Q3 2019 Earnings Call
Ladies and gentlemen, please standby this conference call would be good momentarily once again, ladies and gentlemen, please stay on the line.
Good afternoon, and welcome to Sunpower Corporation's third quarter 2019 earnings call. At this time, all participants are gonna listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if you require operator systems. During the program. Please press Star then zero on your Touchtone telephone.
No I turn the call over Mr., Bob Okunski, Vice President Investor Relations Sunpower Corporation. Thank you Sir you may begin.
Thank you Kevin I'd like to welcome everyone to our third quarter 2019 earnings Conference call.
Call today, we will start off with an operational strategic review from Tom Werner Our CEO , followed by monetizing our CFO will review, our third quarter 2019 financial results before turning the call back to Tom for guidance 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 did are described in the safe Harbor slides today's presentation. Today's press release, our 2018 10-K, and our quarterly reports on Form 10-Q . Please see those documents for additional information information regarding those factors that may in fact, all forward looking statements.
To enhance its call Weve also posted incident, Powerpoint slides, which we will reference during the call on events <unk> presentations page of our website.
And the same location, we have also posted a supplemental data sheets detailing some of our other historical metrics.
With that I'd like to turn the call over to Tom Werner CEO of Sunpower Tom.
Thanks, Bob and thank you for joining us on this call. We will provide an overview of our third quarter 2019 performance any update on our strategic initiatives that are driving improved profitability and shareholder value.
Please turn to slide three.
Some cover executed well in Q3 meeting or exceeding our financial targets for the quarter, including our adjusted EBITDA forecast volume revenue and margin or came in on plan driven by strong demand across our global DG business in S.P.S., we are positioned well for the fourth quarter.
Her with record bookings levels in both our residential and new homes businesses are S.P.T. business also delivered record core quarterly shipments in Q3 with particular strength in DG market, including Europe .
Korea, Australia, and South East Asia.
Volume growth was enabled by capacity expansion initiatives across all facets, including our P series JV.
Finally, we strengthened our balance sheet generating cash today since unit level and closed our safe Harbor financing agreement with Hannon Armstrong.
Now, let me cover our segment performance in greater detail.
First Sps please turn to slide four.
Overall, both our residential and commercial businesses showed sequential revenue and megawatt growth with significant interest in our recently launched residential equinox storage solution.
In residential combined demand for our E series panels is strong and we are ramping production to meet this need.
We continue to build on our industry, leading position in new homes, where our backlog is now over 40000 homes with record bookings in shipments during the quarter.
To give you a feeling for the current scaling this business. We saw 80, new home kidneys go live with Sunpower solar in Q3.
That makes it a cash loan and lease across our residential business remains balance in line with forecast with particularly strong demand for our loan products.
Additionally, we launched our design studio App nationwide and continue to see significant use this design software by argued orders given the east and speed it system design.
Finally, the rollout of our equinox storage product is on plan. We're now completing beta field test and we'll start shipping at scale at the end of Q1.
In CNS side, we maintained our number one share position with volume increasing approximately 10% sequentially.
Our origination team is executing well as we were awarded 65 megawatts of new projects during the quarter.
However, our project deployment execution has been disappointing.
As a result, we are undertaking a number of initiatives in our commercial direct business that we believe will drive stronger financial performance starting in the fourth quarter.
Our helix storage solution is selling well with the pipeline exceeding 145 megawatts in average attach rates of approximately 35% over the last 12 months.
We had been awarded approximately 30 megawatts in storage projects today.
Finally, we are seeing solid demand for our C. P series product.
You factored in our Oregon facility recent deployments for both Chevron and Walmart.
In addition to the initiatives I just mentioned we have made the strategic decision to realign our Sps business by combining a residential and small commercial dealer channel starting in Q4, Please turn to slide five.
We are reorganizing our Sps business into an indirect channel business in a commercial direct model in order to drive scale lowered channel costs and improve our margin profile.
This creates the largest residential and commercial dealer platform in the industry within installed base of 1.7, Gigawatts over 300000 customers in a network of more than 500 dealer partners. This group also includes our new homes business, where our share continues.
To exceed 50%.
We expect this structure going enabled us to improve margins.
Through increased opex efficiency supply chain leverage and potential cross sell opportunities with storage and services.
We're making significant progress towards achieving our greater than 10% EBITDA target in the channels business with Q3 coming in approximately 5%.
