SunPower Inc. (SPWR) Q3 2014 Earnings Report, Transcript and Summary

Good morning, and welcome to SunPower Corporation's Third Quarter 2014 Results Conference Call. [Operator Instructions] Today's call is being recorded. If you have any objections, please disconnect at this time. I would now like to turn the call over to Mr. Bob Okunski, Senior Director of Investor Relations at SunPower Corporation. Thank you, sir. You may begin.

Thank you, Diane. I would like to welcome everyone to our third quarter 2014 earnings conference call. On the call today, we will start off with an operational review from Tom Werner, our CEO; followed by Chuck Boynton, our CFO, who will review our third quarter 2014 financial results. Tom will then discuss our fourth quarter 2014 guidance, before opening up the call for questions. As a reminder, a replay of this call will be available later today on the Investor Relations page of our website. During today's call, we will make forward-looking statements that are subject to various risks and uncertainties that are described in the Safe Harbor slide of today's presentation, this morning's press release, our 2013 10-K and our quarterly reports on Form 10-Q. Please see those documents for additional information regarding those factors that may affect these forward-looking statements. To enhance this call, we have also posted a set of PowerPoint slides, which we will reference on this call, on the Events and Presentations page of our Investor Relations website. In the same location, we have posted a supplemental data sheet detailing some of our historical metrics. Finally, I would like to remind everyone that we will be hosting our 2014 Analyst Day on November 13, starting at 10:00 a.m., in New York City. We will be webcasting this event live on our Investor Relations website, and we'll post our slides prior to the beginning of the event. With that, I'd like to turn the call over to Tom Werner, CEO of SunPower, who will begin on Slide 4. Tom?

Thanks, Bob, and thank you for joining us today. I'll start with an overview of the quarter and then review our performance in greater detail, before outlining some of the key topics we will discuss at our upcoming Analyst Day. First, our results. For the quarter, we delivered strong revenue in earnings, while adding assets to our holdco portfolio. Demand was solid across all geographies and end channels, and ASPs were stable in all markets. We expect to see these trends continue for the balance of the year. In the distributed generation business, Japan remained our largest market, accounting for 28% of our shipments for the quarter. In the U.S., we continue to see strong demand, through our residential channel, for all our offers, including cash, loan and lease. In commercial, we won projects from both new and existing customers, an example of which was a 10-megawatt follow-on order with Verizon. In our power plant business, we continue to execute well on the Solar Star projects from MidAmerican. And construction remains on track for our Quinto project, which we expect to compete in the second half of 2015. Internationally, we are executing well on our projects in South Africa and Chile, and we're recently awarded a 41-megawatt supply agreement in the recent French tender process. In APAC, we continue to expand our low-concentration PV footprint in China, which I'll cover in more detail shortly. We also executed well on our technology roadmaps and reached an important milestone in Q3, the production of our billionth Industry-leading, high-efficiency solar cell. This is quite an accomplishment, and I wish to thank our manufacturing and engineering teams for all their hard work in achieving this milestone. Operationally, the ramp of Fab 4 is continuing with first silicon still expected early next year. We have adjusted our Fab 4 ramp point slightly to account for some minor building and fit-up issues and expect a 10-megawatt volume impact in 2015, as a result. Finally, we are continuing to develop our holdco strategy, which Chuck will discuss in greater detail in his section. I would now like to provide more color on our business, starting with power plants, please turn to Slide 5. Power plants remain a key driver of our global business. In the Americas, we have now reconnected with more than half of the 579-megawatt Solar Star project, and construction of our 135-megawatt Quinto project remains on plan. In Chile, our 70-megawatt Salvador, our merchant plant, is close to completion, with all of the PV panels already installed. This project will be fully energized by the end of this year. In Europe, Middle East and Africa, we can see continued tangible progress related to our cooperation with Total. During Q3, we were awarded a 41-megawatt supply agreement from a subsidiary of GDF SUEZ, relating to 4 French power plant projects, the first of which has already been dedicated with the balance to be constructed by the end of next year. We also won a 1-megawatt system from the Dubai Airport, the latest in a series of high-profile projects in the Middle East. In China, we continue to ramp our LCPV joint venture, and we are exploring additional ways to leverage our early success in Inner Mongolia into other provinces. In an LCV -- LCPV pipeline of more than 1 gigawatt, we see tremendous opportunity for this technology. Overall, we're making good progress in relation to our 8-gigawatt power plant pipeline, working closely with Total in a number of near-term opportunities. We will update you as we reach key milestones. I'd now like to briefly discuss our DG business. Please turn to Slide 6. In the U.S., we continue to balance our residential business between cash and lease transactions against the backdrop of overall strong demand. This allows our customers the choice of a monthly payment model or a long-term ownership, depending on their circumstances and preference. For SunPower, this balance is near-term cash flow generation while maintaining a longer-term retained value stream consistent with our holdco strategy. In Lease, as of the end of Q3, we have approximately 25,000 customers accounting for contracted payments of greater than $750 million. We expanded our Corporate Alliance program during the quarter, with exclusive agreements for both Audi and Volkswagen, to bring our high-quality, industry-leading solar solutions to their U.S. customers. We also recently announced our most recent public sector PPA win with a 16-megawatt ground-mount project for UC Davis. When complete, this project will be the largest solar project in any college or university in the U.S. and will add to our holdco project portfolio. Further, in commercial, we extended our long-term partnership with Verizon. This 10-megawatt agreement will cover the deployment of rooftop, ground-mount and carport systems in 8 different locations. The European DG market continues to evolve, with demand and pricing remaining favorable. We saw good traction in both Germany and France during the quarter and remain positive on the EU markets long term. In Asia Pacific, Japan remains a key market for us, as we leverage our partnerships with Toshiba and Sharp. For the quarter, Japan accounted for 28% of our overall shipments. And with the recent amendment extending our supply relationship with Toshiba to 2018, we expect Japan to remain a material market for us for the foreseeable future. Before returning over the call to Chuck for a review of the financials, I'd like to briefly outlines what we plan to discuss at our Analyst Day on November 13. Please turn to Slide 7. We will be highlighting a number of key topics during our presentation: First, how SunPower is well positioned to capitalize in the future growth of solar, including our industry-leading technology and capacity plans? Second, our long-term strategy in the DG channel and plans to expand our energy solutions and services offerings. Third, the importance of branding and how it impacts customer acquisition cost. Fourth, highlights in our global leadership in power plant development, including our strategy for expanding our international and emerging market footprint. And finally, Chuck will provide an overview of our asset monetization strategy, including the status of our holdco as well as the sum of the parts tools to properly value the company's business. With that, I would like to turn the call over to Chuck to review the financials. Chuck?

