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Emeren Group Ltd
3/13/2025
Hello, ladies and gentlemen. Thank you for standing by for Emory Group Limited fourth quarter 2024 earnings conference call. Please note that we are recording today's conference call. To ask a question during a session, you need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I will turn a call over to Gary Dvorak, Managing Director of the Blue Shirt Group. Please go ahead, Mr. Dvorak.
Thank you, Operator, and hello, everyone. Thank you for joining us today to discuss the fourth quarter and full year 2024 results. We released our shareholder letter after the market closed today, and it's available on our website at ir.emrin.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. Enrico Bocci, Executive Vice President of Europe. Yumin and Ke will provide an overview of our business performance and financial results, followed by a Q&A session, during which Enrico will also be available to answer questions. Before we continue, please turn to slide two. Let me remind you that remarks made during this call may include predictions, estimates, or other information that might be considered forward-looking. These forward-looking statements represent Emory 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 Emory Group's filings of the SEC. Please do not place undue reliance on these forward-looking statements, which reflect Emory Group's opinions only as the date of this call. Emory Group is not obliged to update you on any revisions to these forward-looking statements. In addition, please note that all financial numbers discussed on this call are unaudited. 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, go ahead.
Thank you, Gary, and thank you everyone for joining today. Let me start with a brief overview of our Q4 and full year results before discussing our business outlook and key financial catalysts. After that, Ke will take you through a detailed breakdown of our financial performance and 2025 guidance. 2024 was a year of resonance and disciplined execution. and strategic growth for Ameren. Despite currency halvings and project sale delays, we successfully monetized renewable energy assets, expanded our energy storage footprint, and generated positive free cash flow in Q4. Our IPP and DSA segments provided high margins and stable cash flows, while strategic project monetization strengthen our financial position. For the full year, we generated $92.1 million in revenue and $24.1 million in gross profit with a 26% gross margin. We reported an operating loss of $0.5 million, while non-cash and unrealized foreign exchange loss resulted in a $12.5 million net loss attributed to Emerald Group. However, operating cash flow improved significantly towards breakeven, reaching negative 4.2 million compared to negative 23.4 million a year ago. And adjusted EBITDA rose to 6.9 million, demonstrating disciplined financial execution. Turning to Q4 specifically, we maintained strong financial discipline and cash flow generation, delivering $34.6 million in revenue and $4.8 million in gross profit, with a solid 14% gross margin. While foreign exchange losses due to U.S. dollar strength impacted net income, our operating loss improved by 35% year-over-year in Q4, reflecting strong cost control. We also generated over $5 million in free cash flow in Q4, reinforcing our strong liquidity position. Our capital line model and early stage monetization strategy continue to support financial strengths. We ended the year with $50 million in cash, up 40% sequentially, positioning us well for growth in 2025. With a strong pipeline, expanding energy storage initiatives, and discipline execution, we are positioned to scale profitably and drive long-term shareholder value. Turning to our key milestones in Q4, we successfully closed several strategic transactions, further solidifying our leadership in renewable energy monetization and energy storage across Europe, the US, and China. In Europe, We successfully completed the COD sale of our 17 megawatt solar product portfolio in Poland with 50 megawatt under a PPA, reinforcing our strong foothold in the region. We also expanded our energy storage footprint in Italy, executing a 462 megawatt DSA for battery energy storage system with Appinja, further strengthening our leadership in the growing energy storage market. Additionally, we finalized the sale of 65 megawatt of solar projects in Germany to China through a mixed DSA slash SPA structure, underscoring the strengths of our development partnerships. In the United States, we made further progress in distributed generation by closing the COD sale of our 2.8 megawatt community solar project to Altus Power, demonstrating our ability to capture opportunities in the U.S. community solar market. Meanwhile, in China, we advanced our energy storage strategy with the successful commissioning of 18 megawatt-hour of fast projects, which are now fully integrated into Hualien Power International's virtual power plant platform. This integration enhances great stability and further strengthens our presence in China's evolving energy storage sector. These achievements highlight our ability to execute across multiple regions, efficiently monetize projects, and expand our renewable energy portfolio while reinforcing contracted cash flow generation. Now turning to our core business segments. Our high margin DSA model remains a key driver of stable revenue and early stage project monetization. In 2024, we recognized 19 million