Canadian Solar - Earnings Call - Q2 2020

Transcript

Speaker 4

Ladies and gentlemen, thank you for standing by. Welcome to Canadian Solar's second quarter of 2020 earnings conference call. My name is Annie, and I'll be your operator for today. At this time, all participants are in muted only mode. Later, we'll conduct a question-and-answer session. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Isabel Zhang, Investor Relations Manager at Canadian Solar. Please go ahead.

Speaker 3

Thank you, Operator. Welcome, everyone, to Canadian Solar's second quarter 2020 earnings conference call. Joining us today are Dr. Shawn Qu, Chairman and CEO; Yan Zhuang, President and COO; and Dr. Huifeng Chang, Senior VP and CFO. On this call, Shawn will provide an update on the market environment and Canadian Solar's long-term strategy, followed by Yan, who will review our recent progress and business outlook. Huifeng will then review our financial results and capital management strategy. After the prepared remarks, we will have time for questions. Before we begin, we have reminded listeners that management's prepared remarks today, as well as their answers to questions, will contain forward-looking statements that are subject to risks and uncertainties. Therefore, the company claims the protection of the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ from management's current expectations. Any projections of the company's future performance represent management's estimates as of today. Canadian Solar assumes no obligation to update these projections in the future unless otherwise required by applicable law. A more detailed discussion of the risks and uncertainties can be found in the company's annual report on Form 20F filed with the Securities and Exchange Commission. Management's prepared remarks will be presented within the requirements of SEC Regulation G regarding Generally Accepted Accounting Principles, or GAAP. Some financial information presented during the call will be provided on both a GAAP and a non-GAAP basis. By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends. Management uses non-GAAP measures to better assess operating performance and to establish operational goals.

Non-GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP. At this time, I would like to turn over the call to Canadian Solar's Chairman and CEO, Dr. Shawn Qu. Shawn, please go ahead.

Speaker 6

Thank you, Isabel. Hello, everyone. Welcome, and thanks for joining us today. Canadian Solar delivers strong second quarter results as we manage through the ongoing impact of the COVID-19 pandemic. We continue to deliver clean, reliable, and affordable solar energies to our customers while operating under strict health protocols. Despite these challenges, we delivered higher-than-expected diluted earnings per share of $0.34 in the second quarter. Now, let me give you an update on the market environment and Canadian Solar's long-term strategy. I will also share some thoughts on our recent announcement to access China's capital market. On the last call, I said that global demand for 2020 might decline for the first time in 20 years. Even as a veteran in this industry, I think I might have underestimated the strength of the solar market.

The global demand situation was soft in the first half, but we continued to grow our shipment and gain market share. Over the past few weeks, we have seen a sharp improvement in demand across most of our end markets, including the U.S., Latin America, Europe, Japan, Australia, and China. Inevitably, some projects have been delayed by a quarter or two, but overall, the demand situation is very strong, and we are now running at full capacity. Our team has done an excellent job staying focused on serving our customers in the face of COVID-19 challenges. R&D, manufacturing innovations, and increased levels of economics of scale in the past few years have brought solar to grid parity in a growing number of cities. This is why demand quickly rebounded. Today, projects are less driven by subsidy deadlines but more by project economics and other competitive factors.

The underlying demand is strong. BloombergNEF forecasted 110-240 gigawatts of global demand this year. We now believe it will be somewhere in the middle or probably towards the higher end of this range. The only limiting factor is the availability of raw material supply and ability to supply in the next few quarters, in the next few months. For 2021 and 2022, BloombergNEF's middle point estimates for global demand are 150-160 gigawatts, respectively. This is consistent to what we have heard through our own channel checks. We are extremely excited about the long-term opportunities in the industry, and we are positioning Canadian Solar more assertively for the growth. On the module and system solutions, our MSS business side, we recently announced our strategic decision to list our wholly owned MSS subsidiaries on the Chinese stock market.

If the listing is successful, we expect to have greater access to cheaper sources of capital that will support us in capturing a greater share of market growth and value creation. Additionally, as market consolidation accelerates, we have a unique advantage having spent so many years building a top-tier brand and reputation, robust global sales channels, and an incredibly strong operational and financial track record. We believe we are better positioned for growth than anyone else, and by accessing to China's capital market, we will also benefit from the low cost of capital. Another key motivation for pursuing that listing is to unlock value for shareholders. We hope to address what is, in our view, an unjustified relation gap between Canadian Solar and our China listed peer.

