Canadian Solar Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Canadian Solar's fourth quarter 2018 earnings conference call. My name is Aang, and I'll be your operator for today. At this time, all participants are in listen-only mode. Later, we'll conduct a question-and-answer session. As a reminder, this conference is being recorded for replay purposes. I would like to turn the call over to Ms. Mary Ma, with Canadian Solar's IR department. Please go ahead.

Thank you, operator, and welcome everyone to Canadian Solar's fourth quarter 2018 earnings conference call. Joining us today on the call are Dr. Zhang Qu, our chairman and chief executive officer, and Dr. Hui-Feng Chen, our senior vice president and chief financial officer. Before we begin, may I remind our listeners that management's proposed remarks today will contain forward-looking statements which are subject to risks and uncertainties, and the management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the safe harbor for forewalking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from management's current expectations, and therefore we refer you to a more detailed discussion of the risks and uncertainties in the company's annual report on Form 20-F, fighting with the Securities and Exchange Commission. In addition, any projections as to the company's future performance represent management estimates as of today's call. Canadian Solar assumes no obligation to update these projections in the future unless otherwise required by applicable law. Our proposed remarks will be presented within the requirements of SEC Regulation G regarding generally accepted accounting principles or GAAP. Some financial information presented by us during the call will be provided on both a GAAP and a non-GAAP basis. By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the company's performance for results and underlying trends. Measurements use non-GAAP measures to better assess operating performance and to establish operational goals. Non-GAAP information should not be viewed by investors as a substitute for data compiled in accordance with GAAP. At this time, I would like to turn the call over to our chairman and CEO, Dr. Shang Xu. Shang, please go ahead.

Thank you, Mary. We appreciate everyone taking the time to join us today. 2018 was an exceptional year for Canadian solar. We achieved a record net income of $3.88 per diluted share and our net profit increased by 140% compared to 2017. In 2018, we shipped around 6.6 GW of solar modules and monetized around 1.7 MW of utility-scale solar project globally, with total annual revenue of $3.74 billion. Both of our MSS and Energy Business Group contributed positively to our top line and bottom line. In 2018, our module group, our MSS business, contributed 58% of the total revenue. We successfully maintained a healthy growth margin despite module AS3 pressure that started in May with the policy change in China. We achieved this result through disciplined order management and control of operational costs and inventory, combined with the benefit of the raw material price declines. During the year, we also expanded our EPC business and O&M business. In 2018, our energy business contributed 42% of the total revenue. This reflects the strength of our pipeline of thought-after energy assets and the acceleration of sales of certain projects with high profit into 2018 from 2019. In Q4 specifically, Our MSS business contributed 63% of the total revenue for the quarter, which shipped 1,951 megawatt of solar modules during the quarter, which exceeded our guidance. Growth margin for our MSS business was 31.7%. or 28.8% if we exclude the CVD reversal benefit. Gross margin benefited from our cost and operational controls, lower material costs, and our premium brand that adds to our competitive strengths and the ability to control the price erosion. As of Q4 2018, We have accumulatively delivered around 2.6 GW of high-efficiency anti-LETID PERC solar modules worldwide. The majority of these modules are polycrystalline-based PERC products, which makes us the undisputable worldwide leader in high-power polycrystalline products. In 2019, we plan to convert all of our solar cell capacity, both poly and mono, into perc technology. Our high-efficiency solar module products, such as high-cool, high-dm, and bi-high-cool, are well accepted by our customers. In Q4, contributed around 37% of the total revenue, with a 27.5% growth margin. During the fourth quarter, we sold 857 megawatts of solar project assets globally. We achieved revenue of $326.5 million and investment income of $40.4 million from the sales of those solar project assets. Through this process, we also reduced our project tax by approximately $400 million. Our projects in operation as of February 2019 totals 986 megawatt with an estimated resale value of approximately 1.2 billion US dollar. Our portfolio of late stage utility scale solar power project as of February 28, 2019 including those under construction was approximately 2.9 