in DSA revenue, primarily from Italy and Germany. As of year end, we had DSA contracts with nine partners covering 40 projects totaling over 2.8 gigawatts. with approximately $84 million in contracted revenue expected to be realized over the next two to three years, as well as more than $100 million in uncontracted revenue currently under negotiation. Meanwhile, our IPP segment played a crucial role in supporting stable cash flow, contributing 31% of the total revenue and 64% of the total gross profit. In Q4, we optimized our portfolio across Europe and China while further advancing energy storage integration to enhance long-term profitability. Complementing these efforts, our solar development business continued to generate strong monetization opportunities. In 2024, we successfully monetized about 200 megawatts of solar PV projects across Germany, France, Spain, Holland, China, and the US, alongside 1.3 gigawatt of batch projects. These achievements reinforce the strengths of our capital light development model and our ability to efficiently recycle capital for future growth. Looking ahead, we remain very confident in our ability to execute our growth strategy and drive profitability in 2025. While project sales timing delays impacted Q4 revenue recognition, these projects remain on track to close in the first half of 2025, reinforcing near-term revenue visibility. Key drivers for our 2025 financial outlook include our strong contracted revenue base provide a solid foundation for future growth. We have 84 million contracted DSA revenue with an additional 100 million under negotiation, strengthening long-term cash flow visibility and revenue stability. Overall, with 75% of our DSA pipeline concentrated in Europe, we are positioned to capitalize on demand growth across key markets. Building on this momentum, our high-margin DSA and IPP businesses continue to generate strong gross margin and predictable cash flows, supporting sustainable and profitable expenses. Additionally, our robust monetization pipeline positions us well to capitalize on growing market demand. With approximately 4.3 gigawatts advanced storage pipeline and 2.4 gigawatts of solar PV projects, we have a clean pass clear paths for long-term growth in key regions. Further strengthening our outlook, the opening of China merchant power market in 2025 presents a significant opportunity. Our best assets are statistically positioned to capture new revenue streams through energy arbitrage, reinforcing our leadership in energy storage and grid services. With that, Let me turn the call over to our CFO, Ke Chen, to provide a more detailed breakdown of our financial performance and 2025 guidance.
Thank you, Yu-Ming. And thanks, everyone, for joining us on the call today. In Q4, we delivered $34.6 million in revenue, down 23% year-over-year, primarily due to project delays pending government approvals. However, it has surged 169% quarter by quarter by successful project monetization. While timing delays in the US and Europe impact Q4 revenue recognition, this project remained on track to close in the first half of 2025, providing strong near-term visibility. Growth profit was $4.8 million, compared to $5.6 million in Q3 2024 and $5.1 million in Q4 2023. Growth margin was 13.9%, down from 43.8% in Q3 2024, but up from even 0.3% in Q4 2023. The year-over-year improvement reflects the continued strength of our high-margin IPP and DSA business. Operating expenses were $9.2 million, up from $3.5 million in Q3 2024, but down from $11.8 million in Q4 2023. The annual decline was primarily due to reduced write-offs and the absence of asset impairment losses. Lead loss attributed to Amerigroup LTD common shareholder was $11.8 million, compared to lead income of $4.8 million in Q3 2024. and a lead loss of $2 million in Q4 2023. The increase in lead loss was primarily due to non-operational foreign exchange losses. Diluted lead loss attributed to Emerald Group LTD common shareholder per ADS was $0.23, compared to diluted lead income of $0.09 in Q3 2024, and diluted lead loss of $0.04 in Q4 2023. From a cash flow perspective, we generated $10.4 million in operating cash flow and over $5 million in free cash flow, further enhancing our financial flexibility. Cash used in investing activity was $5 million, and the cash provided by financing activity was $2.8 million. We ended Q4 2024 with $50 million in cash and cash equivalent. up 40% sequentially from 35.8 million in Q3 2024, reinforcing our strong liquidity position. Our debt-to-asset ratio at the end of Q4 2024 was around 11.2%, compared to 10.2% at the end of Q3 2024. The majority of our debt was non-recourse project financing. In 2024, Europe contributed over 70% of our total revenue, and China contributed 19%. Both generate positive operating cash flow. We are seeing a strong execution and steady growth in both regions. Turn to our 2025 outlook. We expect full-year revenue to be in the range of 80 to 100 million, with a gross margin of 30% to 33%. IPP revenue is anticipated to between $28 and $30 million, with around a 50% gross margin. GSA is expected to contribute $35 to $45 million in revenue. IPP and GSA contributors will be expected to contribute over 70% of total revenue in 2025. we anticipate achieving positive operating cash flow in 2025. For the first half of 2025, we anticipate revenue in the range of $30 million to $35 million, with a gross margin of approximately 30% to 33%. With that, let's open up the call for any questions. Operator, please go ahead.
Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by as I compile the Q&A roster. First question comes from Philip Shin of Roche Capital Partners. Your line is now open.
Hey, everyone. Thanks for taking my questions. Wanted to talk about the 25 guide. Specifically, can you share what the mix is between DSA revenue and IPP revenue, and if there's any other revenue in a third bucket? Thanks.
Bill, we just talked about this. IPP revenue will be between 28 to 30 million in 2025, and we did mention gross margin will be around 50%. DSA revenue will roughly between 35 to 45 million. So added up, IPP and DSA will contribute almost 70% of our revenue.
Great. Sorry I missed that. And you talked about how there's another incremental 100 million of DSA revenue that you're negotiating now. Do you have a sense for... what the geographic mix of that DSA revenue is. Is it also European concentrated? And then does it have similar, you know, do you expect high margins for that incremental 100 million? And then when do you think you could start to close the bulk or majority of that 100 million? Is that in the coming months or do you think it might take most of 25 to secure the 100 million? Thanks.
We target to close all of them within this year. And the couple of them, or several of them, are in the final stage to be closed within next two to three months. And more is coming. As you see that, we do have a very welcomed product pipeline on both solar and storage. we have built up the strong track record on the DSA position. And that is why that we are super confident on our 2025 guidance. Two reasons. One is, as Curtis mentioned, that the 70% of the revenue and margin will be coming from the contracted IPP and DSAs. And another confidence is coming from the to-be-billed DSA positions. And at least five to six contracts are being finalized and to be inked in the next two to three months. And more are coming.
Yeah, Phil, in terms of breakdown, I think Europe will around 70% and the U.S. will 30%.
Great. Okay. And then can you talk about the types of counterparties for the 100 million that you're negotiating? Are there any repeat customers or partners? Are they mostly new customers and counterparties? Thank you.
I think it's about half are existing customers repeated and another half are the new customers.
Okay, that's good. And then for 2025, Sorry if I missed this, but did you guys share what your cash generation or free cash flow outlook might be? If you haven't, perhaps you can give us some comments.
We're certainly talking about we expect positive operating cash flow in 2025. So we ended in 2024, $50 million. So we truly believe we should have a higher cash at the end of 2025.
Okay, great. Thanks for taking all my questions. I'll pass it on.
Thank you Phil.
Thanks.
Thank you. As a reminder, please press star 11 on your telephone keypad and wait for your name to be announced.
This is the last call for questions.
To press star 11 on your telephone keypad, Just one moment, please.
We have a follow-up question from Philip Shin. Your line is now open. Philip, did you have a follow-up question?
Yes. Can you guys hear me?
Yes.
Great. Okay. So let's talk about the delays. You know, you've consistently had a number of delays that unfortunately result in expectations or results that are weaker than expectations. So do you think the delays in Europe and the U.S. for government approvals and so forth, do you think we've seen the worst of it? Or do you think it could get worse from here? And if And if we've seen the worst of it, how much could it improve? Do you expect to see improvements in 25 or do we have to wait for 26? Thanks.
This is a very good and interesting question. What we see here is that, for example, in Spain, we could not close the deals as of the government approval. Those two major transactions we could not close. None of them. And one of them we already awaited for 18 months, and we still have not got it. But there is a deadline. The government published deadlines for 12 months and additional three months, additional three months, and deadline is coming. And we see that it is ending in less than three months. So that is one thing. I see that the European governments are moving faster. As for example, Spain, they have to have the strong supporting policies to support renewable energy, including storage. There's one example. Only uncertainty we could not foresee is in the US. But the good part is our DSA structure. Also, let me comment another one on European DSA structure. You know, we normally split the DSA payments into three to four milestones, or sometimes even five milestones. As we go through all the milestones in 2025, I mean this year, we do see the impact from the government approvals on the DSA milestones is very minimal. That's why we have the certainty or high confidence they will deliver in 2025. Interconnection approval delays in the U.S. is expected, but the most DSAs we are signing in the U.S., we are expecting only milestone one payments in 2025. Some expect milestone two, which related to interconnection approval, and we are getting them and actually want to be signed within this month, next two weeks. So we see in the future, maybe if the government in the US slows down the process of approvals, that may impact our 27, 28 DSA milestone payments, but we don't see near-term impacts, even in the US.