As an update on what we are in the process, we have started the pre-IPO capital raising process, including new partners to our MSS business, and converting it into a sino-foreign joint venture, joint stock company. This is required by the Chinese securities regulations for listing in China's stock market. This investment is expected to be completed by the end of September and will bring in fresh capital to support the forthcoming MSS expansion and growth plan for the next year before expected listing. Capital raised from the pre-IPO round will also allow us to use the best available technology and equipment to support our new module shipment plan for 2021. We will update you further as we reach further milestones. At the same time, we remain fully committed to our Nasdaq listing and to growing our global energy business.

We iterate with five-year growth guidance we gave last quarter, which includes achieving around 25% CAGR in the project sales volume. With that, let me turn over to Yan, who will go through our business results and logbook. Yan, please go ahead.

Speaker 5

Thank you, Shawn. Let me start with the three key messages. Firstly, we achieved strong financial and operating results in Q2, with revenue and profitability both above our expectations. We are proud that even under the challenging market circumstances, we adjusted swiftly and continued to deliver strong results. However, in the near term, we see some margin pressure due to cost increases from polysilicon supply shortages. Given our strong market position and pricing power, we expect to share a portion of the higher costs with customers. Most importantly, we are positioning ourselves for long-term growth by expanding capacity and increasing vertical integration in our module business, and strategically investing in solar-plus storage capabilities. Now, let me go through our Q2 2020 operating results. On the MSS business side, shipments in Q2 grew over 30%, both sequentially and year-over-year to 2.9 gigawatts, well above guidance.

Q2 revenues of $669 million were also ahead of our expectations, but were down sequentially as the volume growth was not enough to offset the ASP decline. Manufacturing costs were also lower in Q2, and despite the expected decline, gross margin remained at a healthy level of 21.1%. One of the exciting developments in Q2 was our new product launches as we introduced modules of 500-600 watts. When I joined Canadian Solar back in 2007, the standard module wattage was over 100 watts. We have come a very long way. Over that time, Canadian Solar has been a leader by bringing a series of innovative new solutions to the market as we increase the benefits to customers. Our latest modules have higher cell efficiencies, larger wafer sizes, longer product warranties, and ultimately offer our customers lower LCOE and better returns.

On the energy business side, due to the previous higher volatility in the capital markets, we had some delays in project sales. This is the main reason why both our energy revenues and gross profits were down in Q2. Our strategy is to take a balanced approach between recycling our capital quickly while maximizing the valuation of our solar power plants. Financial markets appear to have stabilized over the past few months, and currently, demand for our projects is strong. For example, we recently announced the financial closing of our Maplewood projects of 367 megawatts. We expect to make more announcements over the coming months as we reach closure. While energy business revenues were soft in Q2, gross margin was higher than usual at 43.4%. Gross margin benefited from stable high-margin revenues from our operations and maintenance business, which now has around 3 gigawatts of projects under contract.

We expect to drive additional growth in our O&M business as we accumulate a growing portfolio of partial ownership in operating assets. In terms of business development, we signed two private PPAs in Q2 in Brazil, totaling 274 megawatts. Brazil is one of our key markets. We were one of the first solar companies to enter this market in 2013 and even set up a module factory in São Paulo. Over the past seven years, we have cemented our leadership position in the Brazilian market, both as a project developer and as a module supplier and system integrator. We continue to see significant growth potential in this market, given the strong energy demand, higher solar irradiance, stable capital markets, and attractive project returns. Now, let me comment on our guidance and business outlook.

For the third quarter of 2020, we expect total module shipments to be in the range of 2.9-3.1 gigawatts. Total revenue were expected to be in the range of $840 million-$890 million, and gross margin is expected to be between 14%-16%. For the full year of 2020, we now expect total module shipments to be in the range of 11-12 gigawatts. In the near term, as reflected in our guidance, we are seeing some margin pressure due to higher costs from the polysilicon supply shortage. However, given our leadership position in premium markets and the strong overall demand rebound, we expect we will be able to share part of the higher costs with customers and have already started to raise module prices. We currently expect the impact of the polysilicon supply disruption to lessen as supply expands in the coming quarters.

