Canadian Solar Reports Second Quarter 2022 Results

Rhea-AI Summary

Canadian Solar (NASDAQ: CSIQ) reported robust Q2 2022 results, achieving solar module shipments of 5.06 GW, exceeding previous guidance. Revenue soared 62% year-over-year to $2.31 billion, surpassing the $2.2-$2.3 billion forecast, while gross margin reached 16.0%. Net income attributable to the company was $74 million, or $1.07 per diluted share. The global solar project pipeline expanded to 26 GWp, with battery storage expanding to over 31 GWh. Management raised the full-year revenue guidance to $7.5-$8.0 billion, highlighting expectations for continued growth driven by demand for clean energy.

Positive

• 62% year-over-year revenue growth to $2.31 billion.
• Gross margin of 16.0%, exceeding prior guidance.
• Net income of $74 million, a significant increase from previous quarters.
• Expansion of global solar project pipeline to 26 GWp.
• Raised full-year revenue guidance to $7.5-$8.0 billion.

Negative

• Operating expenses increased to $255 million, up from $165 million quarter-over-quarter.
• Cost pressures from rising polysilicon prices affecting profitability.
• Non-recourse debt decreased but total debt remains at $2.7 billion.

GUELPH, ON, Aug. 18, 2022 /PRNewswire/ -- Canadian Solar Inc. ("Canadian Solar" or the "Company") (NASDAQ: CSIQ) today announced financial results for the second quarter ended June 30, 2022, with solar module shipments, revenue and gross margin all at or exceeding the high end of prior guidance.

Highlights

• Solar module shipments of 5.06 GW, at the high end of 4.9 GW to 5.1 GW guidance range.
• 62% increase in revenue year-over-year ("yoy") to $2.31 billion, above the high end of $2.2 billion to $2.3 billion guidance range.
• 16.0% gross margin exceeds the guidance range of 14.5% to 15.5%.
• Net income attributable to Canadian Solar of $74 million, or $1.07 per diluted share.
• Accelerating upstream capacity expansion plans to further increase control over supply chain.
• Global Energy solar project pipeline expands to 26 GWp and storage pipeline expands to over 31 GWh, as of June 30, 2022.
• Carve-out IPO of CSI Solar Co., Ltd. ("CSI Solar" or the "CSI Solar subsidiary") remains on track awaiting completion of the CSRC registration.

Dr. Shawn Qu, Chairman and CEO, commented, "We achieved strong results in the second quarter of 2022, with solar module shipments, revenue and gross margin all at or exceeding the high end of prior guidance. Sequentially, we grew our module shipments by nearly 40% and battery storage solutions revenues by 2.8 times, while significantly expanding our profitability and completing a large volume of project sales. Our capacity growth strategy is also well on track, which we expanded per our recent announcement to invest in our own polysilicon capacity in a region rich in renewable energy resources. This will allow us to gain further control over sourcing, technology and supply chain, and is part of a long-term plan to increase our market share while meaningfully reducing the carbon footprint of our supply chain. We provide additional details of our environmental efforts and performance in our latest ESG Sustainability Report, published last month.

"We are also excited to see the Inflation Reduction Act, or IRA, in the U.S. coming into effect. We believe it will drive a big acceleration in demand for clean energy, especially for solar energy and battery storage.

"Separately, CSI Solar's carve-out IPO remains on track awaiting registration with the China Securities Regulatory Commission."

Yan Zhuang, President of Canadian Solar's CSI Solar subsidiary, said, "CSI Solar delivered strong results in the second quarter, significantly growing volume and increasing pricing, while taking cost control measures in a difficult environment as polysilicon prices continue to go up. Our performance in the second quarter was also boosted by a substantial foreign exchange gain from a strong U.S. Dollar relative to the Renminbi. From a market standpoint, we are encouraged by signs of a shift in customer behavior driven by a growing awareness of solar energy's attractive economics and its importance in energy security and climate change mitigation efforts, especially when paired with battery storage. Reflecting this positive trend, our battery storage shipments in the first half of 2022 have already exceeded 1 GWh, a record level for us. We will continue to build on our strong channels and relationships, especially in premium markets, and make capacity expansion preparations to accelerate our global market share gains in the coming years." 

Ismael Guerrero, Corporate VP and President of Canadian Solar's Global Energy subsidiary, said, "We delivered significant growth in the second quarter by monetizing approximately 880 MWp of project sales across Australia, the U.S., Japan and the U.K. We also continued to expand and diversify our global project pipeline, strengthening our leadership position in key markets while allowing us to be more selective in developing the highest quality assets. We are particularly encouraged by the passing of the IRA in the U.S. as our subsidiary, Recurrent Energy, has one of the largest and best quality project pipelines, with a total of 8 GWp of solar and 16.5 GWh of battery storage. Additionally, we are making progress executing on our O&M (operations and maintenance) growth strategy to increase the share of stable, recurring income, including a recent expansion of our platform in Europe, as we evaluate complementary growth opportunities worldwide."

