SunPower Inc. (SPWR) Q1 2013 Earnings Report, Transcript and Summary

Good afternoon, and welcome to SunPower Corporation's First Quarter 2013 Results Conference Call. Today's call is being recorded. If you have any objections, please disconnect at this time. I would like to turn the call over to Mr. Bob Okunski, Senior Director of Investor Relations at SunPower Corporation. Sir, you may begin.

Thank you, Lisa. I would like to welcome everyone to our First Quarter 2013 Earnings Conference Call. Before we get started, I would like to address the early publishing of our results this afternoon, a vendor inadvertently posted our supplementary slides and metric sheet without our permission prior to the public disclosure of our earnings release this afternoon. As a result of this previous disclosure, we thought it was prudent for us to publish our results as soon as possible, hence, the early release. Moving on, on the call today, we will start off with an operating review with Tom Werner, our CEO; followed by Chuck Boynton, our CFO, who will review our first quarter 2013 financial results, before we open up the call to questions. As 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 our 2011 10-K, our quarterly reports on Form 10-Q, as well as today's press release. Please see those additional documents for additional information regarding those factors that may impact these forward-looking statements. To enhance this call, we have also posted a set of PowerPoint slides, which we will reference during 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. On Slide 2 of our PowerPoint presentation, you will find our Safe Harbor statement. Given that our 2013 Analyst Day will be in a few weeks and we expect to provide significantly more detail on our business model at the time, our prepared remarks will be shorter than usual. We will also provide our formal guidance for Q2 and the balance of the year at our event. After our comments today, we'll have a brief Q&A session. With that, I'd like to turn the call over to Tom Werner, CEO of SunPower, who will begin on Slide 3. Tom?

Thanks, Bob, and thank you for joining us today. On today's call, we will update you on our Q1 operational highlights and review our first quarter financials. As Bob mentioned, we will be providing guidance for the balance of 2013 at our Analyst Day on May 15. I'll start with a general overview of our results and operational highlights. Please turn to Slide 4. Overall, Q1 was a solid quarter. We exceeded our revenue, gross margin and earnings forecast for the quarter and generated significant free cash flow. Power plants continue to be a key driver of our business with the CVSR and AVSP projects, again, contributing significant revenue and margin for the quarter. In Rooftop, Residential Lease remains strong with demand, once again outstripping our available financed capacity during the quarter. In Japan, demand for our high-efficiency panels is extremely high, and we shipped record volumes in Q1 as a result. During the quarter, we launch our new X-Series panel with world record efficiency of 21.5%. This panel is particularly well-suited for the rooftop market where its higher efficiency, energy delivery and superior reliability offer significant levelized cost of energy savings. SunPower's technology superiority was once again highlighted in Q1 as our E-Series panels took the top 3 spots in Photon International's annual field test report, covering 109 competing panel types. We will cover the underlying reasons behind SunPower's panel technology superiority during our upcoming Analyst Day and we will explain why product matters. Finally, we exited the quarter with a solid balance sheet as we increased our cash position, prudently managed our working capital needs and generated more than $216 million in free cash flow, including lease financing. I would now like to spend a few minutes talking about Q1 highlights across both power plant and rooftop applications.…

Thanks, Tom. Good afternoon, and please turn to Slide 8. Today, I will discuss our operational performance for the quarter and provide additional color and information on our leasing business. As Tom mentioned, we'll cover our leasing business in our financial model in greater detail at our Analyst Day in May 15, in New York. We've posted strong results for Q1. For the quarter, both megawatt shipped and revenue were in line with Q1 of last year and better than our plan. Non-GAAP gross margin increased 80% year-over-year with net income increasing significantly as we recorded our fourth straight quarter of profits. We also prudently managed our expenses during the quarter and generated $216 million in free cash flow including lease financings. Overall, our results were solid for both earnings and cash flow as we executed on our project commitments, expanded our global rooftop market share, beat our manufacturing cost targets and managed our balance sheet and working capital needs. Moving on to the P&L. Our non-GAAP revenue for Q1 was $575 million compared to $580 million last year. Our North American and Japanese markets, again, showed strong growth in the quarter, while Europe, as expected, was down sequentially due to seasonality and market conditions. Non-GAAP revenue in the first quarter includes $212 million from AVSP and $113 million from CVSR. As we guided in last quarter's earnings call, we recognized the second tranche of AVSP development revenue this quarter. In Q1, GAAP revenue exceeded non-GAAP revenue by $61 million due to the differences between IFRS and GAAP. Global ASPs for our turns businesses were down on average, 8%. We expect ASPs to stabilize in Q2. We increased cell production in Q1 to 208 megawatts, up 36% versus Q4. Megawatts recognized for the quarter totaled 172, while we shipped 186.…