Thanks, Tom. Good afternoon, and please turn to Slide 8. For today's call, I will focus my remarks on our Q3 performance, and I will provide some color on Q4. Overall, Q3 was another solid quarter. In summary, the company executed well in all end-market segments, but especially in our utility and power plant business, led by Solar Star, which is ahead of plan. Additionally, we saw strong demand in our global, residential and commercial businesses, with North America bookings exceeding plan and adding several new PPAs to our holdco strategy. Specifically on the P&L. Non-GAAP revenue came in ahead of our forecast, primarily due to an acceleration of our Solar Star project, where we now have 309 megawatts connected to the grid. We expect to complete Solar Star mid-next year, 6 months ahead of our original schedule. Our non-GAAP gross margin for the quarter was 16.7%, as we benefited from increasing demand and stable ASPs. America's margin was on plan, led by our large projects, but we also benefited from strong demand and margin contribution from residential. EMEA margin was down sequentially, as our results were impacted by a $2 million VAT reserve. Without this, EMEA gross margin would have been approximately 14%. We expect an improvement in our EMEA margins in Q4 and into the future. As we noted last quarter, APAC margins were impacted by a legacy project developed in 2012 at a lower margin, and we expect APAC margins to return to historical levels of high teens to low 20s, starting next year. In residential, our business was solid, as we deployed 92 megawatts of residential products globally, including 42 in APAC, 11 in Europe and 38 in North America. In North America, 62% of our shipments were cash sales, while 38% were leased shipments. Please note that cash sales of SunPower include sales to customers who choose loans from one of our financing partners. Lease bookings were up 50%, sequentially, to 19 megawatts in Q3, with total lease bookings of 203 megawatts, representing $756 million and net contracted payments, excluding the residual value. In our lease business, megawatts booked, recognized and installed were all up sequentially. In addition, NCI for the quarter was $15 million, up $2 million from last quarter. We've prudently managed expenses during the quarter, as OpEx declined by $3 million sequentially. We continue to manage our OpEx through a portfolio approach, which gives us the flexibility to allocate resources to areas offering the best long-term growth potential. As a result, we expect to increase the OpEx spend, as we execute our ESP strategy and expand our international project development activities. For Q3, our EBITDA results were strong at $86 million. For the quarter, our factories ran at full utilization. Additionally, we are continuing the construction of Fab 4 and further implementing our new technology in Fab 2. Moving on to the balance sheet on Slide 9. Inventory was down for the fourth quarter in a row, as inventory turns were a record of 12x. Our cash conversion cycle was 28 days, though DSOs rose, as the EPC retention receivable for Solar Star was moved from long-term to short-term AR, temporarily increasing our DSOs until we collect the cash next year when the project is complete. We closed the quarter with approximately $1 billion in total cash and $1.2 billion in liquidity. The last item in the financial section relates to the GAAP real estate accounting for our Solar Star projects. As we discussed last quarter, once we reach a certain level of cash receipts, there is a potential for a significant acceleration in GAAP revenue and margin. This acceleration may occur in the fourth quarter, and if so, could increase GAAP revenue by approximately $450 million and GAAP earnings by $0.90 per share. However, we have currently excluded it from our fourth quarter guidance due to uncertainty and the timing of the acceleration. This accounting treatment does not impact our non-GAAP results. Before turning the call back to Tom for guidance, I'd like to provide an update in our holdco strategy and execution. First, I'll discuss residential leasing. Please turn to Slide 10. Similar to last quarter, we'll provide any actual data for Q3 lease activity. With this data, it's easy to calculate the holdco value of these assets. We believe that the SunPower Advantage gives us the highest retained value in the industry, with our lowest degradation rates, longest system life and highest efficiency. In addition, we also believe we have the lowest rent escalator in the industry, averaging 0.3%. This low escalator rate, combined with the SunPower Advantage, maximizes the value to the homeowner for the life of the system while ensuring the long-term value to the holdco. Overall, average system size is in line with Q2, and our Q3 average lease pricing declined slightly due to the state origination mix. Please turn to Slide 11. As you can see from our chart, we have updated our holdco assets to 640 megawatts, which includes the new residential lease signings as well as 21 megawatts of signed commercial PPAs, including our 16-megawatt project for UC Davis. In relation to Quinto, we are pleased to announce that we recently closed construction financing for the project, and it remains on track for completion next year. We continue to analyze all aspects of our holdco strategy. While we will not provide -- while we will provide a further update on potential SunPower Yieldco Analyst Day, we do not expect to make a definitive decision until early next year. In closing, our Q3 performance was solid, as we executed across all segments. With our more than 8-gigawatt pipeline and plans to leverage our holdco strategy, we remain confident that we'll be able to significantly grow long-term shareholder value. With that, I'll turn the call back to Tom.