Dr. Huifeng Chang, Senior VP and CFO, added, "In the second quarter, we achieved 85% sequential growth in revenue to $2.3 billion and doubled our gross profit to $371 million, achieving a 16% gross margin. We were able to support the accelerated growth rate and reduce the impact of inflation due to our prior strategic decision to increase inventory during the first quarter. We continue to prioritize cash generation and are pleased with the increase in net cash flow provided by operating activities to $293 million in the second quarter of 2022, from $159 million in the first quarter of 2022. We ended the second quarter with a total cash position of $1.9 billion, giving us significant financial flexibility to fund long-term growth opportunities, including accelerating our upstream capacity expansion."

Second Quarter 2022 Results

Total module shipments recognized as revenues in the second quarter of 2022 were 5.06 GW, up 37% yoy. Of the total, 126 MW were shipped to the Company's own utility-scale solar power projects.

Net revenues in the second quarter of 2022 were $2.31 billion, up 85% quarter-over-quarter ("qoq") and 62% yoy. The sequential and yoy increases were mainly driven by higher project sales, higher solar shipment volumes and average selling price, and significant growth in the Company's battery storage solutions business.

Gross profit in the second quarter of 2022 was $371 million, up 105% qoq and 101% yoy. Gross margin in the second quarter of 2022 was 16.0%, above prior guidance, and compared to 14.5% in the first quarter of 2022. The sequential gross margin increase was mainly driven by higher module pricing, lower manufacturing costs from the depreciation of the Renminbi relative to the U.S. Dollar and scale benefits from higher volume.

Total operating expenses in the second quarter of 2022 were $255 million compared to $165 million in the first quarter of 2022 and $158 million in the second quarter of 2021. The sequential increase was mainly driven by higher shipping and handling expenses and an impairment charge related to certain manufacturing assets.

Depreciation and amortization charges in the second quarter of 2022 were $63 million, compared to $66 million in the first quarter of 2022 and $66 million in the second quarter of 2021.

Net foreign exchange and derivative gain in the second quarter of 2022 was $6 million, compared to a net gain of $3 million in the first quarter of 2022 and a net loss of $3 million in the second quarter of 2021.

Income tax expense in the second quarter of 2022 was $28 million, compared to a $5 million income tax benefit in the first quarter of 2022 and a $2 million income tax benefit in the second quarter of 2021. The expense was a result of the Company's higher income before income tax.

Net income attributable to Canadian Solar in the second quarter of 2022 was $74 million, or $1.07 per diluted share ("diluted EPS"), compared to net income of $9 million, or $0.14 per diluted share, in the first quarter of 2022, and net income of $11 million, or $0.18 per diluted share, in the second quarter of 2021.

For the three months ended June 30, 2022, diluted EPS of $1.07 was calculated to include the dilution effect of the outstanding convertible notes. Diluted EPS of $1.07 was calculated from total earnings of $76 million, adding back the 2.5% coupon of $1.3 million, divided by 71.1 million diluted shares, including 6.3 million shares issuable upon the conversion of the convertible notes. For the three months ended March 31, 2022, diluted EPS of $0.14 was calculated from total earnings of $9 million divided by 64.7 million diluted shares. For the three months ended June 30, 2021, diluted EPS of $0.18 was calculated from total earnings of $11 million divided by 61.3 million diluted shares.

Net cash flow provided by operating activities in the second quarter of 2022 was $293 million, compared to net cash flow provided by operating activities of $159 million in the first quarter of 2022. The increase in operating cash inflow was mainly driven by higher earnings and monetization of project assets.

Total debt was $2.7 billion as of June 30, 2022, unchanged from March 31, 2022. Non-recourse debt used to finance solar power projects decreased to $264 million as of June 30, 2022, from $550 million as of March 31, 2022, mainly due to the monetization of project assets.

Corporate Structure

The Company has two business segments: Global Energy and CSI Solar, which operate as follows:

The Global Energy segment carries out the Company's global project development activities for both solar and battery storage project development, which include sourcing land, interconnection agreements, structuring PPAs and other permits and requirements. The Global Energy segment develops both stand-alone solar and stand-alone battery storage projects, as well as hybrid solar plus storage projects. Its monetization strategies vary between develop-to-sell, build-to-sell, and build-to-own, depending on business strategies and market conditions, with the goal of maximizing returns, accelerating cash turn, and minimizing capital risk.

The CSI Solar segment consists of solar module manufacturing and total system solutions, including inverters, solar system kits and EPC (engineering, procurement and construction) services. The CSI Solar segment also includes the Company's battery storage system integration business, delivering bankable, end-to-end, turnkey battery storage solutions for utility scale, commercial and industrial, and residential applications. These storage systems solutions are complemented with long-term service agreements, including future battery capacity augmentation services.

Global Energy Segment

Canadian Solar has one of the world's largest and most geographically diversified utility-scale solar and energy storage project development platforms, with a strong track record of originating, developing, financing, and building over 6.8 GWp of solar power plants across six continents. The Company has built a leadership position in solar project development with 26 GWp total pipeline, as well as in energy storage project development with over 31 GWh of aggregate pipeline.

The continued pipeline expansion and strong project development track record will support Global Energy's growth in three key areas:

1. Project sales: The Company plans to grow its volume of project sales by a compound annual growth rate of approximately 50% to 2026, while holding and accumulating assets through investment vehicles (see below) in order to better capture asset value.

