Edited Transcript of SOL earnings conference call or presentation 19-Nov-18 1:00pm GMT

Thomson Reuters StreetEvents - finance.yahoo.com Posted 6 years ago
. The sequential increase in gross margin was attributed to -- attributable to revenue mix, with more high-margin electricity sales due to the seasonality of high irradiance during the summer months. Additionally, some high-margin project development business also contributed to the overall increase in gross margin.

Operating income was USD 5.7 million, largely flat when compared to Q2 2018. Operating margin was 30.4%, up from 21.2% last quarter.

Third quarter operating expenses were USD 2.9 million, up from $2.3 million last quarter and up from $2.5 million in the same period last year.

Sales and marketing expenses in Q3 were $0.1 million, down slightly from $0.2 million in Q2 2018. General and administrative expenses were $2.6 million, down slightly from $2.7 million in Q2 2018.

Below the line, third quarter nonoperating expenses totaled USD 2.1 million, down from $5.5 million last quarter. Q3 nonoperating expenses include interest expense of $2.6 million, interest income of $0.1 million, partly offset by a foreign exchange gain of $0.4 million. The forex gain was due to the appreciation of Polish zloty against the euro.

Net income was $3.6 million compared to an income of USD 0.4 million in Q2 2018. Third quarter EBITDA was USD 3.9 million (sic) [USD 7.9 million] compared to $5.2 million last quarter.

Now the balance sheet, shown on Slide 15. We had cash and equivalents of USD 8.1 million as of September 30, 2018, a decrease of about $17 million during the quarter. We used the cash primarily for the construction of our projects in Poland and Hungary in Q3.

Long-term borrowings were approximately $73.3 million as of September 30, 2018, exactly flat when compared to last quarter. We have long-term liabilities related to capital leases and failed sale-lease backs of approximately USD 80 million, a decrease of USD 5 million during the quarter. This relates mainly to rooftop projects in China.

Finally, we will discuss guidance, shown on Slide 18. For the fourth quarter of 2018, we expect the revenue in the range of USD 20 million to USD 30 million, and the gross margin in the range of 20% to 25%.

With that, we will now like to open up the call for any questions that you may have for us. Operator, please go ahead.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have one from Justin Clare of Roth Capital Partners.

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Justin Lars Clare, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [2]

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So first off, I wanted to ask, can you share what the margin was for your electricity sales, EPC services and then your project sales in Q3?

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Johnny Pan, ReneSola Ltd - IR [3]

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Okay. (foreign language)

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Unidentified Company Representative [4]

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(foreign language)

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Johnny Pan, ReneSola Ltd - IR [5]

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Justin, for Q3, the Project Development margin, gross margin was around a 15%, and the gross margin for IPP around 75%.

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Justin Lars Clare, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [6]

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75%. Okay. Great. That's helpful.

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Johnny Pan, ReneSola Ltd - IR [7]

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Gross margin for EPC, 10%.

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Justin Lars Clare, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [8]

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10%, okay, for EPC. All right. And then for Q4, can you share which projects you're planning to sell? And how much of your revenue you expect from those project sales versus EPC services and then electricity sales?

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Johnny Pan, ReneSola Ltd - IR [9]

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Okay. (foreign language)

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Unidentified Company Representative [10]

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(foreign language)

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Xiaoliang Liang, ReneSola Ltd - CFO [11]

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The revenue for IPP around $500.34 million revenue and the Project Development around $28 million, and EPC around $0.4 million. And we are going to sell the project in U.S. -- Minnesota and 10 megawatts and the 14 megawatts project in Poland and the 7 megawatts in Hungary -- 7 megawatts project in the Hungary.

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Justin Lars Clare, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [12]

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Okay. And those numbers are in RMB, right? The...

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Xiaoliang Liang, ReneSola Ltd - CFO [13]

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No, that number is U.S. dollar.

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Justin Lars Clare, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [14]

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U.S. sorry, you did you say $500 million, I missed what you said, I guess.

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Xiaoliang Liang, ReneSola Ltd - CFO [15]

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$500.3 million is IPP, the electricity generated from our IPP project.

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Justin Lars Clare, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [16]

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Okay. All right. So then if we look into 2019, I know you haven't provided guidance here, but can you give us a rough sense for how many megawatts you plan to sell in 2019? And if you could share the cadence of when you plan to sell those projects? Will it be weighted more toward the first half or the back half, that could be helpful.