Thanks, Chuck. I'd now like to discuss some of the highlights of our guidance for the fourth quarter. Please turn to slide 12. For Q4, non-GAAP guidance is as follows: We expect revenue of $575 million to $625 million; gross margin of 19% to 21%; net income per diluted share of $0.15 to $0.30; and megawatts recognized in the range of 300 to -- 340 megawatts. On a GAAP basis, which does not include the Solar Star benefit that Chuck discussed the company expects revenue of $675 million to $725 million, gross margin of 22% to 24%, and net income per diluted share of $0.20 to $0.35. Capital expenditures in the third quarter are expected to be in the range of $30 million to $40 million, as we continue to ramp construction of Fab 4. We will provide our first look at 2015 guidance at our upcoming Analyst Day in November. We will now open the call to questions. In addition to Chuck, we also have Howard Wenger, President of Regions; and Bob Okunski, our Senior Director of Investor Relations. First question, please.

[Operator Instructions] Our first question comes from Vishal Shah.

It's Deutsche Bank. I guess my question is around the U.S. market. Can you maybe talk about how you're seeing the financing in the U.S. market evolve. Especially on the tax equity side, there is a lot of demand out there. But do you see any constraints at all on the tax equity side when you're executing, especially the smaller site, the DG projects? And then you're going to provide more details about potential yieldco at the Analyst Day. But maybe you talk about how many megawatts of projects you have, besides the 2 big ones that you could be constructing over the next 2 years?

Sure, Vishal. It's Chuck. Thank you. We see the tax equity market in the U.S. is very liquid. We have had no issues and we're seeing competitive pricing. So we're very excited about the prospects. We recently closed the construction financing with Quinto and very, very favorable rates in the mini-perm structure that we're excited about. That's yieldco-friendly. With relation to your question on megawatts, our holdco today has 640 megawatts of projects that generate enough cap to launch a yieldco. We also have another several hundred megawatts in pipeline in near term. So we feel like we're set up well, if we choose to go down that route.