2. Investment vehicles: The Company is optimizing its project monetization strategy by establishing local investment vehicles that will help maximize the value of its project assets. The Company also intends to retain minority ownership in these vehicles. By 2026, the Company plans to reach 1.3 GW of combined net ownership in solar power projects through these vehicles. This approach will help the Company build and grow a stable base of long-term cash flows from contracted electricity. The Company plans to recycle a large portion of the capital into developing new solar projects for growth. Meanwhile, Canadian Solar expects to capture additional operational value throughout the partial ownership period, including long-term cash flows from power sales, O&M, asset management and other services (see point 3). The Company currently owns a 15% stake in the Canadian Solar Infrastructure Fund ("CSIF", TSE: 9284), the largest Japanese infrastructure fund listed on the Tokyo Stock Exchange, and has also established the CSFS Fund I, a closed-ended alternative investment fund of a similar nature in Italy. Through launching these localized vehicles, Canadian Solar is building its expertise in designing investment vehicles in local markets that will help maximize the value of its project assets.

3. Services: Canadian Solar currently manages over 3.1 GW of operational projects under long-term O&M agreements, and an additional 2.4 GW of contracted projects that will be operated and maintained by the Company once they are placed in operation. The Company's target is to reach 20 GW of projects under O&M agreements by 2026.

Management targets to achieve the following over the next few years:

Global Energy Targets	2021A	2022E	2023E	2024E	2025E	2026E
Annual Project Sales, GWp	2.1	2.1-2.6	2.8-3.3	3.5-4.0	4.0-4.5	4.3-4.8
Operational O&M Projects, GWp	2.1	4.5	7.5	11	15	20
Net Cumulative Projects Retained, MWp*	292	370	630	1,000	1,100	1,300
Gross Cumulative Projects Retained, MWp*	748	1,500	2,580	3,500	4,000	5,000

*Net projects retained represents CSIQ's net partial ownership of solar projects; the gross number represents the aggregate gross size of projects, including the share which is not owned by CSIQ.

Solar Project Pipeline

As of June 30, 2022, the Company's total project pipeline was 26.2 GWp, including 1.3 GWp under construction, 3.9 GWp of backlog, and 21.0 GWp of projects in advanced and early-stage pipelines. We have updated our project pipeline classification as follows:

• Backlog projects are late-stage projects that have passed their Risk Cliff Date and are expected to start construction in the next 1-4 years. A project's Risk Cliff Date is the date on which the project passes the last high-risk development stage and varies depending on the country where it is located. This is usually after the projects have received all the required environmental and regulatory approvals, and entered into interconnection agreements, feed-in tariff ("FIT") arrangements and PPAs. Over 90% of projects in backlog are contracted (i.e., have secured a PPA or FIT), and the remaining are reasonably assured of securing PPAs.
• Advanced pipeline projects are mid-stage projects that have secured or have more than 90% certainty of securing an interconnection agreement.
• Early-stage Pipeline projects are early-stage projects controlled by Canadian Solar that are in the process of securing interconnection.

The following table presents Global Energy's total solar project development pipeline.

	Total Project Pipeline (as of June 30, 2022) – MWp*
Region		In Construction	Backlog	Advanced Pipeline	Early-Stage Pipeline	Total
North America		-	601	2,767	4,736	8,104
Latin America		907**	2,469**	3,417	1,040	7,833
Europe, the Middle East and Africa ("EMEA")		21	379	4,033	1,811	6,244
Japan		145	157	-	105	407
Asia Pacific excluding Japan and China		-	38	137	1,762	1,937
China		250	300	-	1,170	1,720
Total		1,323	3,944	10,354	10,624	26,245
*All numbers are gross MWp. **Including 311 MWp in construction and 517 MWp in backlog that are already sold to third parties

Battery Storage Project Pipeline

In addition to developing utility-scale solar power projects, the Global Energy segment has also been developing hybrid solar plus energy storage projects, as well as stand-alone battery storage projects. Since the first quarter of 2021, the Company has been co-hosting energy storage facilities with solar power plants on the same piece of land for nearly all projects under development. By using a single interconnection point per project, the Company expects to significantly enhance the efficiency of its development and the value of its assets under development.

Canadian Solar's storage development business model also includes signing storage tolling agreements with a variety of power purchasers, including community choice aggregators, investor-owned utilities, universities, and public utility districts. In addition, the Company has signed development services agreements to retrofit operational solar projects with battery storage, many of which were previously developed by the Company.

The table below sets forth Global Energy's total storage project development pipeline.

Storage Project Development Backlog and Pipeline (as of June 30, 2022) – MWh
Region		In Construction	Backlog	Advanced Pipeline	Early-Stage Pipeline	Total
North America		1,400	-	6,319	8,760	16,479
Latin America		-	1,300	2,806	970	5,076
EMEA		-	82	1,324	4,178	5,584
Japan		-	-	-	19	19
Asia Pacific, excluding Japan and China		20	-	-	2,320	2,340
China		-	300	100	1,400	1,800
Total		1,420	1,682	10,549	17,647	31,298

Solar Power Plants and Battery Storage Projects in Operation

As of June 30, 2022, the Company's solar power plants in operation totaled 311 MWp, with a combined estimated net resale value of approximately $270 million to Canadian Solar. The estimated resale value is based on selling prices that Canadian Solar is currently negotiating or comparable asset sales.