Okay, thanks.
In US, we also have this community solar segment, which we believe we are moving along, despite of the federal uncertainty. So, community solar, still get approved as normal. So we think those projects we are on our pipeline, we will see that execution in 2025.
Okay. So remind us for your U.S. projects what percentage is community solar and then what percentage might be larger scale in the 1 to 200-plus megawatt level?
From megawatt size, as utility scale size is a lot bigger and the community solar size is a lot smaller, so it's hard to really make the monetary adjustment or predict the financial results from the megawatt numbers, as especially the margin on development fee for big deals will be normally in single digits. And community solar is several times or many times of that margin. So on the megawatt side, I would say the total utility scale compared to community solar, I would say 80-20.
So 80% community solar.
80% utility and 20% community solar.
Sorry. Okay, got it. So the inverse, 20%. community solar. So what about for the utility-scale solar that's not community solar, do you have any AI or data center-type customers, hyperscaler-type customers that you are currently working with or that you plan to work with in future DSAs, for example?
We do have some assets in those hot data center spots, and we are building our internal expertise on data center power supplies slash data center power management. And on that part, we try to combine where our developer head, which is we talk about we are literally a developer and start from a land developer. And then we are also a developer supplying power to our customers. These two together, literally, we are a natural fit to support the data center demand. So in the house, we are building that expertise. Especially, we are doing the analysis in detail to understand the data center demand and AI demand from the power supply point of view.
So that is also another point.
We have several projects in those hotspots. That is also why some customers, they are looking at them and try to sign the DSA with us.
What percentage of the U.S. market is working with DSA frameworks? Do you think it's still very small?
It will not be small anymore. I will say that it quickly can go as big as one-third to 50% of our entire portfolio.
I mean, it's big for you, but I mean for the overall market. Is it becoming more common for the rest of the markets?
I personally don't think so. The reason is as a listing company, we have to provide numbers to the investors on quarterly basis. So naturally, it's not really advantages for us to wait for several years to really finally monetize. That is why in the last 18 months, we strategize the whole operation of the company and put up the DSA strategy across the board. And we are signing many DSAs, as we mentioned in this script, in Europe, and we will be signing more. But as now we see that the people are actively signing, but when the new market is coming, we see within the next 12 months, the market will be in favor of the renewable energy and battery storage. I think we don't need to sign DSAs anymore.
Okay, got it.
That applies to many other developers too.
Interesting. Thank you. Maybe one more and I'll pass it on. As it relates to power prices, what is the base case? Maybe talk about the top three countries in Europe. What's the base case you have for those end markets? We hosted a webinar with WoodMac recently and the outlook for retail power prices in Europe in general was maybe a little bit of an increase in 25, but then maybe it's flat or down even for 26 and 7. And so do you expect power prices to remain, you know, kind of at current levels, or do you see upside, or what's your base case as you develop these projects and sell against them? Thanks.
We have IPP operation or the COD solar assets. in two countries now, in Hungary and Poland. And we also definitely have in China. China is stable, the power price is stable. And Europe, we see the price remains to be very nice compared to before COVID or before the war. But we do have noticed that in some countries like Spain, the price is going down in the last 12 to 18 months. and goes down from as high as eight to nine cents or the eight to nine cents per kilowatt hour to all the way to below three cents. And even corporate PPAs only give you about 3.5 to four cents. But in general, European market is a lot nicer than the US market. The beauty of US is we still enjoy the tax equity of the 30% or 40%. And that helps. While U.S. tariff, as you know, you know better maybe than I do, that we are looking at the four or five even higher, four or five cents or even higher.
Phil, I just want to add, our Brownstone project in UK is under strong PPA still. It's much higher than the current version price in the UK. So that's an advantage we have with this strong PPA with our Brownstone project.
Okay. Thank you for taking all my questions.
Thank you, Phil.
Thank you. Just one moment for our next question, please. Our next question comes from Samara Joshi from HC Wainwright. Your line is now open.
