Q4 2021 First Solar Inc Earnings Call
Okay.
Sure.
[music].
Good afternoon, everyone and welcome.
First.
Fourth quarter 2021 earnings call.
This call is being webcast live on the investors section with first solar website at Investor Dod first solar dotcom at.
At this time all participants are in a listen only mode.
A reminder, today's call is being recorded.
I would now like to turn the call over to Mitch Ennis from first solar Investor Relations. Mr. Ennis you may begin.
Thank you good afternoon, and thank you for joining US today the company issued a press release announcing its fourth quarter and full year 2021 financial results as well as its guidance for 2021 copy of the press release and associated presentation are available on first of all this website at Investor <unk> first of all our dot com.
With me today are Mark with <unk>, Chief Executive Officer, and Alex Bradley Chief Financial Officer.
Mark will begin by providing a business update Alex will then discuss our financial results for the fourth quarter and full year 2021. Following these remarks, Mark will provide a business and strategy outlook. Alex will then discuss our financial guidance for 2022.
Following their remarks, we'll open the call for questions. Please note. This call will include forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations, including among other risks and uncertainties the severity and duration of the effects of the COVID-19 pandemic. We encourage you to review the Safe Harbor statements contained in today's press release and presentation.
For a more complete description. It is now my pleasure to introduce Mark Widmar, Chief Executive Officer Mark.
Thank you Mitch good afternoon, and thank you for joining us today.
I would like to begin by expressing my gratitude to the entire first solar team for their hard work and perseverance in a year, where much of the solar PV manufacturing industry faced supply chain logistics cost and pandemic related challenges.
Despite these dynamics, we have continued to scale, our manufacturing capacity and adapt our business model in a constantly evolving market.
Through our points of differentiation, which include our CAD Tel thin film module technology.
Vertically integrated continuous manufacturing process.
<unk> balance sheet and a commitment to the principles of responsible solar.
We have created a growth oriented business model, which we believe positions us to be successful over the long term.
Alex will provide a more comprehensive overview of our 2021 financial results.
I'd like to highlight that our full year EPS results of $4 38 per diluted share.
In above the midpoint of our guidance range. We provided at this time during our third quarter earnings call.
Of note. The Cps result, despite an unprecedented challenging freight environment is also solidly within the original guidance range. We provided last February .
Beginning on slide three I will highlight some of our key 2021 accomplishments, which we believe positions us for sustainable growth.
To begin we had an excellent year from a commercial perspective, securing a record $17 five gigawatts of net bookings in 2021.
More than double our prior annual record.
This momentum has carried into 2022 with four eight gigawatts of net bookings year to date.
Which brings our total since the previous earnings calls 211 eight gigawatts.
As we secure this very significant volume for delivery into the future.
We have been employing a contracting strategy, which enables our customers to benefit from the evolution of our product and technology platform.
While also partially de risking our position around sales.
I will discuss this approach later in the call.
We produced seven nine Gigawatts in 2021, delivering against our near term commitments despite pandemic related challenges.
Moreover, we reduced our cost per watt produced by 6% between the end of 2020 and 2021.
Despite inflationary pressures rising commodity costs and as a result of the COVID-19, the inability to implement as planned several module cost reduction program.
Expansion has been important theme in 2021.
As we set the foundation to reach approximately 16 gigawatts of capacity in 2024.
<unk> added our six series six factory, our second factory in Malaysia in early 2021.
We announced plans for new factories to produce our next generation of solar panels, which we are calling series seven and India in Ohio.
As a reminder, the $2 37 factories are expected to come online in 2023, and combined with combined with the benefit of locating supply near to demand reducing the cost of sales rate are expected to increase gross profit per watt approximately one to three staff relative to our existing series six fleets.
On the technology front, we increased our top series six production been to 465 Watts, which represents a 21 increase year over year and is in line with our guidance provided last February .
We reduced our 30 year warranted power output degradation rate from 5% to 3% per year.
This meaningful improvement can result in the module usually up to four 4% more energy on a lifecycle basis.
And finally, we completed the sale of our U S project development in North America, and O&M businesses.
In summary, each of these achievements are the result of our intent to focus on our greatest competitive advantage, which includes our differentiated technology and manufacturing process.
Turning to slide four.
I'll next discuss our most recent shipments and bookings in greater detail.
We shipped approximately two one gigawatt and 7.7 gigawatts for the fourth quarter and full year 2021, respectively.
This was within but towards the lower end of our guidance range that we provided during the Q3 earnings call.
