our forecast, again, we're confident about our outlook here. As we mentioned, part of this COD sales will happen in the fourth quarter, so we are still confident to collect all this cash by end of this year and also expect on a full-year basis, we should be operating cash flow positive. - Ke Chen, CFO
Q: With respect to the guidance for the remainder of the year, you're saying you could potentially do $28 million in net income on roughly, let's say, $100 million to $110 million in sales. I'm just trying to get a sense of what's driving this significant level of profitability for the revenues that you are expecting to recognize in the second half?
A: We have worked on a bunch of expected closings starting over two, three months ago, and we do expect to close them in the second half. The significant part of the revenue may come or will come from the COD sales, and those COD are either reached or are to be reached within Q3. The COD assets are pretty valuable and hotspot to be chased upon by buyers. - Yumin Liu, CEO
Q: Is any of this dependent on interest rates going lower, any of these deals in the second half? Are folks maybe waiting to pencil these deals once they have clarity on where interest rates will head in the next few months?
A: Very good question and very good point. I really hope that the buyers will pay a better price with better interest rate or lower interest rate environment, and we believe that should be the case. - Yumin Liu, CEO
Q: You talked about monetizing 400 megawatts to 500 megawatts this year. Is that -- and I noticed in the letter to shareholders, it says that the priority is advancing early-stage projects, securing additional DSA partnerships in Europe and US, and maximizing value of development pipeline. Do you still see 400 megawatts to 500 megawatts monetization of advanced stage?
A: Yes. Absolutely true. We did not really mention that because monetizing or selling the advanced-stage pipeline is in our -- we consider as normal business. We have been doing so in the past years, but the DSA is new. So we mentioned the DSA more and especially monetizing are the ones in the early-stage portfolio is also the focus literally speaking in the last almost 12 months. - Yumin Liu, CEO
Q: For the 1.7 gigawatts of the DSA contracts for BESS in Italy that you have. Is that a subset within the 2 gigawatts of contracted DSA that you have? So does the implication that 85%, 90% of the 2 gigawatts you have signed contracted for DSA, that 85% of that is BESS in Italy?
A: You are right. In fact, it is the case. Our DSA under BESS projects, storage projects, represent over 80% of the whole DSA portfolio. - Yumin Liu, CEO
Q: Can you clarify just what it was that triggered the write-off? Was it specifically an interconnection delay? Or what was the specific bottleneck or parameter or event that triggered the write-off?
A: The write-off comes mostly from
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
