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Q2 2013 Earnings Call
August 07, 2013 8:00 am ET
Chris Chaney - Director of Investor Relations
Ahmad R. Chatila - Chief Executive Officer, President and Director
Brian Wuebbels - Chief Financial Officer and Executive Vice President
Brandon Heiken - Crédit Suisse AG, Research Division
Vishal Shah - Deutsche Bank AG, Research Division
Brian K. Lee - Goldman Sachs Group Inc., Research Division
Sanjay Shrestha - Lazard Capital Markets LLC, Research Division
Shahriar Pourreza - Citigroup Inc, Research Division
Stephen Chin - UBS Investment Bank, Research Division
Krish Sankar - BofA Merrill Lynch, Research Division
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Good morning, and thank you for joining SunEdison's Second Quarter 2013 Results Conference Call. I am Chris Chaney, Director of Investor Relations. With me today are Ahmad Chatila, President and Chief Executive Officer; and Brian Wuebbels, Chief Financial Officer.
After my remarks, Ahmad will provide an overview of the significant events and commentary on the company's second quarter performance, and Brian will then review the financial results. Brian's discussion will reference slides that we have made available in the Investor Relations section of our website at www.sunedison.com.
Our discussion today will refer to certain non-GAAP financial measures. A reconciliation of these non-GAAP measures has been provided in our earnings press release financials published earlier this morning.
Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statement contained in the earnings release and the slides published today for a more complete description.
And now I'll turn the call over to Ahmad.
Ahmad R. Chatila
Thanks, Chris. Good morning, everyone. I'll make a few brief remarks and then, turn it over to Brian to review the quarter in more detail. The second quarter was generally in line with our expectations and the targets we laid out last quarter.
In our Semiconductor business, we again grew sales during the quarter, as well as profits and cash flow. I'm very pleased with our Semiconductor team and with their systematic efforts to drive continuous improvement. The team has done an outstanding job in a very difficult market. They have made the most of an extended downturn, being meticulous in identifying and exploiting opportunities for efficiency and cost improvements that will continue to benefit us going forward. For example, lean implementation and other manufacturing efficiency improvement at multiple plants helped enable the business to ship record volume in the second quarter and drive growth.
As we look at the second half, visibility has diminished to some degree, with demand not firming up across all segments as expected. To mitigate pricing pressure, we will continue our aggressive focus on cost reduction.
Turning to our Solar Energy business. Earlier this year, we indicated that the first and second quarters would be relatively weak. This was an artifact of our modest development spend in the first half of last year. This played out as expected. We also indicated that the second half of 2013 would constitute a strong ramp that would continue into 2014. Our view has not changed.
Projects under construction increased in Q2, and we added significantly more at the outset of Q3. During the second quarter, we grew our project pipeline by more than 200 megawatts to 2.9 gigawatts, and grew our backlog by more than 100 megawatts to 1 gigawatt. We continue to have a robust growth engine and maintain good diversity in our pipeline, both in terms of geography and project size.
Last quarter, I alluded to a few of the actions we are taking in the Solar business that we expected to have an increasing beneficial impact. One of them has been to enhance our business development efforts and ensure that we have a team dedicated to evaluating late-stage projects and partnerships to improve the size and quality of our pipeline and backlog and complement our organic growth engine.
Among other achievements, the team has recently closed 3 development-stage acquisitions in U.S. utility and DG that will benefit 2014, nearly all our late-stage projects were PPAs.
Another action I mentioned last quarter, and said that we would talk more about in the future, was growing what we are -- we call our flow businesses to provide more steady streams of revenue. These businesses include: services, energy sales and distributed generation.
Brian will share with you some new information so you can begin to track our progress on initiatives there, including the growth of our North American DG business. While the solar industry continues to be tough, with government tariffs on polysilicons through modules, as well as changing government policies, we believe we are uniquely positioned to be a long-term winner in this market.
The flexibility of our supply chain in diverse locations such as China, Korea, Malaysia and Taiwan and broad control over manufacturing, including, for example, our Kuching facility and module manufacturing in Malaysia, allow us to circumvent or withstand significant tariffs and other market pressures. It has allowed us to continue to grow and show significant increases in installed megawatts each year and work on strengthening our business in a difficult environment.