On the energy side, the exact timing and recognition of certain project sales remain uncertain. In terms of volume, we expect to recognize a large part of this year's project sales in Q4, with some projects potentially moving into next year, as we previously communicated, mainly due to delays and impact of COVID-19. Over the longer term, I'm very excited about our growth outlook given the compelling solar market dynamics and Canadian Solar's company-specific catalysts. We are expanding capacity and increasing vertical integration for our module business, which will allow us to capture more global market share, enhance pricing power, control costs, and improve profitability. In fact, next year, we're planning on 18-20 gigawatts of shipments. We're in the process of completing capacity and CapEx plans that will support our long-term growth, and we plan to give an update during next quarter's results, tentatively scheduled for November.

Importantly, we are seeing industry consolidation accelerate, and as the global leader in both the energy and module businesses, we are uniquely positioned to capture an outsized share of industry profits to generate long-term sustainable returns for investors. From a technology standpoint, we are building our expertise and ramping up quickly in the solar PV-plus storage space. In this quarter, we almost doubled our total pipeline and backlog of storage projects. In the U.S., for example, some of the customers that we previously sold utility-scale solar projects to are coming back to us to help them retrofit the power plants with our proprietary battery storage solution. We're also starting to build our storage pipeline in other parts of the world, including Latin America, Europe, and Australia. Every day, I'm reading news articles about how conventional fossil fuel generators are being retired earlier than expected.

I think we'll see a lot more growth in the solar-plus storage space. At Canadian Solar, we're committed to innovation and building the technology DNA to lead the next wave of growth in the energy industry. Now, let me turn over the call to Huifeng for more details on our financial results and capital management strategies. Huifeng, please go ahead. Huifeng.

Speaker 4

Huifeng, are you still on the line?

Speaker 5

David, can you connect me? You connected. You're on the line. We can hear you now. There's a lot of echo.

Speaker 4

Right.

Speaker 5

Thank you. Thank you, Yan. Sorry for the technical problem. Before I reveal the numbers, I'd like to share a quick thought with you. The keyword I will use to describe Canadian Solar in 2020 is resilience. In Q1, as the coronavirus first hit China.

Speaker 4

I think we lost Mrs. Qu.

Speaker 5

Yeah.

Speaker 4

Qu, Chang?

Speaker 5

I'm here now. Can you hear me? Hello? Can you hear me?

Speaker 4

Yes.

Speaker 5

Yeah. Yes. I can continue.

Speaker 4

Right.

Speaker 5

Hello? Okay. Thank you. Yes. Yeah. The keyword I would use to describe Canadian Solar in 2020 is resilience. In Q1, as the coronavirus first hit China, we lost production for a few weeks. Our teams worked incredibly hard to catch up safely. As production issues were resolved, demand issues emerged in Q2, and we became extremely cautious with our liquidity management. Over the years, our management team has developed a habit of being extra alert to potential challenges. When we see one on the horizon, we ring the alarm bells and plan for the worst. We always face the situation head-on. Because of this habit, most times, things eventually turn out to be better than what we initially expected. I'm very proud of our teams for working through these challenging times with resilience, focus, and actionable results. Now, back to the financials.

Yan reviewed the revenues and the profitability, so I won't go through it again. Total operating expenses in Q2 were $102 million, down 17% year-over-year. The decline was partly driven by lower travel expenses as well as our continued efforts to control OpEx. The net foreign exchange loss in the second quarter was $4.5 million, which was larger than usual. As a global company, we manage our currency risk through a comprehensive hedging program. A hedging 100% is cost-prohibitive, so we take a balanced approach by hedging our exposures only to a level we consider reasonable and take some currency risk. In this quarter, for example, the high FX loss was mainly due to the unfavorable moves in the Brazilian real and the Thai baht.

Moving on to the balance sheet, as demand and the capital market conditions have both improved, we are working to strike a balance between investing for the long-term goals and preserving cash. Our leverage and the liquidity matrix were stable this quarter. Total debt was at $1.9 billion. Non-GAAP net debt to EBITDA was 2.4 times, and the EBITDA to net interest coverage was 7.9 times. Both of these matrices are healthy and broadly unchanged from the previous quarter. We also continue to focus on working capital management. Where one could argue that we have been too successful at managing working capital, given the recent raw material price increases, we almost wish we had built a larger inventory. The tide could turn quickly, and it is not a risk we are willing to take. CapEx in the first quarter was $86 million.