Solar Power Plants in Operation – MWp*
Latin America	Japan	Asia Pacific ex. Japan and China	China	Total
166	48	15	82	311

*All numbers are net MWp owned by Canadian Solar; total gross MWp of projects is 577 MWp, including volume that is already sold to third parties.

Operating Results

The following table presents select unaudited results of operations data of the Global Energy segment for the periods indicated.

Global Energy Segment Financial Results (In Thousands of U.S. Dollars, Except Percentages)
	Three Months Ended				Six Months Ended
	June 30, 2022	March 31, 2022	June 30, 2021		June 30, 2022	June 30, 2021
Net revenues	553,984	92,966	280,614		646,950	751,676
Cost of revenues	473,979	75,130	268,855		549,109	626,892
Gross profit	80,005	17,836	11,759		97,841	124,784
Operating expenses	24,326	18,847	15,632		43,173	43,576
Income (loss) from operations*	55,679	(1,011)	(3,873)		54,668	81,208
Gross margin	14.4 %	19.2 %	4.2 %		15.1 %	16.6 %
Operating margin	10.1 %	-1.1 %	-1.4 %		8.5 %	10.8 %
* Income (loss) from operations reflects management's allocation and estimate as some services are shared by the Company's two business segments.

CSI Solar Segment

CSI Solar's 2022 and 2023 capacity expansion targets are set forth below.

Manufacturing Capacity, GW*
	Dec. 2021	Jun. 2022	Dec. 2022	Dec. 2023
	Actual	Actual	Plan	Plan
Ingot	5.4	5.4	20.4	25.0
Wafer	11.5	11.5	20.0	25.0
Cell	13.9	13.9	19.8	35.0
Module	23.9	27.9	32.0	50.0

*Nameplate annualized capacities at said point in time. Capacity expansion plans are subject to change without notice based on market conditions and capital allocation plans.

Operating Results 

The following table presents select unaudited results of operations data of the CSI Solar segment for the periods indicated.

CSI Solar Segment Financial Results*  (In Thousands of U.S. Dollars, Except Percentages)
	Three Months Ended						Six Months Ended
	June 30, 2022	March 31, 2022	June 30, 2021				June 30, 2022	June 30, 2021
Net revenues	1,816,410	1,209,994	1,183,958				3,026,404	1,879,110
Cost of revenues	1,526,755	1,034,165	1,028,470				2,560,920	1,656,164
Gross profit	289,655	175,829	155,488				465,484	222,946
Operating expenses	227,262	143,931	140,516				371,193	260,642
Income (loss) from operations	62,393	31,898	14,972				94,291	(37,696)
Gross margin	15.9 %	14.5 %	13.1 %				15.4 %	11.9 %
Operating margin	3.4 %	2.6 %	1.3 %				3.1 %	-2.0 %
*Includes effects of both sales to third-party customers and to the Company's Global Energy segment. Please refer to the attached financial tables for intercompany transaction elimination information. Income (loss) from operations reflects management's allocation and estimate as some services are shared by the Company's two business segments.

The table below provides the geographic distribution of the net revenues of CSI Solar:

CSI Solar Net Revenues Geographic Distribution* (In Millions of U.S. Dollars, Except Percentages)
	Q2 2022	% of Net Revenues		Q1 2022	% of Net Revenues		Q2 2021	% of Net Revenues
Asia	587	33		473	41		527	46
Americas	742	42		453	39		421	37
Europe and others	431	25		231	20		201	17
Total	1,760	100		1,157	100		1,149	100

*Excludes sales from CSI Solar to Global Energy.

CSI Solar shipped 5.06 GW of modules to more than 70 countries in the second quarter of 2022. The top five markets ranked by shipments were China, the U.S., Spain, Brazil and Germany.

Battery Storage Solutions

Within CSI Solar, the battery storage solutions team provides customers with competitive turnkey, integrated battery storage solutions, including bankable and fully wrapped capacity and performance guarantees. These guarantees are complemented with long-term service agreements, which include future battery capacity augmentation services and bring in long-term, stable income.

The table below sets forth CSI Solar's battery storage system integration's project pipeline as of June 30, 2022.

	LTSA (Long Term Service Agreement)	Contracted/ In Construction	Forecast	Pipeline	Total
Storage (MWh)	861	1,892	40	8,242	11,035

LTSA projects are operational battery storage projects delivered by CSI Solar that are under multi-year long-term service agreements and generate recurring earnings. Contracted/in construction projects are expected to be delivered within the next 12 to 18 months. Forecast projects include those that have more than 75% probability of being contracted within the next 12 months, and the remaining pipeline includes projects that have received exclusivity agreements or have been shortlisted, but still have a below 75% probability of being contracted.