Great, thanks. Hey, Yumin. Thanks for taking my questions. So the range of top line expectations for this year, the DSA seems to be like a wide range of 10 million from 35 to 45 million. What are the, like, what will it make, how will it be at the lower end versus the higher end? Are there projects, big projects that you expect to materialize and timing is an issue? Or are there some other things at play?
I think the range is because accounting will have to really Some of the project, like we said, is DSA slash SPA. So we have to trade this differently. It's SPA and DSA. So that's why there's big rents. I believe that's a major reason. So it's mainly accounting category.
Okay, understood. And then the push out of the project from this year into fourth quarter into next year, or rather fourth quarter into the first half, uh do we know what uh the size of those projects was like if those had materialized what would the revenue have been uh for the fourth quarter i think uh it's around uh uh around 10 million yeah in terms of pretty pretty big chunk okay And then also the outlook for gross margins. I think you mentioned the overall gross margins, the IPP gross margins. But I don't think guidance for DSA gross margins was provided. Is there a reason for that? And does it depend on project to project? Or how should we look at that DSA segment gross margin?
In general, as I also mentioned, you may understand our DSA milestone payment structure. In normal case that the milestone, early milestone have lower margin and later milestone will be having a higher margin. For example, we normally try to book all costs in the first two milestones. So the margin in the earlier payment or early years of the DSA will be lower. And that put our 2025 margin for the DSA for the new ones, newer ones, lower. Got it. You see my point? Yes, I understand. You know, we mentioned we have $84 million remaining DSA contracted revenue. We already recognized 19. And that 19 we recognized in 2024 has lower margin compared to the 35 to 45 we are building in 2025. I will say that at least half of the 35 to 45 margin expected in 2025 will generate higher margin and other half as they are newer or they are milestone one payment, that will be a lower margin.
Yeah, yeah. No, that was a good explanation. Thanks for that. And one last one, I know Phil also asked about this, the $100 million that they are additionally negotiating. Is there a possibility of upside from those projects, like if you sign those in the next few months, Is there any possibility that your revenues for 2025 will be able to recognize some of those revenues or is it too early?
We learned the lessons in the last couple of years. We tried to understand the market and also precisely make the predictions or guidance for numbers. The DSA on the revenue and the pricing of the DSA we are going to close, let's say, within Q2 this year, next three months. The price there, the revenue expectation is there for the milestone one payment, and those covers about five to six DSAs to be signed. But the potential upside may come in the DSAs we are negotiating to be closed in Q3, or late Q2, or June, July, August timeframe. We do see possibility that that provide us upside as more DSAs will be coming as the $100 million expectation. If we successfully sign all $100 million, the milestone one payment will absolutely help the 2025 revenue. Understood.
That's good.
In the guidance, we only consider part of it which, literally speaking, the ones to be closed within the next two months.
Got it. Understood. And then, just actually, this probably will be the last one. Is there a mix of BESS versus only PV? that you are looking at maybe different in different geographies or how do you see the project mix in your pipeline?
It's a whole mixture. As you see that we presented already that we started our storage business, our initiative over two and a half years ago. And the point is almost every single country we have storage assets. And PV, either big or small, normally big ones in the US and in Europe, we try to sign DSAs. And smaller ones, we try to do it all the way to NTP and sell that at this totally risk-free format and make higher margins.
I think that you will definitely see more storage from U.S. because we launched the first storage last year, and you will see more in U.S. Definitely, again, we have a strong pipeline, both from solar and storage, and then you will see more from different countries, from Europe. We talk about Italy a lot, but you see we launched Germany, France, so you will definitely see more from different countries, and also, again, it's a good mix of solar and storage.
Got it. Thanks a lot for taking my questions.
Thank you.
Thank you for all the questions. This concludes the Q&A session. I will now hand back to our CEO, Yu Min.
Thank you, operator. The global transition to renewable energy continues to accelerate. creating strong tailwinds for solar and energy storage. With disciplined execution, a solid contracted revenue base, and a growing presence in high margin segments, we are well positioned for sustained growth. As we enter 2025, we remain focused on executing our strategy across DSA, IPP, and energy storage, reinforcing our leadership in the sector. Backed by a strong financial foundation and a commitment to innovation, we are confident in our ability to seize new opportunities, drive long-term value creation, and deliver meaningful returns for our shareholders.
Thank you all, Peter. Thank you. This concludes today's conference call.
Thank you for participating. You may now disconnect.