Our CapEx plan for the full year of 2020 is slightly higher than what we said last quarter, around $300 million, as we are expediting capacity expansion as a response to the stronger demand. At the same time, we remain disciplined in our capital allocation decisions, and our goal is always to pursue returns-accretive opportunities. Our potential listing in China, if successful, will give us the additional resources to deliver higher future earnings goals and a return on capital. Given the confluence of several factors, including the opening of China's financial markets, strong solar demand growth, and the cost of solar reaching grid parity across an increasing number of markets, and accelerating market consolidation, we currently see a strategic window of opportunity to invest in growth and to capitalize on long-term opportunities and to unlock sustainable value for our shareholders.

With that, I would now like to open the call to your questions. Operator.

Speaker 4

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. For your questions, please press star and the number one on your telephones and wait for your name to be announced. You can also request it as a pound or hash key. Once again, it is star one to ask the question. First question is from the line of Philip Chang of Ross Capital Partners. Please go ahead.

Speaker 1

Hi, everyone. Thank you for taking my questions. The first one is on your 2021 guidance. It's a nice and large increase versus 2020. Shawn, I think you mentioned in your prepared remarks that today is driven less by subsidy and more by project economics. I was wondering if you're seeing, with the lower module pricing, any result of greater unsubsidized demand creation. We saw this pattern in early 2019 after the May 31, 2018 downturn when China reduced its and changed its feed and tariff program. Do you think we could see something similar for 2021? How much of 2021 demand do you think could come from unsubsidized markets versus what we've seen in prior years?

Speaker 6

Hi, Philip. This is Shawn speaking. My answer is that I believe almost all the 2021 demand—sorry. Almost all of the 2021 demand will come from unsubsidized demand rather than the government-subsidized demand.

Speaker 1

Great. How much of 2021 do you have visibility into? Let's say your guidance is 19 gigawatts at the midpoint. Do you have already visibility or even contracts for 25% of it or something even more?

Speaker 6

No. This is the demand we're facing, and this is what we believe we can ship. We did our channel check. We think, first of all, there are demands. The 2020 project getting pushed to 2021, that will be one of the demand sources. Second, there are many projects prepared for 2021 anyway. Third, the availability of increased financing in the capital market will fuel the growth in 2021. As a matter of fact, we believe that the module ASP will probably start to be stable, more stable than through the remaining of 2020 through 2021, rather than the big decline we have seen in the past few years. Because of that, right now, we are focusing on new products, and we're offering new products to the market rather than to rush out to sign off contracts.

We do have a lot of quotations out already, and we're monitoring and in close negotiation on many of the big potential contracts.

Speaker 5

Let me add on Shawn's comments. Philip, actually, when we're talking about how much volume we have locked in, I think it's not just the contract we sign. Remember, there are a lot of demands that are more reliable than contracted demand. This depends a lot on our long-term contract signing, for example, in the U.S., and also demand-supply relationship. The U.S. demand can only be met by the Southeast Asian capacity that does not have that much bankable capacity. We have over 3 gigawatts of capacity in Thailand that are almost everything's reserved for the U.S. We have quite a few large contracts that are three-year long-term contracts based on cost-plus model. That is already locked. I think the entire U.S.-Thailand capacity of 3 gigawatts, to me, is locked because U.S. demand is high and the margin is healthy.

We have markets like Japan because in Japan, we have different channels, including the residential system sales that are a distribution business that are very loyal channels. They are repeat customers, so they are not going to change. We know that volume of business is coming in every year with stability. Even for utility-scale projects in Japan, the demand is close to two or three years ahead of time. It does not change suddenly. That will be coming in for sure. Globally, we have a direct sales channel handled by a separate team, selling small volume at a higher price to the installers going into residential and commercial rooftop. Those customers are repeat customers, so they will be coming in. We have our own project that needs modules, and that volume is going up significantly next year. That volume is locked.

If you count all those in, I think we have half already locked in. That's my answer. I hope that answers your question.