Business Outlook

The Company's business outlook is based on management's current views and estimates given factors such as existing market conditions, order book, production capacity, input material prices, foreign exchange fluctuations, anticipated timing of project sales, and the global economic environment. This outlook is subject to uncertainty with respect to, among other things, customer demand, project construction and sale schedules, product sales prices and costs, the global impact of the ongoing COVID-19 pandemic and shutdowns, supply chain constraints, and geopolitical conflicts. Management's views and estimates are subject to change without notice.

For the third quarter of 2022, the Company expects total revenues to be in the range of $2.0 billion to $2.1 billion. Gross margin is expected to be between 15.0% and 16.5%. Total module shipments recognized as revenues by CSI Solar are expected to be in the range of 6.0 GW to 6.2 GW, including approximately 140 MW to the Company's own projects.

For the full year of 2022, the Company raises total revenue guidance to $7.5 billion to $8.0 billion, from $7.0 billion to $7.5 billion previously. The Company expects full year volume targets for CSI Solar and Global Energy to remain unchanged from the ranges communicated in the prior quarter: total module shipments of 20 GW to 22 GW and battery storage shipments of 1.8 GWh to 1.9 GWh (CSI Solar), and total project sales of 2.1 GW to 2.6 GW (Global Energy).

Dr. Shawn Qu, Chairman and CEO, commented, "We are off to a strong first half for 2022, and expect continued solar module volume growth through the remainder of the year as we ramp up capacity towards 2023 volume growth targets. The second quarter will likely be the largest quarter of the year for us due to the timing of project sales and battery storage shipments. However, we expect profitability to remain healthy through the second half of the year, driven by continued manufacturing processing cost reductions and lower logistics costs partially offset by higher polysilicon prices. We continue to build on our long track record of innovation, and we are excited to officially introduce our long-awaited battery storage products for utility and residential applications in the upcoming Solar Power International exhibition in California. In a gradually improving market backdrop aided by strong policies such as the recently passed Inflation Reduction Act, Canadian Solar is strongly positioned to achieve profitable growth as we continue to focus on long-term investments and create lasting value for shareholders."

Recent Developments

On August 10, 2022, Canadian Solar announced that a wholly owned subsidiary of CSI Solar entered into an investment agreement with the municipal government of Haidong City in Qinghai Province to invest in a polysilicon manufacturing facility. Under the agreement, CSI Solar plans to build a facility with an annual capacity of approximately 50,000 tons of high-purity polysilicon later in 2022 and the facility is expected to commence production in mid-2024. Subject to market conditions and approvals from its board of directors, CSI Solar may also build other manufacturing facilities, including ingots, wafers, cells, modules, and other auxiliary materials in Haidong.

On July 25, 2022, Canadian Solar completed the sale of two fully permitted and construction ready solar and battery energy storage projects in the U.K. to specialist alternative asset manager, Gresham House. The two projects comprise a collocated solar and battery energy storage project in Durham, with 50 MWp solar capacity and 38 MW (or 76 MWh) of battery energy storage, and a standalone solar project in Warwickshire of 28 MWp.

On July 25, 2022, Canadian Solar published its latest ESG Sustainability Report, which highlights the Company's progress in advancing its sustainability strategy from an environmental, social, and governance perspective.

On July 7, 2022, Canadian Solar completed the sale of two solar farms, Suntop and Gunnedah totaling 345 MWp in New South Wales, Australia to CalEnergy Resources (Australia) Limited, a subsidiary of Northern Powergrid Holdings Company. Both projects have reached substantial completion.

On June 16, 2022, Canadian Solar acquired two standalone energy storage projects in the South Load Zone of the Texas ERCOT market from Black Mountain Energy Storage. The projects are each anticipated to store up to 200 MWh of energy, with notice to proceed expected in 2023 and commercial operation in the second quarter of 2024.

On June 15, 2022, Canadian Solar secured 136 million Brazilian reais (approximately US$28 million) non-recourse project financing from Banco do Nordeste do Brasil S.A. to support construction and operation of its 79 MWp Lavras II solar power project in Brazil.

On June 6, 2022, Canadian Solar signed an agreement with SPIC Brasil, a leading power generation company in Brazil to sell 70% stake in the Company's 738 MWp Marangatu and Panati-Sitia solar projects in Brazil. Both projects are expected to begin construction in late 2022 and reach commercial operation in late 2023.

On May 27, 2022, Canadian Solar announced that its wholly owned subsidiary Recurrent Energy successfully completed the construction on the 100 MW Sunflower solar power plant in Mississippi. Recurrent Energy developed and built the solar power plant under a Build Transfer Agreement for Entergy Mississippi which owns the plant for the life of the facility after the completion of construction. 

Conference Call Information The Company will hold a conference call on Thursday, August 18, 2022 at 8:00 a.m. U.S. Eastern Daylight Time (8:00 p.m., Thursday, August 18, 2022 in Hong Kong) to discuss its second quarter 2022 results and business outlook. The dial-in phone number for the live audio call is +1-877-704-4453 (toll-free from the U.S.), 800-965-561 (toll-free from Hong Kong), 400-1202-840 (local dial-in from Mainland China) or +1-201-389-0920 from international locations. The conference ID is 13731878. A live webcast of the conference call will also be available on the investor relations section of Canadian Solar's website at www.canadiansolar.com

A replay of the call will be available 2 hours after the conclusion of the call until 11:00 p.m. U.S. Eastern Daylight Time on Thursday, September 1, 2022 (11:00 a.m., September 2, 2022, in Hong Kong) and can be accessed by +1-844-512-2921 (toll-free from the U.S.), or +1-412-317-6671 from international locations. The replay pin number is 13731878. A webcast replay will also be available on the investor relations section of Canadian Solar's website at www.canadiansolar.com.

