Emeren Group Ltd

Hello, ladies and gentlemen. Thank you for standing by Foreign and Solar Power's first quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please note that we are recording today's conference call. I will now turn over the call to Mr. Gary Dvorak, Managing Director of the Blue Shirt Group Asia. Please go ahead, Mr. DeFarge.

Thank you, operator, and hello, everyone. Thank you for joining us on today's call to discuss first quarter 2021 results. We released our shareholder letter after the market closed today. It's available on our website. There's also a supplemental slide deck posted on the website that we will reference during our prepared remarks. On the call with me today are Mr. Yu-Min Liu, Chief Executive Officer, Mr. Ke Chen, Chief Financial Officer, and Mr. John Yuen, President of North America. Before we continue, please turn to slide two. Let me remind you that remarks made during this column may include predictions, estimates, or other information that might be considered forward-looking. These forward-looking statements represent Renatola Power'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 the risk factor section and elsewhere and Renasola Power's filings of the SEC. Please do not place undue reliance on these forward-looking statements, which reflect Renasola Power's opinions only as of the date of this call. Renasola Power is not obliged to update you on any revisions to these forward-looking statements. Also, please note that unless otherwise stated, all figures mentioned in the conference call are in U.S. dollars. With that, let me now turn the call over to Mr. Human Lee. Human?

