SunPower Corporation (SPWR) 2014 Q3 法說會逐字稿

Good morning and welcome to SunPower Corporations third-quarter 2014 results conference call.

At this time all participants are in a listen-only mode.

(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 Investor Relations, 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 Warner 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 to 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 10K, 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 AM in New York City.

We'll 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 and earnings while adding assets to our Holdco portfolio.

The main was solid across all geographies, and end channels, and ASP's are 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.

Counting for 28% of our shipments for the quarter.

In the US 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 PowerPoint business we continue to execute well on the Solar Star project for mid-American and construction remains on track for our Quinto project which we expected to completed the second half of 2015.

Internationally we are executing well on our projects in South Africa and Chile and we were 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 will cover in more detail shortly.

We also executed well on our technology road maps 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 cell expected early next year.

We have adjusted our Fab 4 ramp plan 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 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 merchant plant is close to completion with all the PV panels already installed.

This project will be fully energized by the end of this year.

In Europe, Middle East, and Africa we 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 four 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 for 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're exploring additional ways to leverage our early success in inner-Mongolian into other provinces.

Within LCPV pipeline of more than one 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 would now like to briefly discuss our DG business, please turn to slide 6.

In the US 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.

And lease, as of the end of Q3, we have approximately 25,000 customers accounting for contracted payment 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 US customers.

We also recently announced our most recent public sector PPA win with a 16 megawatt grounded out projects for UC Davis.

When complete this project will be the largest solar project in any college or university in the US 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 eight different locations.

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 shipment with the recent amendment extending our supply relationship with Toshiba through 2018.

We expect Japan to remain a material market for us for the foreseeable feature.

Before turning over the call to Chuck for a review of the financials, I'd like to briefly outline 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's 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 with plans to expand our energy solutions and services offerings.

Third, the importance of branding and how it impacts the customer acquisition costs.

Fourth, highlights on our global leadership and power plant development including our strategy for expanding our international and emerging market footprint.

Finally, Chuck will provide an overview of our asset monetization strategy including a status of our Holdco, as well as, the sum of the parts tool 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'll 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 plants 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, six 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 ASP's.

America's margin was on plan led by our large projects but we also benefited from strong demand in margin contribution from residential.

EMEA margin was down sequentially as our results were impacted by her $2 million VAT reserve.

Without this EMEA gross margin would have been approximately 14%.

We expect an improvement in our EMEA in Q4 and into the future.

As we noted last quarter, APAC margin were impacted by a legacy project developed in 2012 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 lease 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 the total lease bookings of 203-megawatts representing $756 million in 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 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 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 onto the balance sheet on slide 9. Inventory was down for the fourth quarter in a row as inventory turns were a record 12 times.

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 in 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 will provide any actual data for Q3 lease activity with this data it's easy to calculate to the Holdco value of these assets.

We believe that the SunPower advantage gives us the highest retained value and 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 every 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 provide a further update on the 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 for 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-megawatts 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 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.

Vishal Shah and please announce your company name.

Deutsche Bank.

Thank you so much for taking the question.

I guess my question is around the US market.

Can you talk about how you are seeing the financing in the US market evolve especially on the tax equity side?

There's a lot of demand out there, but do you see any constraints at all on the tax equity side when you are executing especially the smaller size DG projects?

And then I know you're going to provide more details about potential Yieldco at the analyst day, but maybe talk about how many megawatts of projects you have besides the two big ones that you could be constructing over the next two years?

Sure Vishal, its Chuck.

We see the tax equity market in the US as very liquid.

We've had no issues and we're seeing competitive pricing, so we are very excited about the prospects.

We recently closed the construction financing with Quinto and very, very favorable rates in a mini perm structure that we're excited about that is Yieldco friendly.

With relation to question on megawatts, our Holdco today has 640- megawatts of projects that are generate enough to launch a Yieldco.

We also have another several hundred megawatts in pipeline in near term.

So we feel like we are set up well if we choose to go down that route.

Thank you.

Next question please.

Patrick Jobin, please state your company name.

Credit Suisse.

Thanks for taking the question.

Just a few simple and here.

First on the residential mix.

