Hello, ladies and gentlemen. Welcome and thank you for standing by, for Emeren Group Limited Third Quarter 2024 Earnings Conference Call. Please note that we are recording today's conference call. [Operator Instructions] I will now turn over the call to Gary Dvorchak, Managing Director of The Blueshirt Group. Please go ahead, Mr. Dvorchak..

Okay. Thank you, operator, and hello, everyone. Thank you for joining us today to discuss third quarter 2024 results. We released our shareholder letter after the market closed today and it is available on our website at ir.emeren.com.

We also provided a supplemental presentation that's posted on our IR website, that will reference during our prepared remarks. On the call with me today are Mr. Yumin Liu, Chief Executive Officer, and Mr. Ke Chen, Chief Financial Officer. Before we continue, please turn to Slide 2.

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 Emeren 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 Emeren Group's filings with the SEC. Please do not place undue reliance on these forward-looking statements, which reflect Emeren Group's opinions only as of the date of this call. Emeren Group is not obliged to update you on any revisions to these forward-looking statements.

In addition, please note that all financial numbers discussed in this call are unaudited. Also, please note that unless otherwise stated, all figures mentioned during the call are in U.S. dollars. With that, let me now turn the call over to Mr. Yumin Liu. Yumin, go ahead..

advancing early stage projects, expanding our DSA partnerships across Europe and U.S., and refining our strategies to unlock the full potential of our development portfolio.

While certain project sales in Europe may extend into 2025 due to the delays in government approvals, our core business lines remain robust, and we are confident in our ability to deliver substantial growth in the fourth quarter driven by a strong pipeline and favorable market conditions.

With that, let me turn the call over to our CFO, Ke Chen to discuss our financial performance and guidance.

Ke?.

Thank you, Yumin, and thanks, everyone, again for joining us on the call today. Our third quarter revenue totaled $12.9 million coming below expectation due to delayed project closing, pending government approvals.

Nevertheless, revenue was bolstered by strong performance in our high margin IPP segment and expanding DSA activity across Europe and the U.S. With a robust pipeline, we are well positioned for growth as these delayed projects are sold. Turning to our revenue by segment.

IPP was primary driver, contributing 73% of our total revenue, followed by DSA at 10%. Notably, DSA includes revenue generated from development servers throughout the project lifecycle, while revenue from DSA project ownership transfer is generated is generally recognized as project development revenue.

Regarding our gross profit in Q3, it was $5.6 million, compared to $9.4 million in Q2 2024 and $5.7 million in Q3 2023. Gross margin was 43.8% compared to 31.2% in Q2 2024 and 40.8% in Q3 2023. The year-over-year increase was due to the favorable margin within the revenue from DSA and IPP projects.

Our operating expenses were $3.5 million down from $6.4 million in Q2 2024 and $9.6 million in Q3 2023. The decrease was mainly due to lower G&A expenses, thanks to our continued cost optimization program. Net income attributable to Emeren Group Ltd.

common shareholder was $4.8 million, a significant rebound from net income of $0.4 million in Q2 2024, as well as a net loss of $9.4 million in Q3 2023. Diluted net income attributable to Emeren Group Ltd. common shareholders per ADS was $0.09 compared to diluted net income of $0.01 in Q2 2024 and diluted net loss of $0.17 in Q3 2023.

Cash used in operating activity was $5.6 million cash used in investing activity was $4.2 million, and cash used in financing activity was $2 million. Moving to balance sheet. Cash and cash equivalents at the end of Q3 2024 were $35.8 million compared to $50.8 million in Q2 2024.

Our debt to asset ratio at the end of Q3 2024 was 10.18% compared to 10.22% at end of Q2 2024. Shifting gears to our outlook.

For Q4, we anticipate revenue between $40 million and $45 million, with a project gross margin of 20% to 25%, in line with the strategic move from sale to IPP for the 52.4 megawatt Hungary projects and the revised timing of some project sales.

We have adjusted our full year revenue guidance to a range of $97 million to $102 million, with an expected gross margin of approximately 30%. We do expect to achieve EBITDA of $15 million to $20 million in 2024. Our IPP and DSA segment are demonstrating solid progress.

For 2024, we reaffirm our expectation for IPP revenue to be between $24 million and (ph) $26 million, with gross margin of around 50%. We expect our DSA to be more than $20 million in revenue during 2024. By maintaining a disciplined approach to cost efficiency and operational excellence.

We remain focused on advancing our renewable energy initiative and capture new opportunities for sustainable value creation. In 2025, EBITDA contribution from IPP and the DSA segment are expected to exceed $50 million. With that, let's open up the call for any questions. Operator, please go ahead..

Thank you. [Operator Instructions] Our first question comes from the line of Philip Shen of Roth Capital Partners. Please go ahead..

Hi, everyone. Thanks for taking my questions. First one is on the election results. We have a red sweep officially now and the Inflation Reduction Act could be changed. So I was wondering, you just signed a DSA with -- in the U.S. with a partner in the U.S.