Patrick Jobin. Patrick Jobin - Crédit Suisse AG, Research Division: Crédit Suisse. Just a few simple ones here, first on the residential mix. I guess, when I think about 2/3 going to cash or the loan product, it seems like you'd get a higher value for SunPower under a lease-based system. How do you see that when you are trying to optimize that mix to maximize your value over time? I think you mentioned something on cash, but it seems like, with potential AVS or other back leverage, cash flow could be neutral. Just wanted to better understand that. And I have a follow-up.

This is Howard Wenger. We let our customers decide on how to finance their systems, and what we're finding is that, because of our offering of superior product and superior service that many of our customers, in fact most right now, prefer to own their systems. So we're seeing, consequently, a higher percentage of our customers opt for cash and loan. We're going to continue to offer leases and options for our customers. And we see that percentage growing over time. As Chuck mentioned, our lease volume increased 50% sequentially, quarter-on-quarter. So we still have really strong demand for lease. And so we think that the combination of cash and lease is providing an optimum outlook for the company in terms of cash preservation and also long-term retained value.

And then, Patrick, on your cash flow question. The -- a cash sale does provide better cash flow to the company, but the lease cash flows are positive. So we like both of them. And in the holdco strategy, yes, they are very compelling economics for a lease, but they're both important for the company's financial performance. Patrick Jobin - Crédit Suisse AG, Research Division: And then just a simple follow-up. I think, Chuck, you mentioned, optimizing the tax equity structures for your lease-based product. I mean, the portfolio you have today of the 230 megawatts, are they in the right structure for yieldco? Or are they yieldco-friendly given the 45%, 50% cash flow payout previously?

Yes, very good question. A portion are optimized for yieldco, and a portion that are in a sort of legacy structures would need to mature, from a tax standpoint, before they could be dropped into a yieldco.

Tyler Frank. Tyler Frank - Robert W. Baird & Co. Incorporated, Research Division: Robert Baird. I was wondering if you could discuss the Japanese market. What you're seeing there? Excess legacy project that impacted gross margin this quarter and potentially next quarter, just what you're seeing there in terms of pricing and demand? And your thoughts on the ability of utilities to continue to expand the amount of solar projects that they're able to take into their pipelines and on to the grid.

This is Howard Weng. I'll take that one. We're seeing demand overall in Japan that continue to increase. It's really strong. Most of our -- most of the demand that we're seeing is in the distributed generation. There are some large-scale projects that are being deployed. You asked a question about our mix. We had a large project in Japan that was 70 megawatts with URS that we announced previously, and most of that is shipping this year. So that has impacted our margin somewhat in -- for the year. But generally, overall, we're seeing stable pricing and most of our products being deployed in distributed generation. There has been some noise in the market regarding utilities that are slowing interconnection approvals. And by and large, it's not, there are 14 utilities in Japan. Only a few of them are considering doing it, and only 2 have done so, and those are for systems that are 50 kilowatts and above. So it's not really impacting SunPower. And in terms of the long-term trajectory for Japan, we see most of that in DG. Tyler Frank - Robert W. Baird & Co. Incorporated, Research Division: Great. And just as a follow-up, on the global pipeline, can you discuss your current pipeline? I think you mentioned that it remains over 8 gigawatts, but just wanted a little bit more color there.

So we did say 8 gigawatts and the pipeline is growing around the world. I'd say that the markets are growing most significantly. We continue to add projects in America, which is good news for our holdco strategy. And China has a huge upside potential, and we are making great progress in China. So those are the 2 specific regions. But we're, of course, located in the other places that you hear about project announcements, including South America and parts of the Middle East.

Colin Rusch.

Colin Rusch from Northland Capital Markets. Tom, could you give a little bit of background in the margin recovery here in 4Q. And then I have a follow-up around C7 product.

So I think the question was a color on margin recovery in Q4. And then if you could try to somehow ask the second part of your question with a better phone connection, that would be awesome. Chuck, you want to take margin recovery in Q4?

Sure. As we stated before, we see European margins recovering, although it's a small percentage. We see North America being in line with Q3. And Japan will, and Asia will improve a little bit in Q4 and recover significantly in Q1.

Okay, great. And then the follow-on question is really around the C7 product and the traction that you're getting not only in China but in other regions. So could you give us a little bit more detail? I know you've got a little bit of traction, but obviously there are some very big mandates, particularly in China. Where are you with project development and in your confidence in being able to move those projects forward and actually get paid in those regions as those projects get build?