As a reminder, we generally defined shipment is when the delivery process to our customer commences at the module leaves one of our facilities, whereas revenue recognition or volume sold occurs is transfer of control of the modules to the customer which is commonly upon the arrival of the destination Port project site.
No extended transit times and container availability constraints contributed to our full year 2021 shipments being towards the lower end of our guidance range.
The global freight market continues to experience record levels of scheduled delays and reliability issues, which has worsened since the previous earnings call.
Due to these challenges we ended the year with one two gigawatts of inventory on hand.
675 megawatts of shipments in transit not recognized as revenue.
While the volume in transit declined quarter over quarter. It was meaningfully above the trailing four quarter average.
Several logistics challenges trended favorably in Q4.
Firstly total transit times for transoceanic freight increased by a factor of weeks between Q3, and Q4, reaching levels nearly double the historic norms.
Secondly, congestion continues to be challenging at U S ports, which are further exasperated in advance of the holiday season.
Thirdly reliability was a significant issue as 3% and 10 planned sailings were canceled around the turn of the year.
Finally over the road trucking is constrained from a capacity perspective with load to truck ratios at the highest level in several years.
In summary, we are experiencing a two front impact related to freight in terms of both higher costs and worst carrier performance.
With regard to bookings momentum has accelerated with 11 eight gigawatts of net bookings since our November earnings call.
We continue to see an increase in multi year module sale agreements driven by our customers' need for certainty in terms of the technology theyre investing in and the suppliers integrity and ethics.
Representative of this we have executed an agreement with our highly valued long term partners SP energy to supply one five gigawatts of deployment in projects in 2023, 2024 and 2025.
After accounting for shipments of approximately $2 one gigawatts during the fourth quarter, our future expected shipments with extended into 2025 or 26 two gigawatts.
Including our year to date bookings were sold out for 2022 and have 10, seven Gigawatts three four gigawatts and two four gigawatts for planned deliveries in 2023, 2024 and 2025, respectively.
Next I would like to provide an update on our project development and O&M platform in Japan.
Today, our remaining offerings outside of our core module business includes project development in Japan.
O&M outside of North America, and our continued ownership of certain power generating assets.
Of these remaining businesses are Japan platform as the most prominent in terms of prospective scale and profitability.
In late 2021, we received an unsolicited offer to acquire our Japan project development and O&M platform.
We believe the potential purchase of your strategy to scale, a leading solar platform in Japan couple.
Coupled with the participation in complementary asset classes could unlock the full potential of our Japan platform.
Accordingly, we are in advanced stage of negotiations to sell our Japan project development and O&M platform.
There is no certainty that we will execute a definitive agreement with this counterparty.
We believe that the contemplated transaction value is compelling.
No.
We do not complete this transaction, we expect to either continue our approach of selling down our contracted projects over time or considering alternative buyer for the platform.
I'll now turn the call over to Alex who will discuss our Q4 and full year 2020 results Alex.
Thanks, Bob and before discussing our financial results for the quarter and full year 2021, I'll first provide an update on our segment reporting.
With the potential sale of our Japan project development, and O&M platform, the revenue and margin opportunities outside of our core modules business line, largely with a relatively small pool of existing O&M contracts outside of Japan, and North America power generating assets or projects that we previously developed and any legacy obligations as a result of our prior systems activities.
Yeah.
Accordingly, we've changed our reportable segments to align with our internal reporting structure and long term strategic plan.
Going forward, our module business will represent our only reportable segment.
For comparative purposes, the prospective module segment is fully comparable to prior periods.
Any revenue or margin associated with activities that were historically categorized as our systems business I'll now presented at other type of thing.
Starting on slide five I'll cover the income statement highlights for the first quarter and full year 2021, which is presented in this manner.
Net sales in the fourth quarter were $907 million, an increase of $324 million compared to the prior quarter.
It was primarily a result of the sale of three projects in Japan and increased module volume sold in Q4.
For the full year 2021, net sales of $2 9 billion compared to $2 7 billion in 2020.
Relative to our guidance expectations net sales will go in towards the lower end of our guidance range due to delays in module sales revenue recognition as a result of the aforementioned freight and logistics challenges.
Gross margin was 27% in the fourth quarter at 21% in the third quarter.
For the full year 2021, gross margin was 25%, which is unchanged from the prior year.
2021 guidance that assumed the completion of two project sales in Japan as a result of completing three project sales in Q4 Q4 gross profit from our residual business operation was $102 million approximately $25 million above the high end of our guidance range.