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Unidentified Company Representative [17]

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(foreign language)

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Johnny Pan, ReneSola Ltd - IR [18]

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Justin, let's start with China DG. We're monetizing our China DG operating assets. So in the -- probably in Q1 next year, we will sell 150 megawatts in China. And then in the first half of next year, we will sell our project in Poland, that is 41 megawatts. And another 35 megawatts in Hungary. And for the second half of 2019, we will sell shovel-ready projects rights for our projects developed in China, India and U.S., total around 600 megawatts. And then we have IPP revenue.

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Justin Lars Clare, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [19]

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Okay. And then -- did you have any more? Okay, IPP revenue. Can you share approximately how much IPP revenue you expect?

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Unidentified Company Representative [20]

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(foreign language)

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Johnny Pan, ReneSola Ltd - IR [21]

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It's around 126 megawatts operating assets we will -- selling electricity next year for our IPP business.

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Justin Lars Clare, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [22]

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Okay. So then those --

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Johnny Pan, ReneSola Ltd - IR [23]

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The revenue is around...

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Justin Lars Clare, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [24]

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Generally -- well, go ahead.

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Johnny Pan, ReneSola Ltd - IR [25]

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Okay. What's your question?

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Justin Lars Clare, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [26]

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You were going to say, the revenue, please go ahead.

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Xiaoliang Liang, ReneSola Ltd - CFO [27]

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On the IPP.

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Johnny Pan, ReneSola Ltd - IR [28]

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IPP. (foreign language)

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Unidentified Company Representative [29]

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(foreign language)

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Johnny Pan, ReneSola Ltd - IR [30]

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It's around $14 million.

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Justin Lars Clare, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [31]

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Okay. So then I just wanted to ask a little bit more broadly about the China market. So you've announced plans to build and sell 600 megawatts in the China market that are unsubsidized projects. But it looks like that NEA could announce an updated solar policy within the next few months or may be early next year, and that policy could have new subsidies. So I was wondering, can you just share your expectations for what new policy could potentially be announced? And how that might affect your development plans in 2019?

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Johnny Pan, ReneSola Ltd - IR [32]

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Okay. (foreign language)

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Unidentified Company Representative [33]

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(foreign language)

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Johnny Pan, ReneSola Ltd - IR [34]

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Justin, I need to correct that you said, we were to 6 megawatt projects in China, but actually 6 megawatts -- 600 megawatts, it's for China, India, and U.S. In China, we plan to do 300 megawatts. And for your question of the new policies in China with the subsidy, actually, we believe that we are developing unsubsidized project at greater priority because EPC cost is lower enough to unsubsidize the projects in many provinces in China.

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Justin Lars Clare, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [35]

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Okay. So if a new solar policy were to be announce, that would not change your development plans for the year, is that right?

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Johnny Pan, ReneSola Ltd - IR [36]

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That's right.

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Operator [37]

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The next question is from Kevin Huang of [CITIC.]

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Kevin Huang, Citic - Research Analyst [38]

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Justin, it's a spot question about the Chinese market. So that's enough information. So I want to ask, well, ReneSola continue to build and own DG projects?

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Johnny Pan, ReneSola Ltd - IR [39]

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Where to build and own DG projects, sorry.

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Kevin Huang, Citic - Research Analyst [40]

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Yes. Well, you continue to build and own DG projects.

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Johnny Pan, ReneSola Ltd - IR [41]

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Okay. (foreign language)

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Unidentified Company Representative [42]

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(foreign language)

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Johnny Pan, ReneSola Ltd - IR [43]

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(foreign language) Kevin, Mr. Li said for next year for DG, we don't have the support for financial institutions because the financial -- financing cost is increasing, so we would like to spend more time on the ground-mounted the greater parity projects.

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Operator [44]

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(Operator Instructions) There are no questions at this time. I would like to hand the conference back to Mr. Johnny Pan. Please go ahead, sir.

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Johnny Pan, ReneSola Ltd - IR [45]

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Thank you, operator. Let me make some closing remarks on behalf of Mr. Li. We are very pleased with our Q3 results and our continued execution of Project Development strategy. We remain committed to growing profitably, managing our operations and strengthening our financial position. We are optimistic about our opportunities around the world and look forward to providing our business update in few months. Thank you all for -- again, for your participation. This concludes our call today. You may all disconnect.

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Operator [46]

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Thank you, ladies and gentlemen. This does conclude the conference call for today. Thank you for participating. You may now all disconnect.

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