Yes. So things in China are going really, really well. We -- as you know, we have a 4-way joint venture in Inner Mongolia. We are building projects there and in one other region. And we are shipping -- our supply chain is being perfected. What we're seeing is the ability to get cost out of our LCPV product is better than anticipated. So the economics -- the future economic potential of those projects looks better than we thought in the past. We'll be energizing one of those projects here in the very near term, so we'll be collecting field performance data. So for C7, we're focused almost exclusively on China because there is so much upside potential. And the size of projects we expect in the next few years is really, really significant. We are also building a couple of projects in North America. Several are already online that we're collecting performance data off of, and we'll be building that 21-megawatt project in the near term here in the U.S. as well. What we'll probably do is -- well, first of all, I'll talk more about this on Analyst Day, but we'll focused mostly on China. But I'll give you a little better sense of where we're going with this whole product line on Analyst Day.

Next question comes from Brian Lee.

Goldman Sachs. I had 2. First one was just on a couple of the announcements recently around new PPAs being awarded in the Southeast from some of the utilities there. It looks like there has been a lack of wins from the traditional developers. A number of regional and local players are, it looks like, seeing traction there. So I just wanted to get your take on whether this just means the U.S. utility scale market is getting more competitive here, or if maybe these developers are taking share as they're willing to bid more aggressively and take lower margins. And then I had a follow-up.

So I'll say a few comments, and I'll turn it to Howard. What I would say is, for sure, if you look at the vintage of the PPA, I think we all know that the level of competitiveness has increased. The good news is that that's because costs have come down. And I think that there are regional strengths, based on knowing the local policy, are also having preferable land positions and then also understanding the bid strategies which will include local content. So you will see regional winners. We have a strategy to focus on key markets. So we're not spreading our bets across all regions. So there are some markets that you won't see announcements in SunPower, and that's okay. That's by choice. Realize that for the foreseeable future, we're fully allocated on. So having focus on key markets allows us to execute more effectively. Howard, do you want to add anything?

Yes, I would just substantiate what you mentioned around bidders bidding very aggressively. And there is a difference between bidding aggressively and winning a project and then executing and actually earning a profit on a project. And we're seeing that some developers who are especially new to the [inaudible] large scale are bidding in a way that's extremely aggressive. And those -- many of those projects just never come to fruition. So there's some caution on some of the announcements.

Okay, so that's helpful. My second question was just on the resi segment. You may have answered this. But on the bookings for that segment, can you break out how much of that came from new leases, new loans and cash system sales this quarter? It seems like -- and the reason I ask is, the leasing revenue, if I look at it sequentially and on a year-on-year basis, it's just not growing all that much. So wondering what might be driving that dynamic, given you think some seasonality would have helped you here in Q3.

Yes, I'll say a comment or 2 and then Chuck will give the numbers. We will elaborate a bit and -- well, quite a bit on in the Analyst Day is, what our strategy is in residential, but we start with customer choice. And if a customer chooses loan or cash over lease, then that's fine with us. Second would be economics. And there was previous question about cash flows and NPV of cash flows, which are very good questions. And in fact, we could optimize around cash flows, but that's not what we're choosing to do strategically as a company. We're choosing to do -- "go customer first" is our strategy. Howard will elaborate though on the Analyst Day more on who those target customers and why that results in the profile that you see but also, importantly, give you a sense of where we expect that to go over time. Chuck will give you some numbers next here.

So Brian, yes. So the total shipments for the quarter in resi were 38. And of that, 38% of the 38 were lease bookings. And we had about 3 megawatts of loan-financed projects that are in our cash number via our financing partners.

And that's for the America.

For North America only.

Krish Sankar.

Bank of America Merrill Lynch. It's Andrew Hughes on for Krish. I know you've mentioned a few times that customer preference drives the decision in the residential business, lease versus own. Curious if you would try to direct that more towards leasing if you were to pursue a yieldco strategy. And also Chuck, if you could just provide a little color on what the nuances in the tax equity structures for some of the leases that makes them more optimized for the yieldco potential than others?

Sure. I don't think we would, likely want direct customers, we want to preserve customer choice. We enjoy the benefits of cash. Like we said, they provide better cash flow upfront. So they’re both structures are important to us. The nuances on tax equity structuring relates to technically how you structure the tax equity fund and who the owner of the asset is at the time you structure it. It's fairly technical probably beyond the realm of this call. But the specific tax equity structuring would be different for a yieldco than it would be for our holdco.

