Canadian Solar Conference Call Highlights

Canadian Solar Inc. CSIQ reported its third quarter earnings on Wednesday. Shares of the company are down 8 percent. • Our Q3 revenue module shipment and profit were all well above our guidance. • Our Q3 revenue was over $914 million. Module shipments were 770 megawatts, and we achieved a gross margin of nearly 23%, with net income reaching approximately $104 million or $1.75 per share. • Our record financial performance was driven by higher contribution from our higher margin solar energy solution business, as well as the strong performance of our solar module business. • Our solar energy solutions business contributed 53.8% of revenue in Q3 compared to 32.6% in Q2. • In Q3, our team was able to close and recognize the sales of five utility-scale solar power projects in Canada. • This is the first quarter in which our downstream solar energy solutions business contributed more than 50% of the company's revenue • A strong testament to the strength of our team and our overall leadership position in this promising market segment. • We are also pleased to report that our module business delivered another solid performance in Q3. • As we maintain our focus on profitable growth and providing high-quality products rather than simply competing for volume at unattractive prices or at the expense of product quality. • It is worth to mention that our module business made significant contribution to our bottom line profitability in the quarter. • Our prime reputation and strong position in premium market allowed us to compete in a global marketplace including some of the price-sensitive emerging markets while still maintaining our average selling price at $0.69 per watt in Q3. • From a geographic standpoint, we continued to maintain a leading position in Japan, North America and Europe. • In Japan, we have maintained our position as the leading foreign brand with shipment of 181 megawatt under the Canadian Solar brand in the quarter. • We also continued to pursue numerous other project opportunities worldwide. • We see good opportunities in Europe, Asia, Latin America and Africa. Financials: • Net revenue for the third quarter of 2014 was $914 million, up 46.6% sequentially and up 86.3% compared to the year-ago period. • Gross profit in Q3 was $209.3 million compared to $118.2 million in Q2 and $100.2 million in the comparable period last year. Gross margin in Q3 was 22.9% compared to 19% in Q2 and 20.4% in the third quarter of 2013. • Our gross margin exceeded our original guidance of 19% to 21% as we closed the sale of more projects on Ontario than we had expected. • Our gross margin in Q4 is impacted by several main factors when compared to Q3. • We are exploring different financing solutions to allow us to bridge projects from construction to possible securitization. • We hope to reduce the need to sell equity in our projects before they reach commercial operation.