About Canadian Solar Inc.

Canadian Solar was founded in 2001 in Canada and is one of the world's largest solar technology and renewable energy companies. It is a leading manufacturer of solar photovoltaic modules, provider of solar energy and battery storage solutions, and developer of utility-scale solar power and battery storage projects with a geographically diversified pipeline in various stages of development. Over the past 21 years, Canadian Solar has successfully delivered around 76 GW of premium-quality, solar photovoltaic modules to customers across the world. Likewise, since entering the project development business in 2010, Canadian Solar has developed, built and connected over 6.8 GWp in over 20 countries across the world. Currently, the Company has 311 MWp of projects in operation, 5.3 GWp of projects under construction or in backlog (late-stage), and an additional 21 GWp of projects in advanced and early-stage pipeline. Canadian Solar is one of the most bankable companies in the solar and renewable energy industry, having been publicly listed on the NASDAQ since 2006. For additional information about the Company, follow Canadian Solar on LinkedIn or visit www.canadiansolar.com.

Safe Harbor/Forward-Looking Statements

Certain statements in this press release, including those regarding the Company's expected future shipment volumes, revenues, gross margins and project sales are forward-looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially. These statements are made under the "Safe Harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by such terms as "believes," "expects," "anticipates," "intends," "estimates," the negative of these terms, or other comparable terminology. Factors that could cause actual results to differ include general business, regulatory and economic conditions and the state of the solar and battery storage market and industry; geopolitical tensions and conflicts, including impasses, sanctions and export controls; volatility, uncertainty, delays and disruptions related to the COVID-19 pandemic; supply chain disruptions; governmental support for the deployment of solar power; future available supplies of high-purity silicon; demand for end-use products by consumers and inventory levels of such products in the supply chain; changes in demand from significant customers; changes in demand from major markets such as Japan, the U.S., China, Brazil and India; changes in effective tax rates; changes in customer order patterns; changes in product mix; changes in corporate responsibility, especially environmental, social and governance ("ESG") requirements; capacity utilization; level of competition; pricing pressure and declines in or failure to timely adjust average selling prices; delays in new product introduction; delays in utility-scale project approval process; delays in utility-scale project construction; delays in the completion of project sales; continued success in technological innovations and delivery of products with the features that customers demand; shortage in supply of materials or capacity requirements; availability of financing; exchange and inflation rate fluctuations; uncertainties related to the CSI Solar carve-out listing; litigation and other risks as described in the Company's filings with the Securities and Exchange Commission, including its annual report on Form 20-F filed on April 28, 2022. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, level of activity, performance, or achievements. Investors should not place undue reliance on these forward-looking statements. All information provided in this press release is as of today's date, unless otherwise stated, and Canadian Solar undertakes no duty to update such information, except as required under applicable law.

Investor Relations Contacts:

Isabel Zhang Investor Relations Canadian Solar Inc. investor@canadiansolar.com

David Pasquale Global IR Partners Tel: +1-914-337-8801 csiq@globalirpartners.com

FINANCIAL TABLES FOLLOW

 

 

 

The following tables provide unaudited select financial data for the Company's CSI Solar and Global Energy businesses.

			Select Financial Data – CSI Solar and Global Energy
			Three Months Ended June 30, 2022 (In Thousands of U.S. Dollars, Except Percentages)
			CSI Solar		Global Energy		Elimination and unallocated items (1)		Total
Net revenues			1,816,410		553,984		(56,208)		2,314,186
Cost of revenues			1,526,755		473,979		(57,598)		1,943,136
Gross profit			289,655		80,005		1,390		371,050
Gross margin			15.9 %		14.4 %		—		16.0 %
Income from operations (2)			62,393		55,679		(1,955)		116,117

 

			Select Financial Data – CSI Solar and Global Energy
			Six Months Ended June 30, 2022 (In Thousands of U.S. Dollars, Except Percentages)
			CSI Solar		Global Energy		Elimination and unallocated items (1)		Total
Net revenues			3,026,404		646,950		(108,819)		3,564,535
Cost of revenues			2,560,920		549,109		(97,435)		3,012,594
Gross profit			465,484		97,841		(11,384)		551,941
Gross margin			15.4 %		15.1 %		—		15.5 %
Income from operations (2)			94,291		54,668		(17,327)		131,632

 

			Select Financial Data – CSI Solar and Global Energy
			Three Months Ended June 30, 2021 (In Thousands of U.S. Dollars, Except Percentages)
			CSI Solar		Global Energy		Elimination and unallocated items (1)		Total
Net revenues			1,183,958		280,614		(34,911)		1,429,661
Cost of revenues			1,028,470		268,855		(52,451)		1,244,874
Gross profit			155,488		11,759		17,540		184,787
Gross margin			13.1 %		4.2 %		—		12.9 %
Income (loss) from    operations (2)			14,972		(3,873)		15,281		26,380