Q4 affiliate 71.
Module segment gross margin was 21% in the fourth quarter, which is unchanged from the prior quarter.
For full year 2021, a module segment gross profit came in below the low end of our guidance range by approximately $12 million.
Additionally, fully essential join the module segment gross margin of 20% was down five percentage points from 25% in 2020.
This was relative to several items.
Firstly sales rate continues to adversely impact our financial results, reducing gross margin by six percentage points in 2000 2011 percentage points full year 2021.
13 percentage points in Q4 of 2021.
Note as a reminder, many of our module peers freight cost as a separate operating expense.
Pass with us as we encourage you to consider the fact that we're benchmarking our module gross margin relative to our peers.
Secondly, 2021 volumes sold was below our full year expectations due to the aforementioned ocean freight reliability issues port congestion and over the road trucking capacity constraints.
Year end 2021 module is in transit number 675 megawatts remains above historic norms.
Thirdly factory upgrades in 2021 resulted in higher downtime on our utilization and lower production with full year 2021 ramping up utilization on <unk> expense of $19 million or one percentage point of gross margin.
Finally, while we reduced our cost per watt produced by 6% between the end of 2020 in 2021, we faced a couple for these headwinds.
Higher inbound freight.
In light of these circumstances, although the module segment gross profit and gross margin came in below our 2021 expectation. We are pleased with how we navigated the current environment delivered call. It module segment performance.
SG&A R&D and production startup expenses totaled $73 million in the fourth quarter, an increase of approximately 1 million relative to the third quarter.
This increase was primarily driven by $1 million increase in production start up expenses from the addition of our third factory in Ohio, and a $4 million increase in R&D expenses predominantly related to cure testing, which will partially offset by impairment charge relates to certain development projects that occurred in the prior period.
SG&A R&D and production startup expenses totaled $290 million in 2021 compared to $357 million in 2020.
Overall, we're pleased with our operating expense results for $290 million, which was within our full year guidance range 285 to 300 million and represents a significant year over year reduction.
Operating income was $173 million in Q4 and $587 million for the full year 2021.
Income tax expense was $130 million for the full year 2021.
Fourth quarter earnings per share was $1 23 competitive <unk>.
From the prior quarter.
For full year 2021 earnings per se.
438, compared to $3 73 in 2020.
2021 EPS results came in above the midpoint of the guidance range. We provided on the third quarter earnings call and is also within the original range. We provided last February .
While there were several unexpected challenges and benefit too faced last year overall performance reflects the strength of our business model and ability to navigate a challenging environment over the course of the year.
Turning to slide six our cash and cash equivalents restricted cash and marketable securities balance at year end was $1 8 billion, a decrease of $109 million from the prior quarter.
By year end net cash position, which includes cash and cash equivalents restricted cash marketable securities less debt was $1 6 billion, a decrease of $71 million in prior quarter.
Our net cash balance is higher than our guidance range due to lower than expected project spend of Japanese development projects and the timing of cash payments for capital expenditures between late 2022.
Cash flow from operations was $238 million in 2021 $37 million in 2020.
Capital expenditures were $195 million in the fourth quarter compared to $165 million in the third quarter Capex was $540 million in 2021 at $417 million in 2020.
And with that I'll turn the call back to Mark to provide a business update.
Thank you Alex turning to slide seven I would like to begin by providing an update on our <unk> program.
Over five years ago, we announced the acceleration of our series six transition.
Which transformed our manufacturing process and significantly increased our module wattage.
While the outcome of the series six program has been a great success as reflected by a record 22 gigawatt backlog as of the end of 2021.
Easy to lose sight of the initial challenges we face when scaling high volume manufacturing with respect to module wattage.
And manufacturing yields.
Through persistence resilience and ingenuity.
Our manufacturing associates methodically resolve these challenges enabling series six to meet the success. It is today.
Looking forward <unk> represents an anticipated an enhancement to our module performance, which is expected to increase efficiency and lifecycle of energy.
On the November earnings call. We indicated that we had demonstrated cure is full performance entitlement in a lab setting.
And are working to realize the entitlement in high volume manufacturing conditions.
As a result, we have revised our integration.
Jewel to lead line implementation by the end of Q1 2022 with fleet wide replication timing to be determined upon completion of the lead line.
Since the previous earnings call. We have conducted a series of pure runs on high volume production lines in Ohio.