Thanks, Chuck. I will now turn the call over to questions. In addition to Chuck, we also have Howard Wenger, President of Regions; and Peter AschenBrenner, Executive Vice President of Strategy; and Bob Okunski, our Senior Director of Investor Relations. First question, please.

[Operator Instructions] And our first question comes from Sanjay Shrestha.

Lazard Capital Markets. The 2 quick questions I had, number one, just want to make sure that I'm understanding this North American non-GAAP gross margin right, can you give us a sense of how much of that gross margin improvement was due to ongoing cost reduction that we're seeing? And what was the contribution, if anything, from the development-related margin for the AVSP in the quarter?

Sanjay, thank you for the comment on our Q1. What was your second question? So we can...

So the second question was how much was the, if any, contribution from margin associated with the development work from AVSP in Q1?

Okay, so I'll just say a really quick comment and turn it over to Chuck. The answer is both, as Chuck mentioned, we beat our cost reduction targets, which means that we accrued better gross margins as a result of that, all right? And also, the way we managed our capacity resulted in almost complete absorption of all of our overhead. There was a development effect -- or an effect from development margins.as well. Chuck?

Sanjay, the -- obviously, the cost reduction applied to the entire base of our business and was -- we're pretty solid. We don't give the exact metric for the cost per watt but we beat our numbers and it was less than 10%, but a great quarter on the cost side. As it relates to AVSP development margin, we don't break it out separately, it was over $200 million in total, as we disclosed. And that drove 33% margins across North America which was a big driver of the positive margins.

Okay, great. One quick follow up on the comment about the Total in France, then, guys. So that's a big win for you, guys, finally, relationship, I think, is starting to show up in the contract wins. So at what point, Tom, do you think, given there's some talk about movement in the Middle East, that given Total's presence there in that market, we might start to actually hear about a project win for SunPower, given you're probably in one of the best-positioned company that really do a lot of work there?

Yes. Thank you for the question, and you're right. France was the result of our teams working together and, as everyone would expect, Total has world-class relationships throughout the country. In -- to your point, Total has been doing business in the Middle East for 90 years and similarly has some really, really deep relationships. So I was, in fact, in Saudi Arabia last week, as well as Abu Dhabi, and I can tell you that, generally speaking, the market is going to take a little while to develop. What I would tell you is, I feel really confident about our position, and I would tell you, around the world, they have 130 countries they operate in. Many of which we are doing similar things to what we did in France. We will have announcements in the next few quarters of similar wins to France, so it's near term.

The next question comes from Vishal Shah.

Deutsche Bank. Tom, just a couple of quick questions. First on the AVSP and CVSR projects, are you still expecting to recognize about $1.3 billion of revenues from those 2 projects this year, in 2013?

Let me have the team. Chuck, you have the number?

Yes, Sanjay. We don't have an -- sorry, Vishal. We don't have an exact number for the year. We've disclosed that there's $3.5 billion of revenue between '13 and '16, and $1 billion of margin. So that said, but we didn't break out the annual numbers.

Okay, but the trajectory for revenues for the rest of the year, we should assume flattish revenues, growth in the back half. I mean, how should we think about Q2 and then the rest of the second half?

What I would say, Vishal, is we're going to give you a lot of that color, probably all of that color, in 2 weeks. Just to give you a sense of that, the back half of the year should be quite strong for us. I think of Q2 as an inline or transitional quarter to a very strong back half. But again, we'll give you a lot of detail on the call in 2 weeks -- or in the Analyst Day in 2 weeks.

Okay, that's very helpful. And then, it seemed to me you did a great job on the execution of some of these projects, but I'd like to get a sense of you on what your thoughts are of a new project activity in the U.S. in larger community projects now that you're starting to see a much lower cost structure, you're seeing more utilities looking at solar and starting to evaluate some power technology?