 

			Select Financial Data – CSI Solar and Global Energy
			Six Months Ended June 30, 2021 (In Thousands of U.S. Dollars, Except Percentages)
			CSI Solar		Global Energy		Elimination and unallocated items (1)		Total
Net revenues			1,879,110		751,676		(111,786)		2,519,000
Cost of revenues			1,656,164		626,892		(143,445)		2,139,611
Gross profit			222,946		124,784		31,659		379,389
Gross margin			11.9 %		16.6 %		—		15.1 %
Income (loss) from    operations (2)			(37,696)		81,208		26,351		69,863

 

(1) Includes inter-segment elimination, and unallocated corporate costs not considered part of management's evaluation of reportable segment operating performance.

(2) Income (loss) from operations reflects management's allocation and estimate as some services are shared by the Company's two business segments.

 

	Select Financial Data - CSI Solar and Global Energy
	Three Months Ended June 30, 2022		Three Months Ended March 31, 2022		Three Months Ended June 30, 2021
	(In Thousands of U.S. Dollars)
CSI Solar Revenues:
Solar modules	1,350,495		963,045		843,463
Solar system kits	150,765		90,456		88,057
Battery storage solutions	227,438		82,500		68,890
China energy/EPC (incl. electricity sales)	5,397		5,323		94,347
Others	26,107		16,059		54,290
Subtotal	1,760,202		1,157,383		1,149,047
Global Energy Revenues:
Solar and battery storage power projects	540,056		78,392		266,598
O&M and asset management services	7,745		7,948		8,607
Others (incl. electricity sales)	6,183		6,626		5,409
Subtotal	553,984		92,966		280,614
Total net revenues	2,314,186		1,250,349		1,429,661

 

	Select Financial Data - CSI Solar and Global Energy
	Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
	(In Thousands of U.S. Dollars)
CSI Solar Revenues:
Solar modules	2,313,540		1,395,710
Solar system kits	241,221		124,128
Battery storage solutions	309,938		71,248
China energy/EPC (incl. electricity sales)	10,720		101,442
Others	42,166		74,796
Subtotal	2,917,585		1,767,324
Global Energy Revenues:
Solar and battery storage power projects	618,448		719,445
O&M and asset management services	15,693		18,573
Others (incl. electricity sales)	12,809		13,658
Subtotal	646,950		751,676
Total net revenues	3,564,535		2,519,000

 

 

 

	Canadian Solar Inc.
	Unaudited Condensed Consolidated Statements of Operations
	(In Thousands of U.S. Dollars, Except Share and Per Share Data)
		Three Months Ended								Six Months Ended
		June 30,		March 31,		June 30,				June 30,		June 30,
		2022		2022		2021				2022		2021
Net revenues		$ 2,314,186		$ 1,250,349		$ 1,429,661				$ 3,564,535		$ 2,519,000
Cost of revenues		1,943,136		1,069,458		1,244,874				3,012,594		2,139,611
	Gross profit	371,050		180,891		184,787				551,941		379,389
Operating expenses:
	Selling and distribution expenses	158,017		108,845		83,581				266,862		167,661
	General and administrative expenses	87,920		62,810		68,578				150,730		136,035
	Research and development expenses	18,050		13,280		13,158				31,330		25,608
	Other operating income, net	(9,054)		(19,559)		(6,910)				(28,613)		(19,778)
Total operating expenses		254,933		165,376		158,407				420,309		309,526
Income from operations		116,117		15,515		26,380				131,632		69,863
Other income (expenses):
	Interest expense	(19,709)		(15,302)		(14,795)				(35,011)		(29,468)
	Interest income	4,216		4,212		2,837				8,428		6,085
	Gain (loss) on change in fair value of derivatives, net	(4,869)		(24,738)		(12,150)				(29,607)		422
	Foreign exchange gain (loss), net	11,333		27,862		8,884				39,195		(10,764)
	Investment income (loss)	6,984		(5,524)		5,154				1,460		6,417
Other expenses, net		(2,045)		(13,490)		(10,070)				(15,535)		(27,308)
Income before income taxes and equity in earnings of unconsolidated investees		114,072		2,025		16,310				116,097		42,555
Income tax benefit (expense)		(27,731)		5,183		1,645				(22,548)		(12,207)
Equity in earnings of unconsolidated investees		2,214		1,726		585				3,940		1,788
Net income		88,555		8,934		18,540				97,489		32,136
Less: Net income (loss) attributable to non- controlling interests		14,093		(273)		7,279				13,820		(1,904)
Net income attributable to Canadian Solar Inc.		$ 74,462		$ 9,207		$ 11,261				$ 83,669		$ 34,040
Earnings per share - basic		$   1.16		$   0.14		$   0.19				$   1.30		$   0.57
Shares used in computation - basic		64,262,556		64,028,919		60,288,824				64,146,383		60,077,039
Earnings per share - diluted		$   1.07		$   0.14		$   0.18				$   1.21		$   0.54
Shares used in computation - diluted		71,103,568		64,720,107		61,339,043				71,067,215		67,580,787