While the trends before improving module wattage degradation appear favorable we are still working thriller realize the full performance entitlement and high volume manufacturing conditions over.
Over the coming weeks, we intend to conduct further testing, which we believe will informed our views on lead line implementation timing.
Again, this England implementation timing, which will in turn inform fleet wide replication time.
As highlighted on our Q2 2021 earnings call. Our technology team continues to create new optionality in our technology roadmap.
This optionality enables us to partially mitigate the effects of cure delays through the enhancement of our current series six technology with.
With our top production been reaching 4% to 65 watts, and our Ohio and Malaysia factories.
In addition to this improved efficiency and module Wattage series six now has a significantly improved long term degradation rig.
Using the improvement metrology to measure degradation in our test sites and further validated by third party analytic methods and customer site data.
The current series six platform now has a 30 year warranted power output degradation rate of 3% per year, which is 40% below our previous warranted and represent the potential.
Four four increase in lifecycle of energy.
While the improved series six nameplate wattage allows us to achieve our targeted exiting 2021 with a top production bin of $4 60 to $4 65, what's the expected overall lifetime energy performance of the current series six program remains under that of cure, primarily due to the differences in warranty duration rate and temperature.
Coefficient.
That said looking into 2022, we believe there is a path for our series six module to increase the top production been to $4 70 watts with an upside potential of 475 loss.
Hitting the year.
Furthermore, we are also working on our series six modules produced under the current program to achieve a temperature coefficient similar to what is expected under our care program.
I'll discuss this additional optionality on our technology roadmap, including bifacial, Audi and the opportunities to drive to higher levels of efficiencies later in the call.
Okay.
Sure implementation has been delayed the significant improvements in efficiency a derivation of series six has been beneficial to more closely meet our customers' expectations.
In connection with our cure obligations this year negotiation to amend certain customer contracts utilizing your technology by substituting our enhanced series six product.
<unk> margin by approximately 60 million in our guidance.
No.
We are still working to finalize certain share with.
Related contract amendments.
Relative to our contracted backlog disclosure approximately 40% of the $60 million in some of our contracted backlog disclosure as of December 31, 2021, and the balance will be reflected once the remaining contract amendments are completed.
These amendment, coupled with the existing and forecasted improvements to our current series six program related to efficiency module wattage degradation rate and temperature coefficient as well as other potential enhancements under our technology roadmap.
I will discuss momentarily.
Reduce the requirement to implement our care program by a particular deadline.
Looking into 2022, we are pleased to have entered the year with a record backlog and our growth plan well underway with capacity expansions in the U S and India.
However for 2020.
Two is expected to be a challenging year from an earnings standpoint, both due to external factors in the near term impact of factory startup costs associated with our growth plans.
The most significant driver impacting freight costs for contracted volumes have risen 200% to 300% from pre pandemic levels.
Our recently concluded carrier negotiations rates to increase by more than 100% year over year.
This compares to a pre pandemic historic annual percentage increase in the mid to upper single digits.
At the same time transit times.
Thanks have significantly increased and reliability and availability have significantly worse.
Pushing more volume into our higher priced spot market.
<unk> record profitability across the shipping industry. This situation concurrently shows no sign of improving in 2022.
We increasingly are monitoring the growing calls for accountability.
In particular from Georgia Senator Warren.
Who has demanded an investigation into the inherent price gouging of ocean carriers.
We expect sales rate for 2022 to increase to approximately <unk>.
This is a combination of contracting and premium rates year on year, we expect a better mix of contract to premium rates, but with the.
A substantial increase in contract rates, we expect sales freight costs to increase by approximately $200 million to $240 million year on year.
Note our anticipated 2022 shipments were largely book prior to the shocking increase in freight rates relative to our expectations at the time of the negotiation the module ASP freight rates have more than doubled.
Externally there have been a number of events that have adversely impacted our module cost reduction roadmap firstly, the aforementioned freight market disruption has resulted in higher shipment.
The cost for inbound raw materials.
Secondly, the increase in inflation in commodities has both directly and indirectly affected our bill of materials and cost of production.
The cost of aluminum, which has increased over 40% between the start and end of 2021 has been a strong headwind against our module cost.
We have partially offset this headwind by implementing a percent.
Thirdly, COVID-19 constraints, including travel.
Quarantine restrictions for both first solar associates, and third party equipment and stuff.
Sellers have impacted the timing of our series six plus and throughput upgrade in Vietnam.
Expect to see a loosening of travel restrictions this year.
