Canadian Solar Inc. Q2 FY2025 earnings call

• Shawn Qu mentioned in the second quarter, module delivery was 7.9 gigawatts near the high end of guidance, storage shipment was below guidance due to tariff impacts, revenue was $1.7 billion, gross margin was 29.8% driven by higher mix of North America module shipments and robust storage performance, but profitability was weighed down by nonrecurring operating expenses. - Industry faced challenging policy environment with One Big Beautiful Bill Act having implications on supply and demand in the U.S. - Yan Zhuang noted for CSI Solar in 2025, module shipments reached 7.9 gigawatts near high end of expectations, storage deliveries below guidance but still strong, revenue $1.7 billion, gross margin expanded, and there are rising supply chain costs in module business. - Ismael Guerrero stated for Recurrent Energy, second quarter revenue was $106 million, lighter project sales led to sequential decrease, monetized over 200 megawatts of projects in Europe and Japan, energized Fort Duncan storage project in Texas, achieved milestone at Blue Moon Solar in Kentucky, and had a large pipeline of solar and storage. - Xinbo Zhu reviewed financial results, including module and storage delivery, revenue, gross margin, operating expenses, net interest expense, net foreign exchange loss, and net income. - Sustainability progress was mentioned, such as 2024 environmental and supply chain ESG achievements.

In the second quarter, Canadian Solar delivered 7.9 gigawatts of modules near the high end of guidance. Storage shipment was 2.2 gigawatt hours below guidance due to tariff impacts. Revenue totaled $1.7 billion. Gross margin was 29.8%. For CSI Solar, in 2025, module shipments reached 7.9 gigawatts near the high end of expectations, storage deliveries were below guidance but still had strong shipments, revenue reached $1.7 billion, and gross margin expanded 890 basis points quarter over quarter to 22.3%. For Recurrent Energy, in the second quarter, revenue was $106 million, sequentially lower due to lighter project sales, gross margin was 32.4%, and operating loss was $74 million.

• Third quarter 2025: Expect module volumes between 5 to 5.3 gigawatts, storage shipments 2.1 to 2.3 gigawatt hours, revenue in the range of $1.3 to $1.5 billion, and gross margin between 14 to 16%. - Full year 2025: Narrowed module volume guidance to 25 to 27 gigawatts, maintained storage shipment guidance of 7 to 9 gigawatt hours, revised revenue guidance to between $5.65 and $6.3 billion due to delay of certain project sales into 2026 and more conservative module pricing in the second half driven by weakening demand in China.

• Industry faces challenging policy environment in the U.S., including increasingly stringent FEOC requirements, higher import duties, ITC phase out for solar, and annual FEOC thresholds for energy storage. - Supply chain costs rising due to anti-involution campaign in China combined with tariffs, duties, and underutilization. - Storage margins facing pressure from normalizing, and cost benefit from decreasing lithium carbonate prices tapering off. - Net foreign exchange loss due to dollar weakness.

Q: Could you talk a little bit about the PERC write-down here and the impact ultimately on margins?

A: Shawn Qu said they wrote off pretty much all current equipment assets this quarter as they stopped manufacturing the product in Q2, and the write-off was a big impact.

Q: Given the OBBB and FIAC in the U.S., do you believe Canadian Solar and its subsidiaries are currently FIAC compliant? If so, could you please give some details around what gives you confidence? And then if not, like, what steps are you taking to comply with FIAC?

A: Shawn Qu said Canadian Solar is compliant with OBBA requirements at this moment, and they have a plan to ensure factories meet requirements.

Q: Just on the FIAC side, can you just talk more about the 45X eligibility for the U.S. assets?

A: Shawn Qu said OBBA is quite clear in terms of FIAC and material assistance definition, and they are waiting to see IRS guidance but believe they can calculate compliance based on OBBA language.

Q: I heard there was a meeting in China. I guess, it's the cost hike in polysilicon and wafer. But if module prices are higher, do you think that would actually improve your margins?

A: Shawn Qu said upstream material prices increased, and module price is likely to go up but maybe not as much as upstream.

Q: The press release mentioned that there have been some pushouts and I saw that the storage backlog declined marginally also in the second quarter. I was wondering if you saw any cancellations in the quarter. And if there is a common theme that explains the pushouts or slash cancellations in the quarter, is FIAC playing a role?

A: Shawn Qu said some projects were pushed to the second half due to tariff issues, not FIAC mainly, and there are major deals in the last stage of negotiation.