Speaker 1

It does, Yan. Thank you very much. That's very helpful. Looking at the other side of the equation in terms of your capacity expansion potential, I know you mentioned that you would like to share more on the next call. Given the visibility that you have, I was wondering if you might be able to provide a little bit of color today. Specifically, how much expansion could you see potentially in 2021 as it relates to wafer and cell and module? How much do you expect to have to spend to invest in that vertical integration and expansion? Thanks.

Speaker 5

Sorry, Philip, I can give you some indication, but I cannot give you detailed numbers because we're still in the last phase of planning, and we need to get the board's approval. Before that, I cannot share the tangible numbers. I can tell you that we already have the shipment guidance for next year. We need to expand our capacity to support that volume of shipment and also to sustain our profitability. You know our culture. You know Shawn. You know our management team that we're very rational and we're very number-driven. Once we invest in the capacity, we have a margin target, a profit target. The vertical integration and the capacity expansion need to support both volume and profit and return.

Speaker 1

Okay. Great. Thanks. One last one, if I may. As it relates to the China listing, how much do you think you could raise via the pre-IPO process? Then ultimately, how much would you target during the IPO process in China?

Speaker 6

Philip, we do have our target, but we are in the pre-IPO talk right now. I would rather share this number with you after we close the round. That is only going to be less than two months. I would rather share it. What I can let you know is that the demand for the pre-IPO, the available demand for the pre-IPO target is very, very strong. We are receiving phone calls from some of the large and very credible investment funds on a daily basis. We think that our pre-IPO fund quarter will be oversubscribed.

Speaker 1

Okay. Thanks for the color there, Shawn. I'll pass it on.

Speaker 4

Thank you. Once again, for your questions, it is star number one on your telephone keypads. Next question is from Brian Lee of Goldman Sachs. Please go ahead.

Speaker 2

Hey, guys. Thanks for taking the questions. Maybe just a quick follow-up to Phil's last one on the pre-IPO discussions you're having. Any sort of sense of range of valuations that you're hearing investors are comfortable with for that segment?

Speaker 6

That's another question I would rather answer after we have the numbers. I don't want to give an indication so that my pre-IPO investors know how to negotiate with me. As I said in my answer to the previous question, the demand to our investment quarters is very high. I think we'll see some healthy competition so that the valuation will be probably on the high end of what we have been expected.

Speaker 2

All right. Fair enough. Maybe a couple of housekeeping questions for Wei Feng. Wei Feng, on the three-Q guidance, can you give us a sense of what mix of energy versus MSS sales is embedded in that? And then the kind of gross margin ranges for each of the segments given how lumpy it's been through the first couple of quarters here?

Speaker 6

That breakdown, we do not provide the number yet, but mostly still in the MSS side. In Q3, there will be some product sales closure, but not a significant contribution. There also is uncertainty of the closing time. I think before the end of the year, between Q3 and Q4, there will be some closure.

Speaker 2

Okay. Fair enough. I guess maybe just to follow up on that, though, if you take the implied price per watt in 2Q since 2Q revenue was almost all modules and you assume a fairly small contribution from energy in 3Q, that would imply module pricing is going up from 2Q to 3Q, which I do not think we are really expecting that. I do not know if that is what you are telegraphing here. It seems like 3Q is embedding a decent amount of energy revenue relative to 2Q, I think more in line with what you saw in 1Q. Just trying to understand the puts and takes here because the pricing otherwise would be implicitly going up here.

Speaker 6

Okay. Maybe I'll come back to you later on the follow-up with more details.

Speaker 2

Okay. I'll take that offline. Maybe just one last one for you. On the gross margins, presumably they're going down for modules in Q3 since the majority of your revenues in Q3 are still going to be module-based. Should we expect gross margins to sequentially decline further in Q4 just given the volatility in poly pricing and the timeline between what you're purchasing and ultimately what you're passing through in terms of higher costs?

Speaker 5

Let me take that question. This is Yan, Brian. For Q3, the margin is lower for module businesses because module contract was signed a few months earlier for Q3. Suddenly, we're experiencing a polysilicon shortage and price up, significantly up. We are increasing our module pricing, but for the contracts that are already signed, we will not be able to raise all the pricing for all the signed contracts. That is why you're seeing lower margin for Q3 on module business. When we enter into Q4, because a few months ago, in the past few months, we decided not to take on those super low-price deals for Q4. We still have when the cost came up, when the cost went up, we had a pretty good idle capacity for Q4 to sell that we will be able to sell at a better pricing today.