70% ongoing risk to the timing of it.
Upgrades of our last factory in Vietnam to series six plus.
Which is expected to be completed in early Q2.
Covid related constraints has also delayed the fleet rollout of our glass optimization program.
As mentioned previously our 2021.
So on cost per watt declined by 6% versus our target of 11%.
The shortfall was reflective of the items noted above resulted in us missing our cost per watt target reduction by approximately <unk> <unk> per watt.
Number of the headwinds experienced in 2021, and therefore, our module cost will be higher than our roadmap by approximately <unk> <unk> per watt. This.
This is expected to negatively impact 2022 gross margin.
The approximate.
Approximately $100 million.
While there are better sources Forex.
Our perspective on the most recent activities in Ukraine, and Russia, and the resulting implications on geopolitical risk.
From our perspective, we are watching closely the tragic events unfold.
By the crisis, and we have no current tier one suppliers in the conflict area.
Reasonable to anticipate natural volatility in various supply markets, such as metals or fuel ships should the conflict continually the current tariff limitation delays in expected module wattage improvements will adversely impact our expected cost per watt reductions.
And finally capacity.
So the growth decisions made in 2021 will provide long term benefits in 2023 and beyond but provide a headwind to the 2022 P&L start due to start we will continue to navigate these headwinds with a focus on the future.
As we invented this pivotal year will evolve.
Around continuing significant investments in R&D, new products and employing new contracting strategy.
Geez, all of which we believe will set the stage for sustained growth in 2023 and beyond.
Our team has been cultivating optionality in our roadmap across energy attributes, including efficiency degradation temperature coefficient and bypassed by <unk>.
Along with product attributes including series seven.
For Q2 2021 earnings call. We highlighted that we are deploying prototypes of early stage bifacial CAD Tel module at our test facility.
And we're pleased with the initial results.
Since then we have continued to run performance test on both our current and cure device platforms and has gathered moorefield data with the results implying the potential for an increase in specific energy.
Adding bifacial reality on cats.
A temperature coefficient spectral response, and partial shading and long term degradation energy advantages.
With a midterm target of a 491 bifacial module, we are working diligently to commercialize this technology.
We believe the commercial and financial perspective.
Prospects are for that.
Facial CAD tell a compelling due to the anticipated higher energy yield with limited capex or retooling required in order to integrate a transparent back contact across the fleet.
Turning to slide eight as it relates to expansion construction of our series seven factories is underway and the schedules are on track with the U S factor expected to commence initial production in the first half of 2023 and the India factory by the end of 2023.
Factories are expected to lead the fleet in terms of module wattage efficiency and cost per watt.
With the mid term goal of 570, <unk> mono facial series seven module, we see the potential for meaningful improvement in our module performance.
As we significantly increase our nameplate capacity, we believe this anticipated growth when balanced with liquidity and profitability will drive contribution margin expansion given our operating expense cost structure is 80% to 90% fixed.
As a reflection of this expansion roadmap and continued optimization of the existing series six fleet, we have summarized our expected exit nameplate capacity and production for 2022, 2023 and 2024 on slide nine.
As it relates to our contracting strategy.
<unk> of our newer framework agreement is the customers and entering into a contract today can benefit from the potential utilization of our technology roadmap.
For for approximately seven three gigawatts of bookings secured prior to the end of the calendar year, we have structured the ASP and.
In product expectations on a baseline wattage and energy performance roadmap without the full anticipated benefits of our technology roadmap.
To the extent, we realize future module technology improvements, including new product design and energy enhancements beyond what is specified in the baseline agreement the incremental value is expected to result in a corresponding increase to asps.
Our ability to contract in this matter provides our customers with clarity of pricing.
Availability and delivery timing and alien to underwrite ppas from position of strength with lower risk to their expected project returns.
From our perspective, there is also a strategic rationale to.
Contracts in this manner.
As it provides us confidence in our ability to sell through our expected supply and provides us visibility into an expected profit per watt.
With the potential for meaningful upside to the extent, we realize these anticipated technology improvements.
This framework allows us to understand the price certainty the value of our investments across different product enhancements.
Based on these potential technology improvements.
Approximately seven three gigawatts of contracted module volumes as of December 31, 2021.
Such adjustments at realized could result in additional revenue of up to $2 2 billion.
The majority of which will be recognized in 2023.
Note. This contracting approach has been incorporated in our 2022 bookings year to date.
From a sales rate contracting perspective last year, we began employing module contract structures, which mitigate our exposure to sales right.