Vishal, this is Howard Wenger, I'll answer the question. We're really pleased with our 2 existing projects that we talk a lot about, California Valley Solar Ranch and Antelope Valley. We just dedicated the Antelope Valley project last week. We installed our first megawatt there and we have only 578 megawatts to go. So that's a great project for us. We're going to be building it out over 2.5 years. That's completely underway. We've got a couple of other projects that we've announced. Quinto and Henrietta, these are each 100 megawatts, great projects. We've got the permits for those, we've got the PPAs for those, we got the interconnection. So you can expect subsequent announcements about the progress of those projects, including the financing. As far as new projects in the U.S., the answer is, yes. We're developing more there, more here, I should say, in the U.S. Our costs continue to come down at the system level and we drive the system cost down religiously. And we don't have anything to announce right on this call, but you can expect more significant news in Power Plants in the U.S. One of the things that we're very excited about is the growth of our pipeline, internationally. I'll just pip there for a moment, and Tom already spoke about it. But just to add to that, we're working very actively with Total in many countries. And I'm happy to say that our international power plant pipeline is now in excess -- well in excess of a gigawatt, and we will provide more details on that at the Analyst Day.

That's helpful. Just one last question. How do you see the recent discussion about MLPs for renewables impacting your fundamentals? And also, your ASPs in Japan, in the first quarter, looked like they were about $1.40, but am I looking at that number right? Or -- can you just clarify the ASP movement that you see in the Japanese market?

Vishal, I'll take the MLP question and Howard can address the Japan question. We're excited about the different financing structures coming to market. We think the ABS market, MLPs, REITs, a lot of the discussion that you're reading about, will be favorable for the solar industry over the long-term. And in the very short-term, I think you'll see other structures come to light first, but we're excited about what this means to the industry for liquidity and lower cost of capital.

And as to your ASP question, this is Howard. In Japan, we're not giving out country-by-country ASPs. But you're in the neighborhood, I would say, of what we're doing there. We're really pleased with the growth of our business. We've doubled our megawatt volume from 2011 to 2012, and we expect something along that order in 2013, so things continue to go really well there.

Our next question comes from Shahriar Pourreza.

It's Shahriar at Citigroup. Just 2 quick questions, real quick. The Saudis are, I guess, conducting their reverse auctions this year. I think they're looking for about a gigawatt that should increase about 2 to 3 gigawatts in 2014 and another one in 2015. How active are you right now, or will you be, in the reverse auctions occurring in Saudi Arabia?

So this is Tom, and I believe, Shahriar, in Saudi last week, on -- and let me just comment on the structure of the market in Saudi Arabia. As you know, Saudi Arabia is a dominant oil producer and Saudi Aramco is a world-class oil producer in terms of volume as well as technology. And so when you think of the structure of the market, that Saudi Aramco produces oil, sells it at a preferential price to the Saudi Electric Company. And if they could instead sell that to the open market and Saudi Electric Company buys solar power, they'd be better off economically as a country. So they've recognized this. They formed an entity called K.A.CARE, and perhaps you know most of this, just to make sure we're on the same page, K.A.CARE is responsible for the structure of the market. And what they've announced is that they're going to have a tender, that tender has not happened yet, it's going to happen in the near term. They had a conference last week, they did not announce the timing of the tender, but they gave further detail as to how they expect this to roll out, including centralized solar thermal. So we expect, second half of the year, there'll be a tender, we will definitely participate. We have a very strong position. Our technology, particularly our C7 technology, is already installed and being tested. It works great. We have strong relationships with all of the parties that I just mentioned, including KAUST, Saudi University, K.A.CARE, Saudi Aramco. And you can imagine that Total has an outstanding relationship in Saudi having done business for 90 years. So yes, we'll be participating on -- just be careful on timing, the tender hasn't happened yet. But this will be a big market because the economics are apparent.

Got it. Very helpful. And then, is there -- just on that topic, is there -- can you circumvent or can you work around on the local content requirements down there, or where do we stand there?