We're seeing high we continue to believe in the potential for the business for this business. Despite our uneven performance this year.
Given our number one market share 3 billion dollar pipeline.
Strong repeat customer track record in innovative storage and services offerings.
We are well positioned to continue to lead in the Cnine market.
We are taking a number of steps to improve our project deployment execution and to reduce operating expenses were confident that these adjustments were returned the commercial business is sustainable profitability.
Finally, I'm happy to announce in launch of our equinox residential storage solution last quarter to capitalize on what we see is a significant opportunity for growth in the residential market. Please turn to slide six.
You cannot storage is in next major evolution of our equinox energy platform, giving homeowners more freedom from utility outages and onerous peak electric rates with equinox homeowners Conns store energy for full or partial home backup during blackouts and.
Do Staley peak electricity consumption.
Most importantly, equinox storage is the only fully integrated residential system designed engineered if warranted by single company, which we see as a distinct competitive advantage in this rapidly growing space.
Built on the success of our helix storage Pat platform.
Super next storage offers residential customers in the industry, leading solution with significant advantages compared to our competition, including better cycle performance smaller modular footprint in a superior warranty.
We're currently testing beta units in the field and are taking additional orders, we expect a national rollout starting in Q1 next year.
Now, let's review our Sunpower technologies business, Please turn to slide seven.
Manufacturing team executed well again in Q3 delivering record shipments that exceeded plan, while meeting costing yield targets. Our next generation Max Maxion five technology is hitting its performance goals and we're on track to achieve full ramp of our first maxion five line pair by the ended this quarter.
Production of our P series Technology is also going well and we expect to ship for combined total 1.3 Gigawatts of P series. This year from our joint venture in Oregon manufacturing facility.
Or SPT International sales group posted another strong performance with record overall volume for the quarter led by our best ever shipments into our European DG channel, we continue to drive that mix in SPT toward the higher margin DG segment with more than 70% of our shipments.
This market in Q3.
SPT also continues to expand its footprint in the power plant segment with a solid backlog for 2020 .
Finally, we're making good progress towards finalizing a potential investment to accelerate to scale up maxion five capacity, we expect to be in position to announce this agreement in the fourth quarter.
Now, let's take a closer look if the details of SPP strong international market growth. Please turn to slide eight.
Over the past year SPT is roughly doubled sales volume.
Outside of US with the primary focus on DG markets in EMEA, we're SPT as the deepest in most mature dealer network shipment growth in 2019 exceeded 40%.
In a APAC annual shipment growth of 160% this fueled by strong core market DG demand in Australia in Korea.
Strong traction in several southeast Asian markets as well as supply to selected power plant projects in the region.
Shipments Latin America showed the highest growth, albeit from a small base.
And we're increasing our sales resources in that territory SPT currently does not sell into China based therefore, not exposed China market demand fluctuations.
One of the factors that enabled rapid growth in 2019 is our P series joint venture I would now like to provide a little color on the JV. Please turn to slide nine.
Following the 2015 acquisition of Cogen right in the Shane Green technology, we engage with our long term partner in China, Tcfs, with whom we had structured a number of jvs in joint development agreements in various parts of the value chain.
Early in 2017, we signed agreements to scale up our P series technology within.
At JV located engaging China managed by Tcs.
Yes, broad not only funding to the JV, but also significant manufacturing expertise deep connections with the regional low cost supply chain.
The first P series modules per were produced by the JV at the end of 2017 in 2018, we sold just under 300 megawatts at panels from the JV.
In 2019, we expect that our sales volume of JV produce panels will grow to almost 1.2 gigawatts more than a fourfold increase.
We see strong demand for this technology across our customer segments, driven by superior product attributes such as higher efficiency better reliability and enhance energy yield.
Our P series technology is unique in proprietary and we've taken steps to ensure appropriately strong IP protection.
We are pleased in Q3 to receive our first issued P series patents in China, which adds to a growing portfolio P series patterns in key Gogo markets.
Given the successful two gigawatt ramp of our P series JV the strong customer demand for this product. We're currently in discussions with Tcs about further capacity expansion.
Please turn to slide 10.
In summary, we are pleased with the company's performance in Q3 is we met or exceeded all of our key financial metrics are as PS residential and commercial channel organization is performing well.
We're highly focused on improving our commercial truck business execution.
SPT continues to drive strong.
Global sales growth fueled by expansion of our maxion five in P series capacity and with the bias towards DG markets.