That was a good decision. It was a good call. Q4, and also we believe that the cost up will be stabilized when we get into Q4. Maybe at a certain point of Q4, it may—I do not know. I would not say it will go down, but at least it will not go up more. Module pricing, we can do better in Q4 than Q3. I think the margin going down trend will not continue into Q4. Q4, we should do better.

Speaker 2

Okay. That's everything.

Speaker 6

On the project side in Q4, we might have a chance to have more closure on project sales in Q4 than Q3.

Speaker 2

Understood. Thank you.

Speaker 4

Thank you. Once again, for those who wish to ask a question, it is star and the number one on your telephone keypad. If you change your mind, it is the star or the hash key. Next question is from the line of Colin Rusch of Oppenheimer. Please go ahead.

Speaker 0

Thanks so much, guys. Can you talk a little bit about the next shift and changes with the direct sales channel and how we should think about pricing with some of the bigger volume deals versus pricing dynamics with that direct sales channel?

Speaker 5

We experienced some impact from COVID-19 on direct sales channel on the residential markets and commercial markets in some markets, for example, in the U.S. It started to warm up. However, the impact varies from country to country. Like Japan, which is, in terms of revenue, the biggest residential market for us, was not affected at all. There is no impact. Other markets, Europe, I think, has come back already. There is no impact anymore. China is strong. The only markets that are still where we're experiencing an active impact are the U.S. and Brazil. Still, even in the U.S., the market is already better now. It is better than Q2. Direct sales channel, I think for Q2, we still did well, actually, on the direct sales channel. The proportion is close to 50% for the total shipment in Q2.

That is actually pretty high. That is why we have achieved 21% of gross margin for Q2. I would say the pricing for direct sales channel is actually more robust than the utility-scale projects during the pandemic crisis. Maybe it is the nature because this market is more inertia to pricing. The price elasticity is not that sensitive than the professional utility-scale markets.

Speaker 0

That's very helpful. In the project business, can you guys talk about opportunities for acquiring distressed projects? What's happening with your customers in terms of push-outs and challenges on financing where you guys might be able to step in and capture some outsized value?

Speaker 6

Colin, if we see any good distressed asset, we'll be interested. We will take on opportunities. At this moment, we haven't seen big ones yet. You should let us know if you heard any opportunities. We'll be interested, Colin.

Speaker 0

Okay. Great. Thanks so much, guys.

Speaker 4

Thank you. Once again, for those who wish to ask a question, please press star and the number one on your telephone keypad. Wait for your name to be announced. Next question is from Mark Strauss of JPMorgan. Please go ahead.

Speaker 7

Yeah. Thanks for taking our questions. Most of them have actually been answered. Wanted to follow up on one of Brian's questions, though. Wei Feng, are you able to quantify the impact of the poly supply shortages in Q3, the 14%-16% guidance? Can you say what that might have been without the poly disruption?

Speaker 6

I think Yan knows the answer better. Yan, would you please answer the question?

Speaker 5

I think the impact is pretty major. I've made a calculation. I mean, I think the majority of the impact comes from the silicon, right? However, once something happens, everybody's trying to ride the same boat to raise their pricing. Altogether, I think when it comes to module, the impact is like $0.02. However, in Q3, for pricing, for module price up, we try to raise price for module, but that does not mean we can raise 100%. I would say we still lost at least 5% on margin. That's probably the rough number.

Speaker 7

Okay. Okay. That's helpful. That's it for us. Thank you.

Speaker 4

Thank you. Ladies and gentlemen, that's the end of our question and answer session. Now I'd like to turn the conference back to our CEO, Dr. Qu, for closing comments. Discontinue.

Speaker 6

Thank you for joining today's call and for your continual support. If you have any questions or would like to set up a call, please contact our investor relationship team. We thank you for your continual support. I hope you and your families have a safe and healthy day. Thank you.

Speaker 4

Thank you. Felix, please do stand by. I'll put you back to the next call. Ladies and gentlemen, that concludes our conference for today. Thank you for participating. You may all disconnect.