Emeren(SOL) - 2024 Q2 - Quarterly Results

Shareholder Letter & Q2 2024 Overview The company reports solid Q2 2024 performance driven by strong progress across its DSA, solar development, and IPP business lines Q2 2024 Performance Summary The company generated $30.1 million in revenue and $3.0 million in operating profit, though net income was impacted by one-off charges Q2 2024 Key Financial Metrics | Metric | Amount (USD millions) | | :--- | :--- | | Revenue | $30.1 | | Gross Profit | $9.4 | | Gross Margin | 31.2% | | Operating Profit | $3.0 | | Net Income | $0.4 | - Net income was negatively affected by a ~$2.0 million write-off from canceled projects and a $0.8 million unrealized foreign exchange loss, which offset the solid operating profit[2] Business Line Overview Strong growth was observed across the DSA, solar project development, and IPP segments, particularly in European markets DSA and BESS The DSA model secured significant contracted revenue in Europe, with H1 2024 revenue already surpassing the full-year 2023 total DSA Project Pipeline Status | Status | Project Size (GW) | Expected Revenue (USD) | | :--- | :--- | :--- | | Contracted | > 2 GW | > $60 million | | Under Negotiation | > 2 GW | ~ $100 million | - H1 2024 DSA revenue reached approximately $8.2 million, exceeding the entire 2023 DSA revenue of about $6.5 million[3] - The company's BESS strategy in Italy has grown to a total of 1.7 GW in the DSA structure, highlighted by a recent agreement with PLT for a 394 MW portfolio[4] Solar Power Project Development The company advanced its European solar portfolio with key project sales in Spain and Hungary during the quarter - A 42 MWp Ready-to-Build (RTB) solar project portfolio in Spain, consisting of eight greenfield projects, was sold to CVE España[5] - Completed the delivery of a 13 MW Commercial Operation Date (COD) project in Hungary, building on a previous sale of a 53.6 MWp portfolio in the country[5] Independent Power Producer (IPP) The IPP segment provided stable revenue, contributing 29% of the quarterly total from assets in Europe and China - IPP assets contributed approximately 29% of total revenue for Q2 2024, providing a reliable source of stable cash flow[6] - As of Q2 2024, the company has 67 MW of IPP assets in Europe and a 26 MWh battery storage portfolio in China integrated into a VPP platform[7] Financial Performance & Outlook This section details the company's Q2 financial results, balance sheet strength, and provides guidance for Q3 and the full year 2024 Q2 2024 Financial Highlights Q2 revenue reached $30.1 million, showing strong sequential growth, with Europe representing the dominant geographic market Q2 2024 Financial Performance vs. Prior Periods ($ in millions) | Metric | Q2'24 | Q1'24 | Q/Q Change | Q2'23 | Y/Y Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $30.1 | $14.6 | 106% | $33.8 | -11% | | Gross Profit | $9.4 | $4.3 | 117% | $12.7 | -26% | | Operating Income | $3.0 | $(1.2) | N/M | $5.0 | -41% | | Net Income | $0.4 | $(5.9) | N/M | $8.3 | -95% | Q2 2024 Revenue Breakdown by Segment | Segment | Revenue ($ thousands) | % of Total | | :--- | :--- | :--- | | Project development | 5,884 | 20% | | IPP | 8,690 | 29% | | EPC | 12,365 | 41% | | DSA and others | 3,118 | 10% | | Total | 30,057 | 100% | Q2 2024 Revenue Breakdown by Region | Region | Revenue ($ thousands) | % of Total | | :--- | :--- | :--- | | Europe | 23,419 | 78% | | USA | 394 | 1% | | China | 6,244 | 21% | | Total | 30,057 | 100% | Detailed Q2 2024 Financial Results Revenue grew significantly quarter-over-quarter, though gross margin and net income declined year-over-year due to revenue mix and one-off charges - Revenue rose to $30.1 million, doubling QoQ due to EPC and DSA growth, but fell 11% YoY primarily from reduced RTB sales in Europe[25] - The YoY decrease in gross margin to 31.2% was mainly caused by a shift in revenue mix towards COD (Commercial Operation Date) sales[26] - Net income of $0.4 million was impacted by a ~$2.0 million write-off for canceled projects and a $0.8 million unrealized foreign exchange loss; Diluted EPS was $0.01[27] Financial Position and Cash Flow The company maintains a strong balance sheet with $50.8 million in cash and a low debt-to-asset ratio - Cash used in operating activities was $2.2 million, cash used in investing was $3.8 million, and cash provided by financing was $1.5 million[29] Key Financial Position Metrics (End of Q2 2024) | Metric | Value | | :--- | :--- | | Cash and cash equivalents | $50.8 million | | Net Asset Value (NAV) | ~$6 per ADS | | Debt-to-asset ratio | 10.2% | Outlook The company reaffirms its full-year 2024 guidance and provides specific revenue and margin targets for Q3 Q3 2024 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $25 - $28 million | | Gross Margin | 35% - 38% | Full Year 2024 Reaffirmed Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $150 - $160 million | | Gross Margin | ~30% | | Net Income | ~$22 million | | Earnings per ADS | ~$0.43 | - For 2024, IPP revenue is expected to be between $24-$26 million with a ~50% gross margin, and DSA revenue is anticipated to be around $20 million in the second half of 2024[10] Project Pipeline & IPP Portfolio The company details its extensive solar development and storage project pipelines, primarily concentrated in Europe and the U.S Solar Development Project Pipeline The total solar development pipeline reached 7,844 MW, with a strategic focus on the European and U.S. markets Solar Development Pipeline by Region (MW) | Region | Advanced Stage | Early Stage | Total | | :--- | :--- | :--- | :--- | | Europe | 1,446 | 4,155 | 5,601 | | U.S. | 1,006 | 1,155 | 2,161 | | China | 82 | — | 82 | | Total | 2,534 | 5,310 | 7,844 | - The solar development pipeline is geographically focused, with Spain (3,277 MW), the U.S. (2,161 MW), and Italy (995 MW) being the largest markets[18] Solar Storage Project Pipeline The solar storage pipeline stands at 7,873 MW, led by significant projects in Italy, the U.S., and Poland Solar Storage Pipeline by Region (MW) | Region | Advanced Stage | Early Stage | Total | | :--- | :--- | :--- | :--- | | Europe | 2,982 | 2,904 | 5,886 | | U.S. | 550 | 1,333 | 1,883 | | China | 104 | — | 104 | | Total | 3,636 | 4,237 | 7,873 | - The largest country-specific solar storage pipelines are in Italy (2,673 MW), the U.S. (1,883 MW), and Poland (1,477 MW)[20] IPP Asset Portfolio The company operates 264 MW of solar PV and 26 MWh of storage IPP assets, with a majority located in China Operating IPP Assets (as of June 30, 2024) | Region | PV Capacity (MW) | Storage (MWh) | | :--- | :--- | :--- | | China DG | 160 | 26 | | Europe | 80 | - | | U.S. | 24 | - | | Total | 264 | 26 | Conclusion & Additional Information Management expresses confidence in the company's strategic position to capitalize on growing global demand for renewable energy Conclusion Management highlights a positive industry outlook driven by global energy trends and the company's readiness to lead - The solar industry is benefiting from a global shift to renewable energy, with growing demand from energy-intensive technologies like AI and blockchain[29] - The company is confident in its strategic position, expertise, and financial foundation to capitalize on the accelerating adoption of solar technology worldwide[30] Conference Call Information Details are provided for the upcoming conference call to discuss the Q2 2024 financial results - A conference call to discuss Q2 2024 results is scheduled for 5:00 p.m. U.S. Eastern Time on Tuesday, August 20, 2024, with registration and webcast links available[32] Financial Statements & Non-GAAP Reconciliation (Appendices) This section provides the unaudited consolidated financial statements and a reconciliation of non-GAAP measures for Q2 2024 Appendix 1: Unaudited Consolidated Statement of Operations The statement details revenues, costs, and profits, resulting in a net income of $0.4 million for the quarter Statement of Operations Highlights (Three Months Ended June 30, in thousands) | Line Item | 2024 | 2023 | | :--- | :--- | :--- | | Total net revenues | $30,057 | $33,846 | | Gross profit | $9,382 | $12,662 | | Income from operations | $2,959 | $5,046 | | Net income attributed to Emeren Group Ltd | $392 | $8,348 | Appendix 2: Unaudited Consolidated Balance Sheet The balance sheet shows total assets of $457.8 million and shareholders' equity of $347.5 million as of June 30, 2024 Balance Sheet Summary (As of June 30, 2024, in thousands) | Category | Amount | | :--- | :--- | | Cash and cash equivalents | $50,830 | | Total current assets | $217,859 | | Total assets | $457,751 | | Total current liabilities | $51,046 | | Total liabilities | $110,230 | | Total shareholders' equity | $347,521 | Appendix 3: Unaudited Consolidated Statement of Cash Flow The statement shows a net cash decrease of $4.2 million, primarily from operating and investing activities Cash Flow Summary (Three Months Ended June 30, 2024, in thousands) | Activity | Net Cash Flow | | :--- | :--- | | Operating Activities | $(2,211) | | Investing Activities | $(3,846) | | Financing Activities | $1,487 | | Net decrease in cash | $(4,243) | Appendix 4: Non-GAAP Reconciliation (Adjusted EBITDA) A reconciliation from net income to Adjusted EBITDA is provided, resulting in an Adjusted EBITDA of $4.6 million for Q2 2024 - The company uses non-GAAP measures like EBITDA (net income before interest, taxes, depreciation, and amortization) and Adjusted EBITDA to evaluate business profitability and efficiency[41][42] Adjusted EBITDA Reconciliation (Three Months Ended June 30, 2024, in thousands) | Line Item | Amount | | :--- | :--- | | Net Income | $746 | | Income tax expenses | $1,342 | | Interest expenses, net | $33 | | Depreciation & Amortization | $1,468 | | EBITDA | $3,589 | | Adjustments (FX, etc.) | $1,032 | | Adjusted EBITDA | $4,621 |