Canadian Solar Inc. (NASDAQ:CSIQ) Q3 2018 Earnings Conference Call Transcript
Nov 15, 2018 • 08:00 am ET
Ladies and gentlemen, thank you for standing by. Welcome to Canadian Solar's Third Quarter 2018 Earnings Conference Call. My name is Joanna and I will be your operator for today. At this time, all participants are in listen-only mode. Later we will have a question-and-answer session As a reminder, this conference is recorded today for replay purposes.
I would now like to turn the call over to Mary Ma, the Canadian Solar's IR department. Please go ahead.
Thank you, operator, and welcome, everyone, to Canadian Solar's Third Quarter 2018 Earnings Conference Call. Joining us today on the call are Dr. Shawn Qu, our Chairman and Chief Executive Officer; and Dr. Huifeng Chang, our Senior Vice President and Chief Financial Officer. (Forward-Looking Cautionary Statements).
At this time, I would like to turn the call over to our Chairman and CEO, Dr. Shawn Qu. Shawn, please go ahead.
Thank you, Mary. We appreciate everyone taking the time to join us today. The main takeaways are that Q3 was one of our most profitable quarters ever with net income of $66.5 million. Second, we continue to execute and strengthen our business. Third, the industry has been in a period of higher uncertainty and caution since May 31 China policy change, but we proved that good companies can manage it yet. Our module shipment volume was reduced compared to Q3 2017 reflecting the demand flat in China market. Pricing has been impacted. However, we have managed to reduce raw material cost, achieve greater supply chain and manufacturing efficiency, which gave Canadian Solar a cost leader edge. Our continued focus on product differentiation and operational excellence has helped us to deliver a Q3 gross margin well above plan. Our business efforts extend to communication with our shareholders and analysts.
We have always tried to make Canadian Solar as transparent as possible in an effort to build value for the company and shareholders. Our reporting has evolved along with our business. You hopefully noticed the latest change in our Q3 press release. We have been operating in two principal businesses, which are the module and systems solutions business also called MSS and the Energy business. We are providing additional financial details on those businesses to help you better model our business and prospects. Our MSS business primarily comprises the design, development, manufacturing, and sale of our solar modules, solar system kits, as well as the EPC and O&M services. The Energy business primarily comprises of development, operating, and sale of solar projects. The revenue and profit of Energy business primarily come from the sales of project and the sale of electricity.
Sales from our MSS business to our Energy business are on terms and conditions similar to sales to third-party customers. As noted in our Q3 press release, results from our Energy business may be lumpy quarter-to-quarter depending on the NTP or COD date, sales transaction date, and profit level of each individual project. For Q3, the MSS business contributed 67% of the total revenue for the