As we continue to book is two to four years into the future.
These arrangements provide a balanced risk profile for us and our customers, where we are incentivized to minimize sales freight costs, but generally provide a cap above which customers are obligated to pay.
We started employing these structures in Q2 2021 and approximately one third of our expected 2022 volume includes the provisions.
In 2023 and beyond we anticipate a significant majority of volume. We will include these types of provisions.
Across our contracted backlog these contracts provide greater clarity into an expected gross profit per watt.
By providing freight relief through hiring ESP, if rates remain above pre pandemic levels in.
In addition to our contracting approach our expansion strategy, including our third Ohio plant and our new India plant are expected to further derisk, our exposure to transoceanic freight cost by.
By bringing manufacturing closer to demand.
As these factories scale, our production mix exposed to transit.
Freight rates is expected to decrease by approximately 30 percentage points between 2022 and 2024.
Overall from a pricing perspective, the strong demand we are witnessing for our differentiated CAD Tel module has enabled us to secure <unk>.
10, seven gigawatts of bookings for planned deliveries in 2023 at a baseline ESP, but is only <unk> <unk> below our planned deliveries in 2022.
It is important to note. The Asps is essentially composed of two components the module plus sales strength.
The baseline Asps generally same sales rate will be approximately $2 five per watt to.
To the extent that the actual sales rate is above the baseline the asps will increase to cover most of if not all of the incremental sales rate.
When including this variable pricing adjustment and assuming 2022 sales trade environment. We expect our 2023 sales freight adjusted Asps to be approximately <unk> <unk> higher than 2022 on a like basis.
In addition, as we secure and significant volume for delivery in 2023.
We have been employing a contracting strategy, which enables our customers to benefit from the evolution of our technology and product platform.
Realizing the entirety of the benefit of this platform would increase our baseline 23, asps by up to <unk>.
Turning to slide 10.
We continue to see active customer engagement and high levels of interest in both individual projects as well as a multi year multi gigawatt agreements across key markets in the United States and India.
Our total bookings opportunities of 53, six gigawatts remained very remote robust with 27 seven gigawatts in the mid to late stage customer engagement.
This opportunity set coupled with our contracted backlog gives us confidence as we continue scaling our manufacturing capacity.
Incrementally we continue to evaluate the potential for future capacity expansion at.
As referenced on the Q3 earnings call. We have started to engage with certain suppliers to ensure we have line of sight on critical path tools for further expansion.
We believe strong demand for our <unk> modules are dynamic technology roadmap, our strong balance sheet and largely fixed operating expense cost structure are each catalysts as we evaluate expansion.
While the potential expansion, maybe in the U S India or beyond we are seeking clarity on domestic solar policies to ensure such expansion is well positioned.
Note, we have made no such decision at this time in any capacity expansion are unlikely to contribute to our 2023 production plan.
I'll now turn the call back over to Alex who will discuss the financial outlook and provide 2022 guidance.
Thanks Mark.
Turning to financial guidance I'll provide an update on our cost road map.
As initially presented on our February 2021 guidance call. We forecasted a year end 2020 to year end 2021, Costco produced reduction of 11%.
In November we revised our reduction assumption to 5% based on increased inbound freight glass aluminum from adhesive customers.
Our final year over year reduction came in at 6%.
So I'd note that 5% difference between our original assumption in our year end result remains a headwind in 2022 and is expected to impact full year 2022 cost per watt by approximately a penny.
On a cost per watt sold basis original year over year forecast reduction of 8% was revised to 3% in November and in our final full year result, comfortable what sold remained flat year over year.
This was despite a year over year increase in sales rates for watts of 70%.
Excluding the effects of sales right how comfortable are sold declined by approximately 8% for the same period.
Looking into 2022 from a class perspective, we've largely stabilize this cost through long term predominantly fixed price agreements with domestic suppliers that have economic benefits as we achieve high levels of production.
On the Q3 2021 earnings call, we highlighted COVID-19 related delays impacted the startup timing with a new glass facility to support our Malaysia and Vietnam sites.
In addition to competitive pricing. This facility is expected to reduce the cost of inbound freight for our international sites.
Given recent improvement in the Covid situation in Southeast Asia, We anticipate this new facility will commence production and begin benefiting cost per watt for the first half of this year.
As it relates to aluminum anticipate framing costs will be elevated relative to historical norms.
Highlighted during our Q3 earnings call that we had a commodity swap contracts in place, which cover the majority of our U S consumption in 2021.