Great. And Howard, just curious if there is anything new updates in the Middle East market. I think it's one that everyone is kind of waiting on and there may be some concern on the viability of near-term demand, just given low oil price and the fact that it's actually used as an input to electricity generation in that region.

Yes, the Middle East in the near term, meaning the next 18 months, is not a big part of our plan going forward. But we are present and we have a great position, especially given our collaboration with Total in the region. So we're poised and ready when those opportunities arise. In Africa, we're seeing more demand. And Tom mentioned a project that we're building in South Africa, and that we're going to be building another large project in 2015 there, over 80-megawatt project in South Africa. So there's parts of Africa that are actually emerging as being quite interesting.

Let me add. The price of oil has almost nothing to do with future demand, even in that region. So we can price solar energy significantly below diesel-produced electricity that $80 oil has no impact on those economics. You have to have substantially lower cost of barrel of oil to even come close to the numbers that you can hit in solar. So this isn't oil price or economics-driven. It's a structure of market-driven. It's a long-term gain that we're going to be present, and then we're going to capitalize on Total.

Next question comes from Pavel Molchanov. Pavel Molchanov - Raymond James & Associates, Inc., Research Division: Raymond James. It's been 3 months or so since your Chinese peers got hit with the escalated tariff policy in the U.S. And I'm just curious what's your thoughts are on the competitive landscape for module fails. How it's changed in the U.S. since that time?

Yeah, I'll give an overall comment. And by the way, we're going to take one more question. Thank you, Pavel, for your question. So I think we've seen a modest increase in pricing in the U.S. And I think that there is even more preference for a stable premium supply of products. So it's allowed us to position more effectively in the U.S. market.

And I would agree. The game has shifted more in the systems and the solutions. So if one part of the value chain is getting higher pricing, the other part of the value chain has to absorb it. We're on -- we're fully vertically integrated, so we're able to manage that quite effectively. We are seeing some benefit from it. It's not something that we think too much about day-to-day. Pavel Molchanov - Raymond James & Associates, Inc., Research Division: Okay. Just a quick one on Japan, if I may, kind of related to the previous question about oil prices. As Japan brings back some of its nuclear capacity back online, do you see that as a possible threat to the solar build out there?

Yes, not particularly. Japan has a really long-term view of their energy future and very much dedicated to making solar power happen in a big way. So if you look at their long-range planning, solar is going to continue to be a -- or is a significant part of the mix. And we don't see the -- bringing on nuclear power plants, we don't see that happening in a big way in Japan. They're taking an extremely measured approach as you can imagine. And they've got 52 nuclear power plants, and 50 of the 52 are offline. And so we don't see it impacting demand over the next few years.

And certainly, the DG market in Japan is just really well suited to that market, and therefore, it's more insulated from any kind of long-term macro trends like that.

Yes, I would just want to add one more thing that came to mind, which is, the retail -- building on what Tom said, the retail rate for electricity is now approaching grid parity where the feed-in tariff is actually not really going to matter for DG over time. So what we're seeing is more batteries, more self-consumption and a long-term structural market for solar.

Okay. Last question, please.

Our next last question comes from Mahesh Sanganeria.

RBC Capital Markets. I have couple of questions on the -- on your pipeline. If you -- you talked about 8-gigawatt. Can you give us a sense of how is that trending in terms of DG versus power? And my second question will be, considering the strong pipeline, do you expect to continue to increase the capacity? Or do you have a target based on demand? Or do you have -- basically want to meet a capacity growth at a certain rate?

Sure. So on -- the 8 gigawatts is all power plants. We give -- we don't give pipeline of any DG projects, commercial or residential. The -- I am sorry, it's all power plants plus commercial, but it's predominantly power plants. So that answers your first question. Second question is, is I'll talk a lot more about at Analyst Day is our capacity expansion. As you know, we're building our fourth fab. We'll have first silicon towards early to middle of next year. We'll start producing that in volume in the back half of next year. And then we'll talk about the next steps with capacity. And the way we see it is, is we want to have a certain share or more, and we will stay aggressive on capacity expansion to maintain or to increase share over the next few years. So we look at is a global share number, and then we want to maintain or increase share on. So thank you very much. We look forward to seeing most or all of you at our Analyst Day. And we really appreciate you joining us early on a Wednesday. And have a great day.

This concludes today's conference call. Thank you for listening. You may disconnect at this time.