And was wondering, if you have any automatic adjusters or how are you accounting for this potential risk to the ITC as you try to sign more DSAs in the states? Thanks..

It's a very good question. In fact, we do have planned for this election results. And our action in the U.S. or the whole team's practice remains unchanged. We see that the -- all the changes, potential upcoming changes, will cause significant negative -- will have significant negative impacts, especially to upstream.

But to the downstream, we believe we do have time to execute our available DSAs and the contracts to be negotiated. And the DSAs we just signed in California, including one very near term project, which will be executed starting early next year.

In our humble opinion, we don't think that will be much impacted and others will continue the development path. And I think if it's an impact to the whole industry, our portfolio will remain to be valuable in the whole development process..

Okay. You mean in terms of the potential changes, we published on Monday that the base 30% ITC may require domestic content just to get the 30%.

So, if that kind of a change happens, have you factored that into your planning?.

In fact, after we signed the DSA, the development risk has been passed to the investor. Although, we are planning ahead with our partner/investor to face the upcoming challenges, but at this time, I think we have a good handle for it. Especially, we do see the significant downside or down the -- the price cut from the CapEx side..

Okay. Thank you..

And, Phil, I will say, we mentioned this DSA is related to the storage space. So the investors are looking at, again, the pricing overcharge. They are not depending on the credit at this moment..

Okay.

So your battery DSA does not require the ITC?.

It does require ITC..

Okay.

So if the ITC requires domestic content, do you think you have the ability to meet domestic content for that battery solution?.

We are actively seeking solutions to prepare for this challenge. At this time, we are working on it..

Yeah. And ultimately, we don't know the details yet and we're still very early. Okay. So let's shift gears to the revenue miss for Q3, those projects that were pushed out into Q4. I think, Yumin, you said that you expect that these projects should get approved in Q4.

What is the risk that these delays sustain?.

I want to give you one small example that the -- I don't know if you remember that over 12 months ago, about 14 months ago, we closed a deal in Spain, 29 megawatts solar power we sold to a party. And we forecasted the deal will be finally closed by the end of this year. But, unfortunately, after 14 months, we are still waiting.

Although, we do have received just last week the positive news that the final approval is to be expected as early as within this month. But the holiday season is coming, so we do expect the, most likely the closing will happen in Q1 next year.

So this is one example that the extended delay of more than 14 months or 15 months drag along the whole closing of the projects. And that's one example, and, also, we have other three projects. We received approvals in the last two weeks, but we need time to get the final use permit, which take about six to eight weeks.

If we are lucky, we can get them done by the end of the year. If not, it has to be pushed into January. So those are the examples that the, extremely long approval process was never expected by the management team and local team. So that that's the reason..

Okay. So I understand.

And so when we look at your 2025 guidance, do you think you have factored enough conservatism into your guidance?.

Yes..

So have you increased the conservatism for this guide relative to maybe one year ago or six months ago?.

Yes. Phil, again, when we're talking about the EBITDA for next year, over $50 million. Again, we're looking at IPP/DSA business model only because those two are very predictable. And, our IPP business is very stable and growing steadily, so we were confident that will be around $18 million to $20 million EBITDA next year.

And, we're looking at our DSA contract. We're looking at all the milestones going to happen in the 2025. We're very confident the rest of them will come from the DSA business model we're talking about, like, contract is $69 million and the potential to be signed another $100 million.

So we're conservative in terms of the rest of DSA contribution of EBITDA in 2025. So we believe that's very conservative..

Okay. Thank you.

In terms of the $50 million, what percentage is IPP versus DSA for ‘25?.

Like, I said, $50 million around, I will say, $18 million to $20 million is from IPP, rest of it will be DSA..

Okay. And then so let's say it's, $20 million for IPP and then $30 million for….

Yeah..

Yes. $30 million for DSA. Yes. And what percentage of that $30 million is U.S.

versus Europe?.

About 90% of the whole total is coming from Europe and only a little bit less than 10% from U.S..

Okay. Great. Okay. As the U.S. goes through changes, I think that's -- that mix focus on Europe is good. Great. Well, thank you for taking many questions. I'll pause here and pass it on..

Thank you, Phil..

Thank you. [Operator Instructions] I’m not showing any further questions in the queue. I'd like to turn the conference back to Mr. Liu for any closing remarks..

Okay. Thank you, operator. The global shift towards renewable energy is fueling strong momentum in the solar industry, positioning solar and battery storage as a key component of the future energy mix.

The demand for solar power to support energy intensive technologies like AI and blockchain is especially promising as solar provides a scalable cost effective solution. Looking ahead, we are well positioned to capitalize on accelerating adoption of the solar technology.

With our expertise, strategic partnerships and strong financial foundation, we are advancing towards our goal of becoming a global leader in renewable energy and excited to drive a more sustainable future..

Thank you again for joining our call today. You may now disconnect. Thank you and have a great day..