Well, you probably know that Saudi Aramco was actually joint venture with an American company a couple of decades ago. And they've subsequently become more autonomous, they're completely autonomous and have great technology. And so, that adds sort of an example, I think, as the Kingdom of Saudi Arabia is saying, we want to develop our own renewable market or own renewable economy. And we have experience, we're doing that same sort of thing in China, as we speak, with the 4-way joint venture. So I think we are uniquely positioned to do that in Saudi Arabia. So a key part of the K.A.CARE conference last week was about local content. And they have a phrase called, Saudiization. So they're very serious about developing a renewable economy and I think we're really, really in a good position to deliver on that. So it's real, and we're ready to participate.

Got it. Very good. And then, just shifting to Japan. It seems like the relationship with Sharp and Toshiba is working out fairly well. The question is, where do you think, if you look at your gross margin or revenues, where do you think the mix can be coming -- sourced from? Japan? Especially in light of the -- obviously, with the high profile bankruptcy, insolvency that was announced a couple of months. And I'm curious to see -- that was a large player in Japan. So I'm kind of curious to see where you think your mix will turn out from a gross margin standpoint, sourced from Japan?

Yes, let me just comment briefly, really briefly, and hand it over to Howard. On -- the relationship with Toshiba is over 5 years old and is deep and is strategic and working really well, all right? Sharp as well. And we expect that our products fit so well for the market that we expect it to continue on the current trend, maybe not grow as fast, but continue on a very positive trend. In terms of margins, I'll transition to Howard and he can talk about that and Japan, in general.

Thanks. So as Tom mentioned, Toshiba, excellent partner. We're working with them, principally in the residential area, but we're also beginning to do some work in the mega solar large-scale system area. They're really our preferred partner in Japan and most of the volume is from them, still, today. Sharp, in that relationship, is going just fine and they're doing a good job. We're getting paid on time, and everything is going well, all systems are go there. As you think about margin and if -- for Japan as a country, overall, what we're seeing is that there's really been a continued demand exceeding our own forecast. And we have demand exceeding available supply, and demand for high efficiency because of the country dynamics of having constrained roofs, constrained land areas. We think that our average selling prices and our margins should be fine. Somewhat tempered by foreign exchange, but an excellent market for us going forward.

Got it. And did -- do you recall what market share Sharp controlled in Japan prior to you making the deal?

I don't have the precise number, but Sharp is a pioneer in photovoltaics. I mean, they were one of the first companies, if not the first company to manufacture PV on a large scale, over 5 decades in this business. In fact, they still have a buoy in the Sea of Japan that's powered by PV from 1968, it still works. Pretty impressive. And they're one of the leading, if not leading market share, we think, they're over 25% of the overall market in Japan. So a really strong player there in PV.

Our next question comes from Satya Kumar. Satya Kumar - Crédit Suisse AG, Research Division: Credit Suisse. Chuck, I was wondering if you could spend some time explaining the GAAP to non-GAAP reconciliation of the committee [ph] segment. The revenues for non-GAAP were a bit lower and the first quadrants [ph] have an add back. I was wondering if you could just give a little more color on how that works.

Sure, Satya. As we've mentioned in prior calls, the difference is driven by the real estate accounting under GAAP, which is tied to percent complete, but limited by cash collections. Whereas IFRS, which is the convention we follow for non-GAAP, follows what we would call more basic economics. There's a development margin for the development activities, pre-EPC. And then the revenue and margins follow the EPC buildout on a percent complete, which better follows the real flow of commerce. And this quarter, just based on how the progress on CVSR and AVSP were, GAAP was higher than non-GAAP. In the end, they'll all net out to the same number. But we, again, report non-GAAP using IFRS and had a real solid quarter on both fronts. Satya Kumar - Crédit Suisse AG, Research Division: So the non-GAAP gross margin add back in the quarter, was that -- is that a good way to think about the development fees for AVSP, is it?

Yes, specifically for AVSP, and the same thing happened on CVSR. In Q4, we had part of the development revenue in AVSP. And the final development revenue for AVSP was recognized in Q1. That, on a GAAP basis, that gets amortized over the life of the project. Satya Kumar - Crédit Suisse AG, Research Division: Understood. And then on Slide 10 of the presentation that has information on the residential leasing market. I was wondering if you could clarify, is this the net written value that is accruing to SunPower or the -- or is this the nominal contracted payments? I was wondering if there is a way to think about -- after your financing costs and if we were to think about it from a present value standpoint, how does that -- how much of that net value accrues to SunPower? And also does this assume any post contract payments or is this for the contract duration?