Note many of our aluminum contracted supply of Malaysia, and Vietnam factories referenced aluminum traded on the Shanghai Futures exchange, which makes hedging a challenge given foreign investors cannot access the market without a retrofit local entity in China.
While aluminum pricing remains above pre pandemic levels going forward and for both our domestic and international sites, we have several strategies and process to reduce funding costs in the near to mid term.
Firstly by differentiating the frame design and reducing cost to modules installed in certain geographies with possibly array that are exposed to standard versus high mechanical loads.
Secondly by optimizing the mounting interface for our series seven module.
And finally by evaluating alternative materials for the construction of our frame, including a steal back rail for US 37 modules in Ohio in India.
Sure.
As it relates to logistics outbound sales trade is expected to be approximately <unk> <unk> per watt in 2022.
The context prior to the recent dislocation in the global freight market sales rate for what was generally between two and $2 <unk> in 2020.
Now the aforementioned sales great contract provisions are expected to provide approximately half a penny.
On a fleet wide basis from 2022, which is reflected in our guidance.
On a fleet wide basis relative to where we exit 2021, we anticipate reducing our cost per watt produced by 4% to 6% by the end of 2022.
Despite the expected 25% to 40% increase in sales rate to work, we anticipate our cost per watt told will be flat between the end of 2021 and 2022, respectively.
Excluding the effects of sales rate, we anticipate our cost per watt sold will decline by approximately 5% to 8% over the same period.
Note the expected, 25% to 40% increase in sales price in 2022 is expected to be partially offset by contracts provision for sales rate recovery, which cover approximately one third of our shipments in the year.
By 2023, similar titles rate recovery provisions are expected to cover a significant majority of our ships.
Turning to slide 11, looking forward, despite near term inflationary pressure in certain commodity and logistics costs. We believe our revised mid some roadmap will enable us to continue reducing our series six cost per watt.
Starting with efficiency our mid term goal is a 491 bifacial 500 monetization with Walter.
As a reminder, improvements in module wattage generally provided benefits each component of the cost per well, including our variable fixed and sales freight costs.
Secondly, we are tracking to increase throughput by 9% to 11% in the mid term on our existing manufacturing base.
And a fixed cost solution benefit.
Thirdly, we continue to see a path to increase our series six manufacturing yield to 98, 5% in the midterm.
We see opportunities to reduce our bill of material costs by 10% midterm, primarily across framing and clock.
And finally, we believe elimination of fitting our module profile transport optimization unemployment risk sharing mechanisms in our customer contracting could lead to a 40% to 50% reduction in net sales from vertical.
Note. This expected reduction includes a combination of cost recapture through the aforementioned sales great customer contracting strategy and increased modules to shipping container.
Separately as it relates to series seven we anticipate both at <unk> and Ohio factories on a cost per watt when fully ramped lower than our current lowest cost factories in Vietnam.
Combined with the benefit of locating supply near term demand and reducing the cost of sales rate series seven is expected to reduce costs and net sales spread costs in total by approximately 1% to two.
Relative to series six.
With that context in mind I'll discuss the assumptions included in our 2022 financial guidance.
Slide 12.
Starting with legacy systems items, we're pleased with the potential value and long term benefits of selling much time development and O&M platform.
So that would be no assurance that we will enter into an agreement for a transaction our guidance assumes a gain of approximately $270 million to $290 million, which would be recognized as a gain on sale of businesses, which lies between gross margin and operating income on the P&L.
As we previously assumed ongoing asset sales from the development portfolio, which benefit gross margin. This change in assumption as a headwind to gross margin in 2022.
Furthermore, and so let me start with closed overhead costs associated with the Japan platform, but also continue impacting operating expenses.
In addition, we signed an agreement to sell our remaining international O&M contracts outside Japan.
<unk>, which is expected in the first half of 2022, we expect to recognize a pre tax gain on sales shown on the income statement between gross margin and operating income approximately $10 million.
As it relates to power generating assets, we're evaluating whether to continue holding a lift on multi asset in Chile, whether it's fuel sale of this project.
It is such a sale of a quiet quarter.
Previously discussed on our November earnings call could result in an impairment charge in the future. If we are unable to recover on net carrying value of the project.
No impact from any political sales of this project is included in our guidance for 2022.
Thank you ladies shipments expected to be between $8 nine a nine four gigawatts, which exceeds our production plans of the eight two to $8.
Expected inventory levels at year end 2021.
