ReneSola Ltd (SOL) on Q4 2022 Results - Earnings Call Transcript
Operator: Hello, ladies and gentlemen, thank you for standing by for Emeren Group Fourth Quarter 2022 Earnings Conference Call. Please note that we are recording today's conference call. I will now turn the call over to Mr. Yujia Zhai, Managing Director of the Blueshirt Group. Please go ahead, Mr. Zhai.
Yujia Zhai: Thank you, operator, and hello, everyone. Thank you for joining us today to discuss fourth quarter 2022 results. We release our shareholder letter after the market closed today and is 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; Mr. Ke Chen, Chief Financial Officer; and Mr. John Ewen, CEO of North America. Before we continue, please turn to Slide 2. Let me remind you that the 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 to differ materially. Those risks are described under Risk Factors and elsewhere in Emeren’s filings with the SEC. Please do not place undue reliance on these forward-looking statements, which reflect Emeren’s opinions only as of the date of this call. Emeren 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, and good day, everyone. Thank you for joining our call today. I'll give a high level summary of our full year 2022 results and then elaborate on recent strategic initiatives as well as to provide guidance for 2023. Then Ke, the Company's CFO, will review our financial results for Q4 in detail. After that, we'll be joined by our North American CEO, John, for the Q&A. Beginning with our financial performance. We closed the year with $81.4 million revenue 30.1% gross margin and $17.4 million EBITDA I made challenging market conditions caused by the Russia-Ukraine conflict, volatile energy markets, inflation, supply chain disruptions and rising interest rates. Despite these challenges, we continue to execute our core solar project development strategy, diversify our global footprint and the ones are positioning as a leading global solar company. Let me summarize our key accomplishments in 2022. First, we monetized about 192 megawatts of solar projects in 2022 compared to 128 megawatts in 2021. Sales primarily include 70 megawatts of utility solar projects in Pennsylvania, 12 megawatt of community solar projects in the U.S., 58 megawatts of utility projects in Poland and 12 megawatt utility projects in Germany. Second, we grew our project pipeline to a record 3 gigawatts. In the beginning of the 2022, we set a goal to grow our mid-to-late stage pipeline to 3 gigawatts at the end of the year. Thanks to our team’s strong execution in face of a challenging macro environment and our strategic acquisitions, we achieved that goal. Third, we acquired a 50 megawatts fully operational solar farm in Branston in the U.K., which initiated our European IPP strategy, which will add predictable and stable cash flows to complement our project sales business. Fourth, we acquired Emeren, an Italy-based utility scale solar power and battery storage project developer. Emeren has over 2.5 gigawatts of pipeline under development, at different stages, including over 2 gigawatts of solar projects and over 500 megawatts of storage projects. Additionally, we commercialized our first inaugural IPP project in Hungary. The 10 megawatts project is our first self-developed and self-constructed IPP project in Hungary, which is another project to our growing IPP assets in Europe. And lastly, we accumulated over 1.5 gigawatts of storage pipeline. We are optimistic that storage business initiatives and growing pipeline will become an important growth driver for the Company. We expect contribution from our storage business beginning from this year. Looking forward to 2023 and beyond, we are well-positioned in the world's fastest growing solar markets that are benefiting from increasing demand for clean energy, rising PPA price and supportive government policies. For our project development business, we continue to see strong demand for solar projects globally. We entered 2023 with 3 gigawatts of high quality mid-to-late stage pipeline and we anticipate to monetize approximately 400 megawatts to 450 megawatts in 2023 and we are targeting to grow this pipeline to 4 gigawatts by the end of 2023. Beyond 2023, we are targeting to monetize a minimum 500 megawatts to 600 megawatts a year. We are excited for strong contribution from our recent acquisitions, Branston solar farm and Emeren platform. We expect these assets to contribute approximately $20 million revenue and $10 million EBITDA in 2023. Regarding our IPP strategy in Hungary, as a result of S&P and Fitch’s