Emeren Group Misses Q3 2024 Revenue Guidance, But Raised Net Income

Global solar power projects developer, owner and operator Emeren Group Ltd has reported missing its Q3 2024 revenue guidance of $25 million to $28 million to finally achieve $12.9 million. The management attributes delayed project closings pending government approvals as the reason for this below-expectation figure.  

The delay was specifically related to 3 projects in Europe that remain in its pipeline. In the US, a community solar project portfolio and some projects in Spain and Italy did not close by the end of the reporting quarter. Emeren said it expects some of these sales to close in the next quarter.    

While its revenues for the reporting quarter were down 57% quarter-on-quarter (QoQ) and 8% year-on-year (YoY), it reported a $14.2 million gain in net income on a YoY basis with $4.8 million. On a QoQ basis, this was a gain of $4.5 million for the group that’s listed on the NYSE under the ticker SOL. This was supported by a foreign exchange gain exceeding $4.6 million as the Euro strengthened during the quarter. Europe was the largest generator of its revenues.  

Revenues were led by the company’s independent power producer (IPP) segment as it accounted for 73% of its business during the reporting quarter. The management calls it the cornerstone of its business model that brings in dependable, stable and predictable cash flow.   

The company also calls its Development Service Agreement (DSA) approach a ‘game-changing’, reliable and scalable business model. Under this, Emeren monetizes solar projects at early-to-mid stages. As of September 2024, Emeren said it had contracts with 9 partners covering 28 projects with over 2.1 GW capacity comprising 84% battery energy storage systems (BESS) and 16% PV. This represents more than $69 million in contracted revenue that it expects to monetize within the next 2 to 3 years. 

Over 2 GW of additional DSA capacity is currently under negotiation, according to the management, estimated to bring in $100 million in revenues. Nearly 90% of this DSA pipeline of both contracted projects and potential agreements is based in Europe.  

Robert Freeman of ROTH MKM sees this visibility into the DSA pipeline as a positive for the company despite the management cutting its annual revenue guidance by 35%. He believes this visibility of DSAs could contribute to its improved earnings over time. However, the risk from project pushouts remains on the horizon with no clear timeline of when the challenges will be resolved, he cautions.  

Guidance 

For Q4 2024, Emeren expects to report $40 million to $45 million of revenues with a gross margin of 20% to 25%.  

For FY 2024, its revenue projection is now between $97 million and $102 million, as against the previous guidance range of $150 million to $160 million. The gross margin guidance remains the same at 30%. EBITDA for the entire year is guided between $15 million and $20 million. Previously, Emeren was expecting an annual net income of around $22 million, which it has now pulled back.