Finally, we continue to improve our balance sheet delivered strong cash generation performance for the quarter.
With that I would like to turn the call over to Manu to review the financials money and stop now let me review the financials. Please turn to slide 11.
That is us as we met or exceeded key financial commitments impugning adjusted EBITDA forecast overall, our non-GAAP revenue was above our commitment and they've done a strong execution and continued Google be due to bad in Sps revenue grew approximately 15% sequentially, but maybe a strength.
It into China in Qubec on bookings, but SPP, we shipped 677 megawatts on other backlog and above our driven primarily by internationally BG designs.
Consolidated non-GAAP gross margin was 16% in line with that outlook in Sps gross margin was up sequentially driven by improved performance in both edited engine and commercial channels. However, as Tom mentioned why did it would origination engine commotion direct business remains strong and our backlog content.
Used to grow project deployment execution was due to expectations implementing a number of initiatives in the fourth quarter to improve the overall execution in the commotion direct part of the SBS business, we expect overall Sps margin, improving the fourth quarter and beyond with strength in our residential business given our strong.
On backlog improving cost structure, including synergies achieved by combining that its attention and commercial channel businesses and enhanced focus of the common should be on the direct business in SPD gross margin was higher than forecast on increased volumes strong BG demand as well as the benefit from my least electrons.
Action related to an audit in manufacturing facility, both segments omni beautiful progress on getting to their target models.
non-GAAP Opex was $16 million for the quarter up from $61 million in the second quarter, excluding the onetime ish million dollar opex benefit in Q2 that we mentioned last quarter Opex was slightly below Q2 on an embedded with basis. We remain confident that do on 2019 opex will be less.
$270 million Capex for the quarter was $17 million consistent with that in GP rapid fab fee.
Second line now in production adjusted EBITDA was $42 million and approximately $34 million sequentially, we expect to see significant EBITDA improvement in the fourth quarter as we benefit from a strong backlog increased volumes of MGT and an approximate 20 million dollar margin benefit attribute.
Certain legacy pipeline project.
I'd now like to discuss a few financial highlights for the quarter. Please turn to slide 12.
As previously mentioned, we met or exceeded our key financial commitments for the quarter ended revenue and margin up sequentially, primarily related to fund the growth in NBG volumes for the quarter. We continue to successfully manage their working capital Y. generating cash on the business unit level also we closed.
Key financing arrangement in the quarter related to a safe Harbor program. We believe that this arrangement with Hannon Armstrong provides us with a highly capital efficient and flexible structure to maximize the economics of up to 200 megawatts, a safe harbor in with TV.
We also positioned ourselves for margin expansion in 2020, we expect this extension to come from forbid execution on our cost and technology roadmaps business segments, including hiding Judy and storage volumes revenue and cost synergies, but combining the residential and commercial channels system cost reductions.
And enhanced focus of a commercial team to drive improvement in our direct business on the cost side, we continue to reduce corporate opex and expected to be less than 2% of sales.
Before turning the call back to Tom, but our guidance I would like to provide an update on a cash forecast for the balance of the year. Please turn to slide 30.
On the left hand side, Chuck we did on major cash flow moves for the third quarter of 2019, as well as where we see those items for the yet as a whole.
We remain confident that weve achieved our goal of anybody other than more than $200 million in cash for the quarter, we generated approximately $22 million in cash as he meant on board of being gastro positive at the business unit level for the third quarter.
Published is while further being down a legacy liabilities expanding capacity and allocating resources to further fond of growth initiatives, we remain committed to generating cash at the business unit level in the fourth quarter with that I would have done but going back to golf guidance doll.
Thanks, Mike I would now like to discuss our guidance for the fourth quarter in fiscal year 2019, Please turn to slide 14.
The company's fourth quarter guidance is as follows on a GAAP basis revenue of 522 $720 million gross margin of 11% to 12%.
In a net loss of $28 million to $8 million.
On a non-GAAP basis, the company expects revenue of $520 million to $720 million gross margin of 16% to 19%.
Adjusted EBITDA of 74 to 94 million megawatts deployed in the range for 45 to 645.
On slide 15, the company's fiscal year, 2019, GAAP and non-GAAP guidance is followers revenue of 1.8 to 2 billion on.
On a GAAP basis, and 1.9 to 2.1 billion on a non-GAAP basis Gigawatts deployed is expected to be in the range of 2.1 to 2.3, excluding approximately 200 megawatts for the company Safe Harbor program.
non-GAAP operational expenses of less than 270 million net capital expenditures of approximately 65 million.
