Canadian Solar Reports First Quarter 2024 Results and Announces Appointment of Chief Financial Officer

Total module shipments recognized as revenues in the first quarter of 2024 were 6.3 GW, up 4% year-over-year ("yoy"). Of the total, 236 MW were shipped to the Company's own utility-scale solar power projects.

Net revenues in the first quarter of 2024 decreased 22% quarter-over-quarter ("qoq") and 22% yoy to $1.3 billion. The sequential decrease primarily reflects a decline in solar module shipment volume, a decline in module average selling price ("ASP"), partially offset by higher battery energy storage solutions sales. The yoy decrease primarily reflects a decline in module ASP, partially offset by higher battery energy storage solutions sales and an increase in solar module shipment volume.

Gross profit in the first quarter of 2024 was $253 million, up 18% qoq and down 21% yoy. Gross margin in the first quarter of 2024 was 19.0%, compared to 12.5% in the fourth quarter of 2023 and 18.7% in the first quarter of 2023. The gross margin sequential increase was primarily caused by lower manufacturing costs, partially offset by lower module ASPs. The gross margin yoy increase was primarily driven by lower manufacturing costs and a higher margin contribution from battery energy storage solutions sales, partially offset by lower module ASPs.

Total operating expenses in the first quarter of 2024 were $204 million, compared to $213 million in the fourth quarter of 2023 and $172 million in the first quarter of 2023.

Depreciation and amortization charges in the first quarter of 2024 were $110 million, compared to $89 million in the fourth quarter of 2023 and $68 million in the first quarter of 2023. The sequential and yoy increases were primarily driven by the Company's continued investment in vertical integration and incremental capacity expansion.

Net interest expense in the first quarter of 2024 was less than $1 million, compared to $18 million in the fourth quarter of 2023 and $12 million in the first quarter of 2023. The sequential and yoy decreases in net interest expense were mainly driven by an interest benefit deriving from the interest income generated by anti-dumping and countervailing duty deposit refunds.

Net foreign exchange and derivative loss in the first quarter of 2024 was $4 million, compared to a net gain of less than $1 million in the fourth quarter of 2023 and a net loss of $13 million in the first quarter of 2023.

Net income attributable to Canadian Solar in the first quarter of 2024 was $12 million, or $0.19 per diluted share, compared to a net loss of $1 million, or $0.02 per diluted share, in the fourth quarter of 2023, and net income of $84 million, or $1.19 per diluted share, in the first quarter of 2023.

Net cash flow used in operating activities in the first quarter of 2024 was $291 million, compared to net cash flow provided by operating activities of $190 million in the fourth quarter of 2023 and $47 million in the first quarter of 2023. The operating cash outflow primarily resulted from increased inventories and project assets.

Total debt was $4.3 billion as of March 31, 2024, including $2.2 billion, $1.9 billion, and $0.2 billion related to CSI Solar, Recurrent Energy, and convertible notes respectively. Total debt increased as compared to $3.6 billion as of December 31, 2023 due to incremental borrowings for working capital and additional vertical integration for CSI Solar, and new project development for Recurrent Energy.

Business Segments

The Company has two business segments: Recurrent Energy and CSI Solar. The two businesses operate as follows:  

• Recurrent Energy is one of the world's largest clean energy project development platforms with 15 years of experience, having delivered over 10 GWp of solar power projects and 3.3 GWh of battery energy storage projects. It is vertically integrated and has strong expertise in greenfield origination, development, financing, execution, operations and maintenance, and asset management.
• CSI Solar consists of solar module and battery energy storage manufacturing, and delivery of total system solutions, including inverters, solar system kits, and EPC (engineering, procurement, and construction) services. CSI Solar's e-STORAGE branded battery energy storage business includes its utility-scale turnkey battery energy system solutions, as well as a small but growing residential battery energy storage business. These battery energy storage systems solutions are complemented with long-term service agreements, including future battery capacity augmentation services.

Recurrent Energy Segment

As of March 31, 2024, the Company held a leading position with a total global solar development pipeline of 26 GWp and a battery energy storage development pipeline of 56 GWh.

While Recurrent Energy's business model was historically predominantly develop-to-sell, the Company has been adjusting its strategy to create greater asset value and retain greater ownership of projects in select markets to increase revenues generated through recurring income, such as power sales, operations and maintenance, and asset management income.

The business model consists of three key drivers:

• Electricity revenue from operating portfolio to drive stable, diversified cash flows in growth markets with stable currencies;
• Asset sales (solar power and battery energy storage) in the rest of the world to drive cash-efficient growth model, as value from project sales will help fund growth in operating assets in stable currency markets; and
• Power services (O&M) and asset management through long-term operations and maintenance ("O&M") contracts, currently with 9.3 GW of contracted projects, to drive stable and long-term recurring earnings and synergies with the project development platform.

In January 2024, the Company announced a $500 million investment from BlackRock. The investment will provide Recurrent Energy with additional capital to grow its high value project development pipeline while executing its strategy to transition from a pure developer to a developer plus long-term owner and operator in select markets including the U.S. and Europe. This transition is expected to create a more diversified portfolio and provide more stable long-term revenue in low-risk currencies and enable Recurrent Energy to create and retain greater value in its own project development pipeline.

The perimeter of the transaction includes the U.S., Canada, Spain, Italy, the U.K., France, the Netherlands, Germany, South Africa, Brazil, Chile, Colombia, Australia, South Korea and Taiwan; and excludes Canadian Solar's project development business in China and Japan, and certain assets in Latin America and Taiwan. Closing of the transaction is subject to regulatory approvals and certain terms and conditions in accordance with the transaction agreements.

The $500 million investment will represent 20% of the outstanding fully diluted shares of Recurrent Energy on an as-converted basis. Canadian Solar will continue to own the remaining majority shares of Recurrent Energy after the closing of the investment.

Project Development Pipeline – Solar

As of March 31, 2024, Recurrent Energy's total solar project development pipeline was 26.3 GWp, including 1.5 GWp under construction, 5.0 GWp of backlog, and 19.8 GWp of projects in advanced and early-stage pipelines, defined 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 power purchase agreements ("PPAs"). A significant majority of backlog projects are contracted (i.e., have secured a PPA or FIT), and the remaining have a reasonable assurance 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 Recurrent Energy that are in the process of securing interconnection.

While the magnitude of the Company's project development pipeline is an important indicator of potential expanded power generation and battery energy storage capacity as well as potential future revenue growth, the development of projects in its pipeline is inherently uncertain. If the Company does not successfully complete the pipeline projects in a timely manner, it may not realize the anticipated benefits of the projects to the extent anticipated, which could adversely affect its business, financial condition, or results of operations. In addition, the Company's guidance and estimates for its future operating and financial results assume the completion of certain solar projects and battery energy storage projects that are in its pipeline. If the Company is unable to execute on its actionable pipeline, it may miss its guidance, which could adversely affect the market price of its common shares and its business, financial condition, or results of operations.

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

Project Development Pipeline – Battery Energy Storage

As of March 31, 2024, Recurrent Energy's total battery energy storage project development pipeline was 55.9 GWh, including 4.3 GWh under construction and in backlog, and 51.6 GWh of projects in advanced and early-stage pipelines.

The table below sets forth Recurrent Energy's total battery energy storage project development pipeline.

Battery Energy Storage Project Development Pipeline (as of March 31, 2024) – MWh
Region	In Construction	Backlog	Advanced Pipeline	Early-Stage Pipeline	Total
North America	-	1,600	2,180	15,084	18,864
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