Thank you, Gary. And thank you, everyone, for joining the call. Before we discuss our Q1 results, let me quickly start by addressing the inflation of the commodity input costs, one of the key challenges facing the solar industry these days. The good news is, by far, the higher input costs have not been an issue for U.S. solar power. Now, let's turn our attention to Q1 results. I will summarize our financial performance and review our operating highlights in the quarter. I will then turn our call over to Ke, who will cover financial results in more detail and will provide 2021 guidance. We will then open the call to questions. Revenue was $22.8 million, up 39% sequentially and up 8% year-over-year. Gross margin of nearly 30% was well above expectations. Our operating income on GAAP basis was 4.1 million, up significantly both commercially and year-over-year. Adjusted EBITDA increased more than 250% from last quarter. Importantly, we reported our fourth consecutive quarter of profitability. Our development pipeline remains strong, ending the quarter with late-stage projects of over 1.3 gigawatts. Business momentum continues. The expanded pipeline of business activity indicates greater demand for project development, and we remain optimistic about our multi-year growth prospects. We continue to focus on profitable markets, including the U.S. and Europe. where we see tremendous growth opportunities with high-quality projects. Let me now discuss the recent operational highlights. First, we completed the sale of our 12.3 megawatt portfolio projects in Hungary to Optum, a leading international solar investment company in Denmark. The portfolio comprises 20 solar farms with a combined capacity of 4.3 megawatts. These 20 solar farms are now in operation and are qualified under the Hungarian 25-year CAAT feed-in tariff scheme. Second, we successfully closed the sale of a 10-megawatt portfolio of solar projects in Utah to Greenbaker Renewable Energy Company. The portfolio consists of three ground-mounted commercial distributed generation sites located in Utah. The projects are so-called behind the meter and will sell electricity directly to two optic parties. The projects were sold at the notice to proceed stage and Greenbaker will complete the construction and retain long-term ownership. Third, we executed the JV agreement with iPhone Investment Group last month. The collaboration between the two companies aims to accelerate the development and financing of our current and future solar projects across Europe. With the signing of the JV agreement, Wiener Solar Power and Eiffel Investment Group have created European Solar Energy Development JV. The initial portfolio will consist of 340 megawatts at the one stage development projects located in Poland, Spain, and France, which both partners will support and develop to reach ready-to-build stage. The joint venture company intends to fund the development of up to 700 megawatt of solar projects in the next three years across Europe. Fourth, we strengthened our financial position through debt reduction and capital raise in Q1. as shown in our balance sheet. We reduced short-term borrowings by $31 million in the quarter, a major achievement for us. Additionally, we further soared up the balance sheet, leveraging the capital markets to raise capital. In the first quarter, we raised $219 million through our registered direct placement of ADS. As a result, we significantly improved our capital structure and debt to asset ratio of 0.19. From a capital allocation standpoint, we intend to use the net proceeds to expand our Solar Plus pipeline, further penetrate the Solar Plus storage market for working capital and for potential strategic M&A opportunities. We believe the capital infusion will enable us to execute our long-term strategic growth plan as we further consolidate our transformation into an eyesight-light solar product developer. Fifth, we remain positive on our storage strategy. Energy storage is a large ongoing market. The solar storage assets we acquired from NOAA development management last year are highly complimentary to our existing business. Additionally, the acquisition provides us with access to utility projects and development activities in a number of states across the U.S. Building on the successful acquisition of the energy storage business from NOAA, we expect to grow our pipeline in the solar plus storage market. We are actively evaluating opportunities in both solar plus storage and independent storage facilities solutions in the US and UK. We are making good progress and looking forward to capture more market opportunities. Putting it all together, we are making great progress growing our business and achieving our mission to become a leading global product developer. I will now update you on our project pipeline. At quarter end, our late stage pipeline was 1.3 gigawatts, up from 1 gigawatt last quarter. We continue to direct resources to the markets with the best profit potential. Our objective is to add incremental project pipeline in our core markets to reach 2 gigawatts by the end of 2021. We also intend to monetize approximately 300 megawatts this year. Let's review highlights from certain key geographies. First, let's turn our attention to the US, shown on slide 7. Our latest project stands at 340 megawatts, of which 82 megawatts are community solar in Maine, Minnesota, and New York. Additionally, we have projects under development with a mix of corporate, municipal, and utility outtakers in other states, such as California, Pennsylvania, Florida, and Illinois. Meanwhile, we operate 24 megawatts of small-scale utility projects in North Carolina. In Poland, shown on slide 8, our key asset is the portfolio of project rights. We have a pipeline of 271 megawatts of ground-mounted projects under development and construction. Slide 9 refers to Hungary, where we also invest in small-scale DG projects. Our pipeline has a combined capacity of 42 megawatts in the country. Those projects are all under development. Slide 10 and 11 detail our pipeline in France and Spain. We have 100 megawatts in France. and expanded our pipeline to 180 megawatts in Spain, all of which are ground-mounted and underdeveloped. We are also getting traction in Germany, as shown in slide 12. We have a practical volume toppling 50 megawatts, all of which are ground-mounted projects underdeveloped. In the UK, shown on slide 13, we have a plus pipeline of nearly 210 megawatts, including ground-mounted projects and solar plus storage fields. All of those projects are under development. In addition to our development pipeline, we operate a portfolio of 173 megawatts of solar projects that generate high-margin recurring revenue, as you see on slide 15. Our operating assets, including 148 megawatts of commercial rooftops in China and 24 megawatts of utility solar in the U.S. In China, We are preparing to build at least 100 megawatts of commercial rooftop projects within 2021 and plan to operate them in our light IPP model. In conclusion, we are off to a solid start in 2021. The strong momentum reflects high demand in the markets we serve, the resiliency of our business model, and the excellent execution by our team. Let me now turn the call over to our CFO, Ke Chen, for comments on our financial performance. Ke? Thank you, Yiming, and thanks again, everyone, for joining us on the call today. Our shareholder letter and the supplemental slides contain all the figures and comparisons you need. I'm not going to repeat every number. Instead, I'm going to focus on the factors that influence the results. As I speak, please keep in mind that we will discuss certain long gap financial measures. We use long gap measure because we believe they provide useful information about our operating performance that should be considered by investor along with the gap measures. A long gap to gap reconciliation is included in our shareholder measure. Let's begin with our Q1 financial highlights on slide 19. Revenue of almost $23 million was up both sequentially and year-over-year. As expected, revenue was denied with the updated guidance we provided in our April 30th press release. As discussed, our revenue can vary significantly quarter-to-quarter because of timing. We judge our success over a longer time period that smooths out the quarter-to-quarter variation. Revenue this quarter was mainly from the sale of projects in Hungary, Utah, and Poland, and from power generation in China. Gold's profit of 6.8 million was up very significantly from last quarter and up from the same period last year. Gold's margin was almost 30%, compared to 12% in Q4 and 6% in the same period last year. The increase was due to higher contribution from NTP sales. Moving down the P&L, non-GAAP operating expense up 17% sequentially and up 4% in every year. GN expense was up due to the incremental cost associated with the capital rates in Q1 and the non-cash option expenses. Non-GAAP operating income was $4.6 million compared to non-GAAP operating income of $0.2 million in 4Q last year and non-GAAP operating loss of $0.7 million in first quarter 2020. GAAP operating income was $4.1 million and GAAP operating margin was 18%. Now operating expenses were up sequentially, but down year over year. We had a foreign exchange translation loss, which was caused by the depreciation of Europe and the Romanian realm against U.S. dollar. This led to exchange loss on the balance sheet. All this related to gap-led income attributed to regular power of 0.8 million. Earning per eight years on gap rates was one cent. Now let's review the balance sheet shown on slide 20. At the quarter end, we have cash and equivalents, including restricted cash of more than $300 million. It's about $4.5 per share. In Q1, we used a rate of direct placement to raise capital. that we will use to grow our project pipeline and for working capital. The deal has further strengthened our balance sheets, provided capital flexibility, and enhanced our ability to execute our long-term strategic goals plan. As Yiming mentioned, we significantly paid down our short-term borrowings in Q1, reduced short borrowing to $800K in Q1 from $32 million in Q4. Please note that nearly all our debt is project-based and non-recursive. Also, I would like to highlight that our debt-to-asset ratio is only 19%, a significant improvement in our capital structure. This also represented as well as the lowest debt-to-asset ratio when compared to other solar industry players. Now let's cover 2021 guidance as shown on slide 25. For full year 2021, we continue to expect total revenue in the range of $90 to $100 million and a gross margin of over 25%. And we are anticipating a profitable full year 2021 with significant profit goals compared to 2020. For the second quarter, we're guiding revenue in the range of $19 to $22 million and an overall gross margin in the range of 36% to 39%. Our 2021 outlook has two key factors. First, the COVID-19 and global economic conditions remain highly uncertain. We continue to monitor how the health effects of the pandemic are playing out, as well as the effects on the economy. We anticipate some slowdown in activity in some geographical regions in the first half of 2021. That being said, we expect to see global recovery in a number of key markets, around the world in the second half of the year. In sum, we believe it's prudent to factor in the border variability in our outlook. Second, we consider the normal fluctuation typical of the project development cycle. Overall, we focus on straight back to the solar market, Europe, US, and China. We are very optimistic about our long-term popular goals. With that, We will open up the call for Q&A. Operator, please go ahead.