When I think about two thirds going to cash or the loan product, it seems like you get a higher value for SunPower under a lease base system.

How do you see that, trying to optimize that mix to maximize your value over time?

I think you mentioned something on a cash, but it seems like with potential ABS or other back leverage cash flow could be neutral.

I just want better understand that.

And then I have a follow-up.

Thanks.

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 the 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 lease as an option for our customers.

And we see that percentage growing over time as Chuck mentioned our lease volume increase 50% sequentially quarter-on-quarter.

So we still have really strong demand for lease.

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.

A cash sale does provide better cash flow to the Company, but the lease cash flows are positive.

We like both of them in the Holdco strategy.

Yes there are very compelling economics for a lease but they're both important to the Company's financial performance.

Thanks.

And just a simple follow-up.

I think, Chuck, you mentioned optimizing the tax equity structures for your lease-based product.

The portfolio you have today of the 203-megawatts, are they in the right structure for Yieldco?

Are the Yieldco friendly given the 45%, 50% cash flow payout previously?

Very good question.

A portion are optimized for Yieldco and a portion that are sort of legacy structures would need to mature from a tax standpoint before they could be dropped into a Yieldco.

Thanks so much.

Tyler Frank.

Please state your company name.

Robert Baird.

Thanks for taking the question.

I was wondering if you could discuss the Japanese, market what are seeing there, ex this legacy project, the impact to gross margin this quarter and potentially next quarter.

Just what you are 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 are able to take into their pipeline and onto the grid.

This is Howard Wenger I will take that one.

We're seeing demand overall in Japan to continue to increase.

It is really strong.

Most of our -- most of the demand that we're seeing of is 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; it was 70-megawatts with Euris that we announced previously.

Most of that is shipping this year.

So that has impacted our margins somewhat for the year, but generally overall we're seeing stable pricing and most of our product being deployed in distributed generation.

There's been some noise in the market regarding utilities that are slowing interconnection approvals and by and large it is not -- there are 14 utilities in Japan, only a few of them are considering doing it and only two have done so.

Those are for systems that are 50-kilowatts and above, so it is not really impacting SunPower.

In terms of the long-term trajectory for Japan we see most of that in DG.

Great.

Thanks 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.

We did say 8-gigawatts and the pipeline is growing around the world.

I would say that markets that are growing most significantly, we continue to add projects in America, which is good news for our Holdco strategy.

And China has huge upside potential and we are making great progress in China to those are the two specific regions.

But we're of course located in the other prices that you hear about project announcements including South America and parts of the Middle East.

Great.

Thank you.

Colin Rusch, please state your company name.

Northland Capital Markets.

Could you tell a little bit about your confidence in the margin recovery in 4Q?

And then I have follow-up around C7 product.

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 to want to take the 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 and Asia will improve a little bit in Q4 and recover significantly in Q1.

Okay great.

And then the following question is really around the C7 product and traction that you're getting not only in China, but in other regions.

Can you give us a little bit more detail?

We know you 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 built?

Things in China are going really well.

As you know we have a four-way joint venture in inner Mongolia.

We're building projects there and in one other region.

And we're 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 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 will be collecting field performance data.

So for C7 we're focused almost exclusively on China because there's so much upside potential and the size of projects we expect in the next few years is really, really significant.

We are also building on a couple of projects in North America.

Several are already online that we're collecting performance data off of and will be building a 20-megawatt project in the near term here in the US, as well.

What we'll probably do is -- well first of all I will talk more about this on analyst day, but will focus 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.

Great.

Thanks a lot.

Brian Lee, please state your company name.

Goldman Sachs.

Hello.

Thanks for taking the question.

I had two; the 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's been a lack of wins from the traditional developers.

A number of regional local players are in looks like seeing traction there.

So wanted to get your take on whether this just means US utilities market is getting more competitive here, or if 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 then I'll turn it to Howard.

What I would say is for sure if you look at the vintage, the PPA, I think that we all know the level of competitiveness has increased.

The good news is, is that is because costs have come down.

I think that there are regional strengths based on knowing local policy.

Also having preferable land positions and also understanding the bid strategies, which will include local content.

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 a SunPower and that is okay.