 

 

 

	Canadian Solar Inc.
	Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss)
	(In Thousands of U.S. Dollars)
		Three Months Ended						Six Months Ended
		June 30,		March 31,		June 30,		June 30,		June 30,
		2022		2022		2021		2022		2021
Net Income		$ 88,555		$ 8,934		$ 18,540		$ 97,489		$ 32,136
Other comprehensive income (loss) (net of tax of nil):
Foreign currency translation adjustment		(126,367)		7,511		9,629		(118,856)		(22,073)
Gain on changes in fair value of available-for-sale debt securities		229		—		—		229		—
Gain on changes in fair value of derivatives		160		190		—		350		—
Comprehensive income (loss)		(37,423)		16,635		28,169		(20,788)		10,063
Less: comprehensive income (loss) attributable to non- controlling interests		(3,960)		1,127		8,760		(2,833)		(6,932)
Comprehensive income (loss) attributable to Canadian Solar Inc.		(33,463)		15,508		19,409		(17,955)		16,995

 

 

 

Canadian Solar Inc.
Unaudited Condensed Consolidated Balance Sheets
(In Thousands of U.S. Dollars)
			June 30,		December 31,
			2022		2021
ASSETS
Current assets:
	Cash and cash equivalents		$ 1,053,567		$ 869,831
	Restricted cash		888,262		560,633
	Accounts receivable trade, net		832,967		651,372
	Accounts receivable, unbilled		15,839		37,244
	Amounts due from related parties		162,086		73,042
	Inventories		1,622,297		1,192,374
	Value added tax recoverable		101,904		125,882
	Advances to suppliers		277,820		225,879
	Derivative assets		17,236		7,286
	Project assets		328,937		594,107
	Prepaid expenses and other current assets		431,621		434,177
Total current assets			5,732,536		4,771,827
Restricted cash			6,525		3,818
Property, plant and equipment, net			1,353,870		1,401,877
Solar power systems, net			103,908		108,263
Deferred tax assets, net			252,235		236,503
Advances to suppliers			33,515		34,239
Prepaid land use rights			66,416		71,011
Investments in affiliates			104,528		98,819
Intangible assets, net			16,345		18,992
Project assets			498,043		433,254
Right-of-use assets			31,005		35,286
Other non-current assets			181,164		174,453
TOTAL ASSETS			$  8,380,090		$  7,388,342

 

 

 

Canadian Solar Inc.
Unaudited Condensed Consolidated Balance Sheets (Continued)
(In Thousands of U.S. Dollars)
		June 30,		December 31,
		2022		2021
Current liabilities:
	Short-term borrowings	$ 1,367,616		$ 1,271,215
	Long-term borrowings on project assets - current	153,934		321,655
	Accounts payable	855,861		502,995
	Short-term notes payable	1,413,380		881,184
	Amounts due to related parties	701		143
	Other payables	649,544		667,854
	Advance from customers	151,460		135,512
	Derivative liabilities	10,478		2,622
	Operating lease liabilities	10,366		12,185
	Other current liabilities	170,207		242,783
Total current liabilities		4,783,547		4,038,148
Accrued warranty costs		61,552		45,146
Long-term borrowings		780,149		523,634
Convertible notes		225,271		224,675
Liability for uncertain tax positions		7,776		7,448
Deferred tax liabilities		46,382		48,150
Loss contingency accruals		14,088		15,148
Operating lease liabilities		20,652		23,215
Financing liabilities		44,998		53,641
Other non-current liabilities		284,254		282,699
TOTAL LIABILITIES		6,268,669		5,261,904
Equity:
	Common shares	835,543		835,543
	Additional paid-in capital	(13,657)		(19,428)
	Retained earnings	1,119,221		1,035,552
	Accumulated other comprehensive loss	(152,208)		(50,584)
Total Canadian Solar Inc. shareholders' equity		1,788,899		1,801,083
Non-controlling interests in subsidiaries		322,522		325,355
TOTAL EQUITY		2,111,421		2,126,438
TOTAL LIABILITIES AND EQUITY		$ 8,380,090		$ 7,388,342

 

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SOURCE Canadian Solar Inc.

FAQ

What are Canadian Solar's Q2 2022 financial results?

In Q2 2022, Canadian Solar reported revenue of $2.31 billion, a 62% increase year-over-year, with a gross margin of 16.0% and net income of $74 million.

How much solar module capacity did Canadian Solar ship in Q2 2022?

Canadian Solar shipped 5.06 GW of solar modules in Q2 2022, reaching the high end of its guidance range.

What is Canadian Solar's project pipeline as of June 2022?

Canadian Solar's global energy solar project pipeline expanded to 26 GWp, with over 31 GWh in energy storage.

What is the updated revenue guidance for Canadian Solar in 2022?

Canadian Solar raised its full-year revenue guidance for 2022 to between $7.5 billion and $8.0 billion.

What were Canadian Solar's operating expenses in Q2 2022?

Canadian Solar's operating expenses increased to $255 million in Q2 2022.