gigawatts. Our strategy is to build and sell these projects at COD or to sell them before COD either at NTP or before NTP based on the market conditions. Due to the typical development cycle, we expect to realize sales for the majority of our current 2.9 GW late-stage project pipeline in 2020 or later. In Japan, we energized a 10.8 MW solar power project in November. Our current late-stage project pipeline in Japan of 295 MW reflect the anticipated impact of the final rule of the proposed change to the feed-in tariff program from MADI, or Japanese Ministry of Economy, Trade and Industry. Canadian Solar maintains an approximately 15% ownership of the Canadian Solar Infrastructure Fund. which has a capacity of 106.8 megawatts and a total assets under management, or AUM, of approximately 43.4 billion Japanese yen, equivalent to 389 million US dollars. Canadian Solar will continue to provide a right-of-first offer to CSIF to acquire our solar power plant in operation and project in our late-stage pipelines after they reach COD at competitive market price. In US, we completed the sale of Garland and Tranquility solar power plants totaling 260 megawatt in October. In December, we sold the 210 megawatt Mustang II at pre NTP stage. In addition, we further expanded of our late stage project pipeline to 1.2 gigawatt in US. Following our Q3 call, we successfully signed two power purchase agreement for additional 398 megawatt projects, namely a 25-year PPA for the 88 megawatt Stanford Solar Station 2 project with Stanford University and a PPA of a 310 megawatt project in Texas. with a leading commercial and industry customer. In addition to the 1.2 gigawatt late-stage pipeline, we signed a build-to-transfer agreement for the 100 megawatt AC sunflower project located in Mississippi. The build and transfer agreement is pending regulatory approval. Finally, in February 2019, we provided a preliminary assessment of the potential impact of the PG&E bankruptcy filing on our project pipeline. We noted at that time, the company does not have material exposure with respect to previously sold projects. We do have potential exposure with respect to 60 megawatt AC of power purchase agreement signed with PG&E. In addition, the company has potential exposure with respect to interconnection agreements with PG&E, including an early to mid-stage development project and the late-stage state project, which together total approximately 700 megawatt AC. We continue to monitor the situation but have no further update as of today's call. Now, let me comment on our guidance for Q1 2019 and the full year 2019. We currently expect Total Q1 module shipment to be in a range of approximately 1.3 to 1.4 gigawatt, including 50 megawatt of shipment to our own utility scale solar project. We expect the revenue for the first quarter of 2019 to be in a range of 450 to 480 million US dollars. We expect the growth margin for the Q1 to be between 16% to 18%, with net profit low or negative. Our outlook reflects lower module production and sales during the Chinese New Year holiday season, our IT upgrades during the quarter, continued module ASP pressure, decreased sales of solar power project compared to the previous quarter and an expected foreign exchange loss due to the appreciation of Chinese RMB against the US dollar. For the full year 2019, We expect our total module shipment to be in the range of approximately 7.4 to 7.8 gigawatt and total revenue in the range of 3.5 to 3.8 billion US dollar. We expect profit in subsequent quarters after Q1 likely to recover as module production and sales increase and project sales pick up. However, we currently expect our net profit for 2019 will be lower than that of 2018 due to the lower project sales, ASC pressure and appreciation of RMB against US dollar, which results in higher module costs. The current headwinds would normally be offset by an adjustment of module price or cost reduction enabled by technology improvement, but that process takes time. Overall, the pullback in our 2019 outlook compared to 2018 is not a reflection of the long-term health, growth, or profitability of our co-business. Our co-business and long-term growth trends remain strong and strong. We expect a rebound in project sales in 2020 and beyond, given our robust 2.9 gigawatt late-stage project pipeline, and we will continue to develop and monetize solar projects. Our focus on new solar module technologies, innovative product and premium channels will help us maintain our competitive edge in our module and solar system business. Finally, we announced today the appointment of Mr. Arthur Wong to our board as an independent director. His broad experience in finance, accounting, and as an auditor will add valuable perspective and insight to our board of directors as we continue to maximize the value of our shareholders and focus on delivering improved results. Let me now turn the call over to our CFO, Huifeng Chang, for a more detailed review of our results for the fourth quarter. Huifeng, please go ahead.