As a reminder, fourth quarter in 2019 guidance includes approximately 20 million gross margin attributable to certain legacy power plant projects in the current quarter.
Finally, the company's fiscal year 2019, adjusted EBITDA is unchanged and expected to be in the range of 100 220 million.
In summary, Q3 was a solid quarter for the company as we executed on our strategic initiatives and position the company for a strong and profitable performance coming into the ended the year with that I'd like turn the call.
Over for questions.
Ladies and gentlemen, if you have a question or comment at this time. Please press Star then one on your Touchtone telephone your question has been answered.
From the Q.
So.
Question comes from Brian Lee with Goldman Sachs.
Hey, guys. Thanks for taking the questions.
Maybe first off.
Manon the guidance, that's a pretty wide range here low to high end for for all the metrics can you walk us through some of the puts and takes a what's embedded in the range here. He what what gets you to the high end, then and what would fall out the puts you at the low end. It looks like you know the megawatts deployed ranges is widest on SPT. So maybe if you could just walk us through some of the.
The moving parts here.
Alright, Thanks, Brian .
So if you think about the ovitt on megawatt guidance be increase done megawatt guidance slightly versus.
What's the last time.
SPP business, specifically internationally BG.
Remains very strong.
And then the deliberative project deployment timing within commercial business. So as you think about the to book into very deliberate of Lumpiness in SPD associated with it.
Project shipments that going to the big.
Pipeline.
Diluted scaled businesses out of my JV too so that that explains divide ranging SPD.
So Brian this is Tom that there's no magic chair basically what we did is we confirmed guidance from last quarter for the year.
We moved to megawatts little bit up but.
Otherwise, it's just confirmation in previous guidance, which I view, but obviously you see.
Yes, we expect to be it meaningfully in the middle of that guidance.
Okay Fair enough and then.
Maybe just two more from me and I'll pass it on if you guys had told US you know at the beginning of the year that SPT gross margins would be mid teens and highest across the this has seen its I think most of US would have been surprised so can you give us some sense of lie SPP has been able to get here so quickly and how sustainable. This level is into 2020 are already.
Kind of that target range and the third quarter of 19 and then.
Conversely, I guess on resin commercial what's the trajectory here to get to 20% in mid teens.
Respectively, which I believe are the targets heading into into next year before.
Okay, Brian . Thanks, Hi, This is Tom and then I'm going to handed off to Jeff and then norm and maybe Nam.
The folks who run the business units.
SPT is having a very good year.
Right and it actually is at our guidance model in Q3, the one that we gave on analyst day Bye.
Jeff can talk about the factors that are driving that what I would lead you to is think of that plus or minus a couple points going forward.
We think of it being at that are better on a reliable basis towards the back half of next year going into 2021, so there'll be some quarters, where we might be close but not quite to that level. So you're right.
And I'll, let Jeff give you some color as to what the drivers are to get to model earlier than most with a projected on.
Thank you start thinking about our as PS business, it's a channels business, which residential and.
Residential value added reseller channel and commercial value added reseller channel and new homes. All three are extremely good position.
In our trending very favourably demand is excellent and norm can talk about that more.
And think of getting to model there, though I think similarly reliably towards the back half of next year into 2021.
Commercial is more work in progress that.
Origination engines working we're getting lots of awards our execution is on even as we enter new states. So that that's probably a little bit longer to get the model probably 2021 is Robert.
I really to show geography, just briefly if you went to the norm and maybe.
Yes.
The underlying story on the good gross margin performance get it goes back to the products led technology and also the global DG market as Tom highlighted we see great growth in EMEA, we seeing great growth in Asia Pac and even markets like Latin America.
When the capital markets day that as a little further out but I would say between now and then will be roughly around that area.
As norm, Brian as far as margins go on the channels business, we did grow margins quite well in Q3. So we added almost 5% gross margin and I can tell you that in Q4 that growth will continue in effect in for Q4 going to get fairly close to our models are current plan.
Now that is Q4 and thats ramping very large I think through as Tom said overall hit model consistently towards the second half next year is likely now our margin improvements really been driven by a couple things when we're getting more a series mix more a series we ship higher margins go and the other one is new homes can seem to be a bigger and bigger piece of our business.
And that backlog grows our gross margins get healthier and healthier.
