ReneSola Ltd announced its unaudited financial results for the first quarter ended March 31, 2017.
First Quarter 2017 Highlights
- Revenue of $156.6 million exceeded the high end of the guidance range of $130 million to $150 million;
- Gross margin was 1.1%, compared to 2.1% in Q4 2016 and 17.1% in Q1 2016;
- Net loss was $23.2 million, compared to net loss of $25.5 million in Q4 2016 and net income of $5.7 million in Q1 2016;
- Total external module shipments were 266.8MW while module shipments to the Company's downstream projects were approximately 44.3MW;
- Total external wafer shipments were 259.2MW, compared to 305.9MW in Q4 2016 and 351.0MW in Q1 2016;
- Recognized revenue of $2.2 million from sale of rooftop projects in China with aggregate capacity of 2.3MW;
- Signed agreements to sell a 6.75MW of utility project in North Carolina and 1.3MW of utility projects in Holyoke, Massachusetts with revenue expected to be recognized in Q2 2017;
- Connected two ground-mounted projects in the UK with a combined capacity of approximately 10MW; revenue is expected to be recognized in Q2;
- As of June 2, 2017, the Company had a solar power project pipeline of over 1.4GW, of which 613.1MW are "shovel-ready";
- LED sales of $9.6 million increased by approximately 3% compared to Q4 2016 with gross margin of approximately 30.9%;
- Total borrowings increased by $54.3 million to $678.6 million compared to Q4 2016.
Mr. Xianshou Li, ReneSola's Chief Executive Officer, commented, "First quarter results were generally in-line with our expectation, as we continued to gain traction from our downstream project efforts and LED distribution business, while affected by challenging market conditions of our solar power product business. We continue to execute our strategy to shift our business focus from manufacturing to downstream project development, and I am excited about the progress we are making. For the second quarter of 2017, we expect downstream project sales to increase when compared to the first quarter of 2017 due to continued growth in our project pipeline and our solid execution in project monetization."
Li continued, "We remained focused on managing our working capital, controlling costs and improving our balance sheet. We believe these measures have prepared us well to develop sustainably as we progress through the current industry down-cycle."
First Quarter 2017 Financial Results
Revenue of $156.6 million was down 32.5% q/q and down 39.9% y/y, but exceeded the guidance of $130 million to $150 million. The decline in the year-over-year revenue was primarily due to lower module ASP's and reduced product shipments to external customers.
Gross profit of $1.7 million was down 65.4% q/q and 96.1% y/y. Gross margin declined to 1.1% from 2.1% in Q4 2016 and from 17.1% in Q1 2016. The sequential margin decline was primarily due to lower module ASP's as well as annual maintenance of our polysilicon plant.
Operating expenses were $19.5 million, representing 12.4% of revenue, down from $26.8 million in Q4 2016 and $32.3 million in Q1 2016. Sales and marketing expenses were $3.8 million, down from $7.3 million in Q4 2016 as we reversed certain warranty expenses to reflect the declining module ASP.
Operating loss was $17.8 million, compared to operating loss of $21.8 million in Q4 2016 and operating income of $12.2 million in Q1 2016.
Non-operating expenses of $9.1 million included net interest expense of $8.9 million and loss on derivative of $0.3 million, partially offset by foreign exchange gains of $0.2 million.
Net loss was $23.2 million, compared to net loss of $25.5 million in Q4 2016 and net income of $5.7 million in Q1 2016. Loss per ADS was $1.16.
 The Company executed a ratio change for its American Depositary Receipt ("ADR") program effective on February 10, 2017. As a result, the number of the Company's shares represented by each ADS was changed from two (2) shares to ten (10) shares.
Balance Sheet, Liquidity and Capital Resources
The Company had cash and cash equivalents (including restricted cash) of $144.4 million as of March 31, 2017, compared to $133.2 million as of December 31, 2016. Total borrowings were $678.6 million, increasing by $54.3 million from $624.3 million as of December 31, 2016.
First Quarter Operating Highlights
The Company remains focused on developing, operating and selling high-quality solar power projects. Our business activities are centered on building a pipeline of distributed generation and utility-scale projects in attractive locations worldwide. In the first quarter, the Company continued to monetize its existing solar power project pipelines as part of its development cycle.
The Company recognized revenue of $2.2 million from the sale of rooftop projects of 2.3MW in China's domestic distributed generation market in Q1 2017. The Company also signed agreements to sell a utility-scale project located in North Carolina with a capacity of approximately 6.75MW and two utility-scale projects in Holyoke, Massachusetts with a combined capacity of approximately 1.3MW in Q1 2017. The Company expects to recognize revenue from the sales of these projects in Q2 2017. The Company connected two ground-mounted projects in the UK with a combined capacity of approximately 10MW with revenue expected to be recognized in Q2.
As of June 2, 2017, the Company had a pipeline of over 1.4GW of projects in various stages, of which 613.1MW are projects that are "shovel-ready". The shovel-ready projects include (i) projects that are overseas and that ReneSola has the legal right to develop based on definitive agreements, and (ii) projects in China that are owned by ReneSola and have been filed with National Development and Reform Commission or third-party projects that the Company has signed definitive agreements to provide EPC services to. The Company identified a number of opportunities in China's domestic distributed generation market, and had 306.8MW of such projects in shovel-ready stage in its pipeline as of June 2, 2017. The Company continues to focus on developed markets which are expected to have stable returns and healthy cash flow.
The following table sets forth our shovel-ready projects pipeline by location:
 With the start of operation, ReneSola holds 50% of the economics in the projects, which are held for sale and expected to be sold in the normal course upon connection or shortly thereafter.
The Company currently has over 270MW project pipelines under construction and plans to construct over an aggregate of 550 MW of projects in the year of 2017. During the construction phase, the projects will be financed by construction loans, as well as installment payments from buyers.
Modules and Wafers
During the first quarter, total external module shipments were 266.8MW, down 19.3% from Q4 2016 and down 23.9% from Q1 2016. Total wafer shipments were 259.2MW, down 15.3% from Q4 2016 and down 26.2% from Q1 2016.
LED revenue of $9.6 million was up by approximately 3% from $9.3 million in Q4 2016. Gross margin was approximately 30.9%. The sequential slowdown in LED revenue growth was largely due to short-term adjustment to product offerings, coupled with inventory management in the quarter.
ReneSola remains optimistic about the growth prospects in LED business. The market for energy efficient products is large and growing rapidly. LED lighting is one of the most effective products for reducing electricity consumption. The Company believes it can leverage its brand name and global distribution footprint to build an attractive, high margin business. The Company expects LED business to grow into a meaningful financial contributor in the years ahead.
For Q2 2017, the Company expects revenue in the range of $180 to $200 million, external wafer shipments in the range of 220MW to 240MW and external module shipments in the range of 230MW to 250MW.
For full year 2017, the Company expects revenue in the range of $900 million to $1,000 million.