negative revision to Hungary’s credit rating in January 2023 due to persistently high inflation, economic weakness and external foreign policy pressures, we have decided to explore the sale of our previously announced 50 megawatts of projects in Hungary, which we expect to close sometime in the first half. For our IPP strategy in Europe, including Poland, we will continue to build our planned 50 megawatts of projects but now anticipate the completion to be closer to the end of 2023. In China, we are aligning our strategy to the rest of the world as “Develop – Build - Own or Sell”, compared to the original strategy of “Develop - Build - Own as IPP”. In conjunction, we are refocusing our efforts to five provinces that have the most favorable power prices and regulatory environment. We anticipate selling all our solar assets outside of these five provinces and some in these five focused markets, which will help strengthen our balance sheet. Moreover, China made some payment of its previous renewable energy subsidies at the end of Q4 2022 and Q1 2023, of which we received approximately $8 million. This is extremely positive for the sector and increases the value of our assets in China. In terms of guidance, we expect 2023 full year revenue to be in the range of $140 million to $160 million. We expect gross margin to be approximately 30% and net income to be between $17 million to $21 million. Ke will provide more details on our guidance momentarily. 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 again for joining us on the call today. I will now go over our financial results for the fourth quarter. As a reminder, a non-GAAP to GAAP reconciliation is included in our shareholder letter. We use non-GAAP measures because we believe we provide useful information about our operating performance that should be considered by investors along with the GAAP measures. Q4 revenue was $40.8 million up 41% sequentially and 79% year-over-year, largely driven by our project development business in Europe, the U.S. and the contribution from our Branston acquisition. GAAP gross profit was $11.1 million up from $8.5 million in Q3 2022, and $7.2 million in Q4 2021. The gross margin was 27.2%. Turning to our operating expenses. Operating expenses were $6.2 million compared to $3.5 million in Q3 2022 and $8.7 million in Q4 2021. Net income attributable to Emeren Group Ltd common shareholders was $4.8 million. Net income per ADS was $0.08 compared to $0.05 in Q3 2022 and a net loss per ADS of $0.02 in Q4 2021. Cash used in operating activity was $7.8 million. Cash used in investing activity was $0.2 million and cash used in financing activity was $5.4 million. Now let's review the balance sheet. Our cash balance as of Q4 2022 was $107 million compared to $123 million at the end of Q3 2022. The decrease was primarily due to the Emeren acquisition constructing of our projects in Poland and Hungary. Our debt to asset ratio at end of Q4 decreased to 11% compared to 12.8% in Q3 2022. Moving to our guidance. For 2023, we are changing our near term guidance approach for the first half instead of just quarter due to timing of project sales. For the first half of 2023, we expect revenue to be in the range of $70 million to $75 million. We expect gross margin to be between 24% to 27%. Now we would like to open the call for any questions. Operator please go ahead.
Operator: Thank you. [Operator Instructions]. Our first question comes from the line of Donovan Schafer from Northland Capital Markets. Your line is open.
Operator: Thank you. One moment for next question. And our next question comes from the line of Philip Shen from ROTH. Your line is open.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Pavel Molchanov from Raymond James. Your line is open.
Operator: Thank you. [Operator Instructions]. Our next question comes from the line of Amit Dayal from H.C. Wainwright. Your line is open.
Operator: Thank you. And I'm not showing any further questions in the queue. I'd like to turn the call and turn it back to Mr. Liu for any closing remarks.
Yumin Liu: Thank you, operator. We are thrilled to share our strategy is rock solid and our execution record is outstanding. Our profitability is constantly under rise and we are pumped up with excitement for the opportunities that lie ahead. We can’t wait to keep you updated on our progress in the coming months. And we sincerely thank you for being a part of this journey with us. If you have any inquiries, please do not hesitate to reach out to our Investor Relations team. This concludes our call today. You may all disconnect.