And this nam here with that commercial correct.
I'll, let Tom said.
Origination is looking great helix storage is getting a lot of adoption and look at a focus on execution side I would say you know a year. We are seeing gross margin improvement in terms of getting targets.
I mentioned that 2021 is the right that timeline for us and again over the next quarter.
This on an execution.
Thanks, Brian Great. Appreciate I appreciate the color, maybe just one housekeeping one if I could squeeze it in the.
And on the 20 million in gross margin for legacy projects expected in the fourth quarter.
Can you elaborate on what that's related to and if there's any recurring contribution beyond for Q and was this part of the EBITDA guidance originally for 2019 or is it a new item. Thanks guys.
So.
Two questions.
The gross margin related to fourth quarter legacy project is primarily related to our.
Remaining development project in Mexico, there's a little bit of daily next year, but small.
And then it goes Spotify.
What does your guidance.
Okay. Thank you.
Thanks, Brian .
Our next question comes from Michael Lewis of credit.
Hi, guys.
Hey.
Okay.
Can you talk a little bit about the.
Targets.
Great, 5% for EBITDA for commercial direct.
Timing of that.
Actually expecting it to come in at 2021 at that point or is it going to be ramp up period through that period.
So I'll take that Michael.
So the actual allied target that we gave at analyst day was 7% to 10% and we think we can exit next year close to that rate.
Our goal is on each of these targets is to be sustainably at those rates.
All right, meaning that each quarter is at or above that rate. So the answer specific for cnine, 7% to 10% exit rate next year sustainably in 2021, and it's adjustments were making to our cost structure.
And the way we deploy projects that will result in the improvements.
And on the 40000 home backlog how much of that.
Before.
Morning.
I'll go ahead and what norm.
Yes.
As far as new homes backlog, it's almost 100%, California over 95% of that is in certain buyer super strong position in California.
Got it and one last question just on the Safe Harbor plan for next year.
Should we expect that.
There are more like a Q1 type item.
Oh I is your question. So we let me answer and then.
Jump back in if I Didnt answer your question sufficiently.
We have been putting inventory in our safe Harbor program is plenty mentioned financed by an agreement within an art sharp.
Still be adding to that inventory throughout this quarter and maybe a little bit in Q1 that will be it for <unk>.
2020.
We would expect similar for 2021 at the back at the end of 2020.
Great. Thank you.
All righty.
Our next question comes from Colin Rusch with Oppenheimer.
Thanks, So much guys can you give us a perspective.
The current cat capacity, you have for energy storage and the kids for growth in that capacity.
Yeah, I'll say, a few words and then norm for our residential in Nam.
For commercial.
I would say were modestly supply constrained in commercial now.
But mostly were able to supply we've been able to add other suppliers on and then on residential on the product is.
Alpha.
In the last quarter, it's beta this quarter.
Let's take initial orders towards the end of this quarter with volume ramp at the end of Q1, nor can give you a sense, though of what we're planning for in terms of attach rates and ability to us supply.
Yes, hi, gone so yeah relative to storage.
Obviously was.
Hi, Steve ordinary demand, we think it's going to be.
Huge hardware business going to back out next year.
Brandon just starting to take orders.
I would say that our expectations.
And then kind of revising upwards to where we're now expecting 20 plus percent attach rates overall and more than that in California.
And so that'll be something that affects really most of the second half of next year.
Start.
Total shipments till February and March.
Okay.
Go ahead.
I'm going to stay on the commercial storage side.
We have about 30 megawatts as Tom mentioned already in already we have another 10 thats in the process of being constructed we are managing a couple of their strategic partnerships and you think that we can manage the supply chain.
Thanks to strong.
Okay, and then just thinking about middle of next year on the module business in the U.S. and seen competitors like LG and pass on to bring increasingly.
Compelling products to market what are you, saying at this point in terms of pricing dynamics ability to book of business that far and and.
If you could with and context of your thoughts around this JV for new capacity.
Our yelled say few things and Jeff if you want to add on you can.
So I like the what we see in America is we still have a highly differentiated fleet Allied some of the product you mentioned Darren.
Available in America at scale, So our E series is clearly.
Hi, its deficiency and our highest power ratings are X series is as well I guess, there would be Max private banks for.
And.
So.
Our booking ability as witnessed by the residential channel.
Selling incredibly well this quarter.
It is unchanged.
We have improvements of our own plan for the year on so I'd say, we remain large fleets have the same view on that.