Yes, great. We look forward to sharing all of those details with you at Analyst Day. The data that we've been reporting the last couple of quarters is simply the net contracted payments from the lessee, it does not include the residual value or any other additional upsells that we may have post contract term. It also does not include the financing payments that we might pay to an investor. Incidentally, obviously, with the tax equity investor, typically there's not a lot of payments to them because they're monetizing the tax benefits. Christopher M. Kovacs - Robert W. Baird & Co. Incorporated, Research Division: Understood. And then lastly, on the one gigawatt international pipeline that you mentioned, what is the -- is there any -- is that pipeline which has it from PPAs find in the backlog or is that pre-backlog, pre-PPA?

This is Howard. Pre-PPA. We are very close on several projects to getting PPAs, but it's pre-PPA.

Our next question comes from Brian Lee.

Goldman Sachs. I jumped on late so I apologize if some of these have been asked. The first thing I was wondering on was, if you guys can comment on the variability between that $2 billion and $2.5 billion sales range that you originally stated on AVSP, if that's -- if you have more clarity on that? And also, what actually is driving the variability there?

There's no variability. it's just a matter of what public disclosures that we make in conjunction with MidAmerican.

Well, I guess, my question is just why would there be a range as opposed to one specified purchase price?

No, there is a specified number. We just -- I mean, agreement with MidAmerican, we've not publicly released that number.

Okay. And then I guess on AVSP, again. I think there was a notice to proceed on Phase 1. And then, maybe on Phase 2, you had not received that. Has there been any updates on that front?

This is Howard, yes. The update is, we have full notice to proceed on AV1 and on AV2. So the entire project.

Our next question comes from Ben Kallo. Benjamin J. Kallo - Robert W. Baird & Co. Incorporated, Research Division: Baird. On the leasing model, you mentioned that, I think, the tax equity is a bottleneck. How should we think about that going forward, versus you and competitors out there? And then securitization's a big topic out there, where do you stand on that? And then, finally, on the movement to Antelope Valley after CVSR, is there going to be a lag in between revenue recognition or is it kind of seamless in the transition?

Okay, Ben. First on the tax equity side, the demand for our product was so strong that it, basically, was more than what we had forecasted in tax equity needs. We expect to make some announcements here shortly on additional tax equity partners. And we do think that we're uniquely positioned to benefit from a disproportionate share of the capital as well as better terms than other folks in the industry.

In terms of transition to CVSR from AVSP, I think of a -- perhaps, a quarter of transition. So the answer to your question is, yes. There is a transition period, and that's why I called Q2 a transition quarter. Benjamin J. Kallo - Robert W. Baird & Co. Incorporated, Research Division: And then Tom, if I can, just sort of on macro level, we talked about the shakeout in some of the Chinese module manufacturers and the impact on the industry. Where do you think we stand as far as consolidation is and are you seeing that in -- on the ground in business? Your balance sheet and your track record of a couple of decades now, I guess, being able to win business, are you differentiated there? Is that actually a reality now?

Yes. My comment would be, it's really brutal to be exclusively a module manufacturer. And frankly, I think that as we look at SunPower, we've moved from being module, originally, to systems, maybe a couple of years ago, to most of what we sell today is energy in the form of a lease or a PPA. And we think that, that's going to become almost all we sell is energy. And as we switch, as we transition and drive industry the being an energy provider, we're in a great position because we have vertical integration. We have our own technology, we have a strong balance sheet. We've been active since 1995 via PowerLight. And so we have a real unique depth of experience. And so, as you think of consolidation, I think it's less topical now and less relevant to talk about consolidation, and more relevant to talk about who's going to -- most successfully make the transition to an energy provider. Having said that, the market dynamic is very interesting as a module manufacturer. And we are actually in a rationalization of capacity worldwide, no question about it, you're aware of probably all of that consolidation. I think, there is some capacity coming off-line in China. And a lot of it being absorbed by the Chinese market. So what you see is a stabilization in Europe, and perhaps, even an uptick in pricing in Europe. So there is a module dynamic here. But for us, it's more of a transition to a new model for the whole company.

Our next question comes from Rob Stone.

Cowen and Company. A couple of things, if I might. You mentioned in the prepared remarks that you expect to have less of a drag from factory underutilization and, I guess, other cost in Europe in the second half. Can you provide some more color on that, please?

