Canadian Solar Reports Fourth Quarter and Full Year 2019 Results, Adjusted Earnings Beat Estimates

PVTIME - Canadian Solar Inc. ("Canadian Solar"
or the "Company") (NASDAQ: CSIQ), one of the world's largest solar
power companies, today announced its financial results for the fourth quarter
and full year ended December 31, 2019.

Fourth Quarter 2019 Highlights

  • Total module shipments were 2.5 GW, compared to 2.4 GW in the third quarter of 2019 and fourth quarter 2019 guidance of 2.3 GW to 2.4 GW.
  • Net revenue was $920 million, compared to $760 million in the third quarter of 2019 and fourth quarter 2019 guidance of $850 million to $880 million.
  • Gross profit was $230 million. Gross margin was 25.0%, compared to 26.2% in the third quarter of 2019 and fourth quarter 2019 guidance of 19% to 21%. Gross margin was 24.3% excluding the benefit of a U.S. anti-dumping ("AD") and countervailing duty ("CVD") true-up of $6.4 million.
  • Net income attributable to Canadian Solar was $67.7 million, or $1.12 per diluted share, compared to $58.3 million, or $0.96 per diluted share, in the third quarter of 2019.
  • Net cash provided by operating activities was approximately $247 million, compared to $22 million in the third quarter of 2019.
  • As of January 31, 2020, the Company's portfolio of utility-scale solar power plants in operation was 880.2 MWp with an estimated total resale value of approximately $1 billion.
  • The Company's board of directors authorized a $150 million share repurchase program for a six month-period beginning December 9, 2019.

Full Year 2019 Results 

  • Total module shipments were 8.6 GW, compared to 6.6 GW in 2018 and guidance of 8.4 GW to 8.5 GW.
  • Net revenue was $3.20 billion, compared to $3.74 billion in 2018 and guidance of $3.13 billion to $3.16 billion.
  • Net income attributable to Canadian Solar was $171.6 million, or $2.83 per diluted share, compared to $237.1 million, or $3.88 per diluted share in 2018.
  • Net cash provided by operating activities was approximately $600 million, compared to $216 million in 2018.

Fourth Quarter 2019 Results

Net revenue in the fourth quarter of 2019 was $920 million, compared to $760
million in the third quarter of 2019, and $901 million in the fourth quarter of
2018. The sequential increase was due to higher shipments recognized in
revenue, stable module average selling price ("ASP") and the ongoing
monetization of solar power plants.

Total module shipments in the fourth quarter of 2019 were 2,474 MW,
compared to 2,387 MW in the third quarter of 2019 and fourth quarter 2019
guidance of 2,300 MW to 2,400 MW. This included 295 MW
for the Company's utility-scale solar power projects.

Gross profit in the fourth quarter of 2019 was $230 million, compared to $199
million in the third quarter of 2019 and $271 million in the fourth quarter of
2018. The benefit of the AD/CVD true-up was $6.4 million in the fourth
quarter of 2019, $24 million in the third quarter of 2019 and $16 million in
the fourth quarter of 2018. Gross margin in the fourth quarter of 2019 was
25.0%, compared to 26.2% in the third quarter of 2019, 30.1% in the fourth
quarter of 2018 and fourth quarter 2019 guidance of 19% to 21%. The improvement
was due to a stable ASP and lower manufacturing costs.

Income from operations in the fourth quarter of 2019 was
$111 million, compared to $80 million in the third quarter of 2019,
and $137 million in the fourth quarter of 2018. Operating margin was
12.1% in the fourth quarter of 2019, compared to 10.5% in the third
quarter of 2019 and 15.2% in the fourth quarter of 2018.

Non-cash depreciation and amortization charges in the fourth quarter of
2019 were $45 million, compared to $37 million in the third quarter of
2019 and $32 million in the fourth quarter of 2018.

The Company uses derivative instruments to hedge its foreign exchange
positions. In the fourth quarter of 2019, the Company recorded a $6.6 million
loss on the change in fair value of derivatives used in the Company's
foreign exchange hedging program, partly offset by the foreign exchange
gain of $4 million. The net effect of the currency moves and hedging was a $2.6 million
loss during the fourth quarter, compared to a $0.5 million gain in the third
quarter of 2019 and a net zero effect in the fourth quarter of 2018.

Net income attributable to Canadian Solar on a GAAP basis in the fourth
quarter of 2019 was $67.7 million, or $1.12 per diluted share,
compared to net income of $58.3 million, or $0.96 per diluted share in the
third quarter of 2019, and net income of $111.6 million, or $1.81 per diluted
share, in the fourth quarter of 2018. Net income attributable to Canadian Solar
on a non-GAAP basis in the fourth quarter of 2019 was $63 million, or $1.04 per
diluted share. This excludes the benefit of the AD/CVD true-up during the
quarter of $6.4 million, net of income tax effect. For a reconciliation of
results under GAAP to non-GAAP results, see the accompanying table "About
Non-GAAP Financial Measures".

Dr. Shawn Qu, Chairman and Chief Executive
Officer, commented: "I am pleased with the strong 2019 results, as revenue
and gross margin were both ahead of expectations. The strategic decisions we
made in R&D and production capacity helped us achieve one of the industry's
highest margins, as we build upon our strong brand and maintain pricing power.
We continue to be an innovation leader, recently setting another world record
in cell conversion efficiency of 23.81% for N-type, large-area,
multi-crystalline silicon solar cells. This further extends our competitive
advantage, as we deliver modules with mono-like efficiencies at an attractive
ASP. Along with the rest of the world, we have been working hard to ensure
the health and safety of our employees in the face of the COVID-19 pandemic. We
believe Canadian Solar's proven 19-year track record and the robust,
conservative nature of our long-term strategy will allow the Company to emerge
stronger from the current period of uncertainty."

Yan Zhuang, Acting Chief Executive Officer, commented: "We achieved
strong results in Q4 and the full year 2019. On the Module and Systems
Solutions side, 2019 module shipments grew by almost 30% year-over-year, while
underlying gross margin increased by 480 basis points (excluding the benefit of
the AD/CVD true-up), resulting in a highly profitable Q4. On the Energy side,
we continue to grow and monetize our operating solar assets and pipeline, which
currently stand at 880 MWp and 15.4 GWp, respectively. Strategically, we are
evaluating ways to capture more value by retaining partial ownership in
selected solar project assets we develop to create higher, more predictable and
more profitable revenues, thereby creating additional value for the Company and
its shareholders. Meanwhile, we have set up a global team focusing on system
integration and energy storage, which will help to build the new technology DNA
of the Company and lead the next wave of growth in this industry."

Dr. Huifeng Chang, Senior Vice President and Chief Financial Officer, added: "In Q4, we delivered $230 million of gross profit and $67.7 million of net income, both sequentially higher than the previous quarter driven by higher module sales, stable ASPs, lower costs and increased project sales. We generated $247 million of operating cash flow and increased our total cash position to $1.2 billion. We also reduced total debt to $1.95 billion, and lengthened its average maturity. Our liquidity is healthy and our balance sheet continues to improve. We are proactively taking contingency measures to preserve cash and minimize risk, should the macro situation deteriorate further. Likewise, our financial plan has the flexibility to quickly switch gears if the global economy recovers faster than expected. We plan to continue with our stock repurchase program to create extra value for shareholders as recent COVID-19-related panic-selling has brought our equity valuation below book value."

To view the report in full, please visit http://investors.canadiansolar.com/financial-reports

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