Demand for next year as we've had previously.
Yes, just water speaking globally.
Similar picture and especially when you look at NGC or be a series product ramping where we'd be introducing that overseas.
And at the cost structure that product, especially as we build out more capacity.
It will allow us to compete and compete very profitably even as competition comes as we always expect at low.
Great. Thanks, much guys.
Okay. Thanks.
Okay, and ladies and gentlemen, if you have a question or comment at this time. Please press Star then the one key on your touched on telephone.
Our next question comes from Julien Dumoulin Smith with Bank of America.
Thanks, Good afternoon guys.
Yes.
A little bit.
What we're hearing out there.
From the last questions rather.
Can you comment.
Yes.
The 20.
Yep.
Yeah.
Okay.
Piecing them out.
In terms of margin improvement.
Versus.
Helix solution et cetera.
Sure I'll I'll take a pass and then monitor can add from that line. So.
In the SPT business, what we've seen is a better job managing the west are profitable skews and reorienting that business, we actually modified to form factor of some of our longer or older technologies to be suitable for the DG market for switched to DG is paid off.
Well.
Our focus on DG and his team has paid off well and as you mentioned a series we highlighted the joint venture because last year that was lower no margin. This year. It's meaningfully good margin. So that's another factor that's caused SPT performed better in.
In the channels business.
We have better economics on lease by virtue of a new lease find.
And then we have better performance.
In our business on because if a series is a big driver.
Demand is quite strong.
And.
In that channel, but see var channel is similar.
To that line and then in commercial.
Like storage is has actually been a winner for us offsetting some of the implementation challenges that we've had.
Actually will be similar away. So in 2020, so we've been able to sort of cap the leakages and then harvest some of that.
R&D investments, we made in products and solutions the last few years.
Yes, I think.
Do you start.
Now I'll go ahead.
Yes.
The balance sheets that an equation could you comment a little bit on where you stand with respect to revolver capacities are under liquidity.
As we think about cumulative.
Availability.
Yes, the on so many of mining take that and I might add on a few comments after each done.
So just strong mom.
Hi, good perspective.
We're going to rightsize enabler to about $55 million just because.
With the gas generation.
In the business unit, both in terms of CQ and expected footwear underperformance plus improvement in the model.
Sps when looking capitalized model and working capital improvements in SPD.
We believe the me Doug.
A lot of lot of Oh onto given by the driven by the fact that effectively out of the utility scale. The business from a bottom line perspective, So I think from a cash point of view when I'd say in a balance sheet perspective, I think our balance sheet got stronger aim threeq you with cash generation, we expect the business units to continue to generate cash in fourth quarter.
And we've put their pay down our legacy liabilities.
You are doing is you can't look for and of course, we have a convertible based.
Good is currently at the middle of next year.
We've said on previous calls the combination of 50, you cash generation.
Prudence in working capital management, particularly at least.
Add our ownership and Enphase, we have we call about operational ways, but paying off that convert I do want to note as well.
Right that we did file a shelf registration a few weeks ago.
Maybe a month ago.
In the point of doing that of course like all companies that have flexibility if conditions were favorable we would potentially look to raise capital wide in capital markets, even potentially in the near term.
And that that an equity.
I'm sorry, John can you ask you guys.
Sorry that would include.
Equity right.
Yes, we're evaluating so we don't if we were to do something of course will consider growth.
Excellent. Thank you guys very much.
Alright, Thanks, joining building I think we'll take one more question one more question points. Our last question comes from David Kantor with Baird.
Hi, guys. Thank you for taking the question.
Just wanted to quickly touch on the SPT partnership as any update there and how is our discussion is progressing.
Yes, Thanks, David I think I'll end with this right. So we've made great progress towards finalizing potential investment.
Our debt investment of course is to accelerate the conversion of Bax three cmxfive.
Which is great return on investment.
We're in.
Position to announce at this quarter.
And we are making great progress we've narrowed it down to one party of course, we maintain options.
It is possible to pan out those discussions go that we could have an agreement to announce in the very near term.
So things are.
Progressing quite constructively with one party, it's what I would say on so thank you very much for whichever follow located.
Well I'm all set thank you guys.
Hey, Thanks I appreciate the questions very much appreciate your time.
I think we'll have some things to talk about soon so we look forward.
Talking to you again soon and certainly at our next earnings call.
Ladies and gentlemen, does conclude todays presentation side.