Sure. Rob, the factory charges, effectively are -- when you have an idle factory there are costs that you incur. We are ramping the factory to full capacity and so those charges go away entirely. The factory charge in Q2 was less than Q3, and ours started with less than Q1 and we expect this to be 0 for to back half of the year.

So what drives the uptick in utilization? Is it local or are you using the factory to support other markets? Was it just seasonality in the Q1?

Yes, simply demand from end customers and building out projects.

It's a ramp of AVSP and demand. Rob, one way to easily characterize this is we're sold out.

My follow up question on China and the C7 Tracker. I wonder if you could just provide an update on the status of the joint venture there? And then, any bits on your operational experience with the Tracker, things like maintenance, use of water, et cetera.

Yes. Okay. And then after we answer Rob's question, we'll take one more, and then we look forward to seeing all of you at Analyst Day. So just to get everybody on the same page, we have a joint venture with 3 other parties in Inner Mongolia, China. That joint venture started several months ago, at the beginning of this year. The purpose is to assemble C7, 7x concentrating systems in-region and to develop projects. And we are on track to build projects in the near term, perhaps by the end of this year. So it's going very well. Howard, do you want to comment from the balance?

Sure, this is Howard. I'll comment on the product and the technology. And we just dedicated a megawatt scale project in Arizona with the Salt River Project. They serve part of Phoenix, Arizona, in their utility. And it's really an excellent system. We leverage our know-how from our Oasis power plant product that we've deployed over and over again, in the California Valley Solar Ranch and are deploying now in Antelope Valley. Took all that learning and the benefits of our solar cell, which can accept high concentration and -- low to high concentration, married it together into the C7 Tracker, that's now a commercially available product, that's now been fielded commercially. It's a beautiful product, as the person who has to sell it, it's beautiful, not only from an aesthetic perspective, but in it's performance. It's exceeding expectations in terms of performance and reliability. You had a question around cleaning. It is a factor of 7 in terms of concentration, but has mirrors that do need to be cleaned on a regular basis, we're dialing in the frequency of that. But the cost is very, very minimal and more than offset by all of the tangible and real benefits of going with a 7:1 concentration. So we're really pleased with the progress there.

I went to grad school outside of Phoenix, so I know it's pretty dusty around there. If it can work in that location, you should be all right.

, We completely agree. Thanks, Rob.

Our last question comes from Stephen Chin.

It's UBS. A question on the volumes. It seems Japan is exceeding your expectations, so wondering if any update to your expectation for the year, as well as the 60% volumes you expect from North America? And then your leases' sign-up run rate for the first quarter was in line with the 2012 run rate. Could you maybe give us some color on how we should think about seasonality of the leasing business?

All right. This is Tom, and then I'll give it to Howard. And Howard, if you'd wrap up the call. So volume, in terms of mix around the world, well, I'd thought -- Howard will give you some sense as to the dynamic with the following that I -- a little bit for me. All right, Japan will certainly be as strong in the back half as it is in the first half, but that's how we think of it, as strong. In terms of lease, lease is a really, really good fit for our product because, as we've said for years, we can compete on levelized cost of energy, that's what lease is. Though, we have a superior product at same or similar pricing, better pricing than conventional electricity, so the demand is really strong for our solution. And currently, what's gating the uptick of lease is how quickly we bring on new lease capacity. And as Chuck mentioned, we expect that to pick up in the near-term, but that is a gating factor, currently.

This is Howard, I'll just add a little color on the lease, which is that, as Tom mentioned, we have more demand for our lease than we can supply from a finance capacity -- financing capacity perspective. In terms of -- for the year, we expect to continue at the pace that we're at and increase that in the second half of the year.

Thank you very much, Steve. Unless you had a quick follow up?

Yes, just a quick follow on, on the cash grant and the sequestration you talked about. Just want to make sure that was all about the legacy 1603 cash grant program and nothing to do with the 30% ITC?

Yes, primarily. So as we looked at the impact to the company and evaluated our reserves, we booked $25 million and we think that we're covered going forward.

It is cash grant, though. The specific answer to your question, yes, cash grant. So thank you very much, everyone. We look forward to Analyst Day, we'll see you in couple of weeks.

That does conclude today's conference. Thank you for your participation. And you may disconnect at this time.