That is by choice.

Realize that for the foreseeable future we're fully allocated, so having a 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's 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 PV industry on a large scale are bidding in a way that's extremely aggressive and many of those projects just never come to fruition.

So there is some caution on some of the announcements.

Okay.

That is helpful.

My second question was just on the revenue 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 systems 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 would think some seasonality would've helped you here in Q3.

Thanks.

I will say a comment or two and then Chuck will give you numbers.

We will elaborate a bit -- quite a bit, on analyst day as to what our strategy is in residential.

But, we start with customer choice.

And if the customer chooses loan or cash over lease than that is fine with us.

Second would be economics, and there was a previous question about cash flows and NPV of cash flows, which was a very good question.

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 go customer first, is our strategy.

Howard will elaborate, though, on analyst day more on who those target customers are and why that results in the profile that you see, but also importantly give you a sense of where we expected that to go over time.

Chuck will give you some numbers next here.

So Brian, so the total shipments for the quarter and resi were 38.

And of that 38% of the 38 were lease bookings.

We had about 3-megawatts of loan finance projects that are in our cash number via our financing partners.

That is for the America, yes for -- North America only.

Thanks I appreciate the color.

Krish Shanker please announce your company name.

Bank of America Merrill Lynch it's Andrew Hughes on for Krish.

I know you have mentioned a few times the 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 nuance is in 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 to direct customers.

We want to preserve customer choice.

We enjoy the benefits of cash.

Like we said, they provide their 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 is 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's anything new in the Middle East market?

I think it's one that everyone's 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 is actually used as an input to electricity generation in that region.

Thanks.

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're present and we have a great position, especially given our collaboration with Total and 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 were going to be building another large project in 2015 there: over 80-megwatt project in South Africa.

So there's parts of Africa that are actually emerging as being quite interesting.

Let me add that the price of oil has almost nothing to do with future demand even then in that region.

We can price solar energy significantly below diesel-produced electricity that $80 oil has no impact on those economics.

You would 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, this is structure of market driven.

And it's a long-term game, and we are going to be present and we are going to capitalize on Total.

Thanks next question.

Next question Pavel Molchanov please state your company name.

Raymond James.

It's been three months or so since your Chinese peers got hit with the escalated tariff policy in the US, and I'm just curious what your thoughts are on the competitive landscape for module sales, how it's changed in the US since that time.

Yes Pavel and give you an overall, too.

By the way going to take one more question.

Thank you Pavel for your question.

I think we've seen a modest increase in pricing in the US and I think that there's even more preference for a stable premium supply of products.

So it's allowed us to position more effectively in the US market.

I would agree.

The game has shifted more to the systems than the solution.

So if one part of the value chain is getting higher pricing, the other part of the value chain has to absorb it.

We are 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.

Okay.

And just a quick one on Japan, if I may, 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 -- or is a significant part of the mix.

We don't see the bringing on nuclear power plants; we don't see that happening in a big way in Japan.

They are taking an extremely measured approach, as you can imagine, and they have got 52 nuclear power plants and 50 of the 52 are off-line.

So we don't see it impacting demand over the next few years.

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

I 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 Digi over time.

So what we're seeing is more batteries, more self consumption and a long-term structural market for solar.

Appreciate it.

Last question please.

Mahesh Sanganeria, please state your company name.

RBC Capital Markets.

Thank you, thanks for letting me ask the question.

I have a couple questions on your pipeline if you, you talked about 8-gigawatt.

Can give us a sense of how is that trending in terms of Digi versus power?

And my second question will be considering that the strong pipeline, do expect to increase the capacity, or do have a target based on demand, or do you have basically you want meter capacity through at a certain rate.

So the 8-gigawatt is all power plants.

We don't give pipeline of any Digi projects commercial or residential.

I'm sorry it is all power plants plus commercial, but it is predominantly power plants.

That answers your first question.

The second question is I'll talk a lot of more at analyst day is our capacity expansion.

As you know we're building our 4 Fab.

We'll have first silicon towards early to middle of next year, and we'll start producing 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 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 it as a global share number and then we want to maintain or increase share over time.

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 may disconnect at this time.

[Event Concluded]