Factoring in factory expansion expansion in factory upgrade roadmap are expected to impact operating income by approximately <unk> $95 million to $105 million.
This is comprised of startup expenses of $85 million to $90 million, primarily interest on our new factories in Ohio in India.
As previously mentioned, we are planning to implement series six plus upgrades and other upgrades in 2022.
Okay.
These upgrades required downtime, resulting in estimated under utilization of 10 to 15.
$1 million.
We anticipate these improvements will contribute meaningfully about 2023 production plan.
Our liquidity positions that are strategic.
Terrific differentiator in an industry that historically prioritized growth without.
The capital structure.
For example, one of the few solar companies that both entered and exited the last decade.
Strong balance sheet has enabled us to weather periods of volatility and also pursue growth opportunities.
Additionally, we were able to self fund, our ending 2021 with $1 6 billion of net cash.
Based on our existing liquidity position based on the opportunity to secure a competitive terms and strategic benefits they partner.
Okay.
Entering to new market, we may raise debt financing.
Our new factory in India.
I will now cover 2022 guidance ranges on slide 13.
Our net sales guidance is between two four and $2 6 billion, which is predominantly module segment revenue.
Gross margin is expected to be between 155, and $215 million, which includes $165 million to $225 million of module segment gross margin.
Negative $10 million.
In fact from other legacy activities.
Module segment gross margin includes underutilization losses of $10 million to $15 million.
As discussed we anticipate sales rate will be a significant headwind in 2022.
We anticipate sales rate will reduce our module segment gross margin by 18 to 20 percentage points for the full year 2022.
SG&A expense is expected to total $170 million to $175 million compared to $170 million in 'twenty, one 223 million in 2020.
As indicated on the guidance call last February we anticipated the sale of our U S project developed business to resulted annualized savings of approximately $45 million to $50 million.
60% fits in the operating expense line.
We track well relative to this cost reduction plan and I'm pleased with your expected savings on a go forward.
R&D.
<unk> is expected to total $110 million to $115 million at a 90 $994 million in 2021 and <unk> respectively.
As we continue to grow our manufacturing capacity, what's the intend to add additional head count for our R&D team to further invest advanced research initiatives.
SG&A and R&D expense combined totaled $280 million to $290 million.
Total operating expenses grew to $85 million to $90 million of production startup expenses are expected to be between 365% to $380 million.
Approximately $280 to $300 million gain on sale related to the aforementioned Japan project development and international O&M transactions and $95 million to $105 million of combined underutilization costs and plant start up expenses.
To negative $20 million to $30 million.
This is predominantly driven by FX.
Interest expense related to Japanese project.
Full year tax expense forecast to be 35% to $55 million.
This resulted in full year 2022 earnings per diluted share guidance range of zero to 50.
Thanks.
No from an earnings cadence perspective, we anticipate our earnings profile will improve gradually over the course of the year with a significant impact in the quarter in which any sale of its patent development platform with a close.
Capital expenditures in 2022, it puts the range from $850 million to $1 1 billion.
Advanced the construction of our Ohio in India plant.
Upgrades to the fleet and invest in other R&D related programs.
Our year end 2022, net cash balance is anticipated to be between the decrease from our 2021 year end net cash balance is primarily due to capital expenditures associated with the building.
We should expect will be partially offset.
By financing proceeds.
Turning to slide 14, I'll summarize the key messages from today's call.
Demand has been robust with 11 eight gigawatt.
Net bookings in the previous earnings call.
Our opportunity pipeline continues to grow with a global opportunity set of $53 six gigawatt.
Mid to late stage opportunities of 27 seven gigawatts.
On slide five we continued to expand our manufacturing capacity and approximately 16 gigawatts of capacity.
We see significant midterm opportunity for improvements to our module efficiency.
We ended 2021 with full.
EPS of $4 38, and are forecasting full year 2022 things for sure there are 60.
With that we conclude our prepared remarks under difficult questions.
Yeah.
Thank you.
Ladies and gentlemen, if you have a question at Bernstein. Please press. The Star then the number one key touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
Our first question.
Paul.
Sure.
Hi, everyone. Thanks for taking my questions.
First one is on pricing as you think through your pricing for 'twenty two 'twenty three with the <unk>.
Backdrop.
The contracting strategy.
The recent bookings do you think.
<unk> pricing in 'twenty two could be.
Sure.
Possibly 30 or higher or do you expect.
'twenty two 'twenty three to be in the high 20 cents per watt and also I was wondering if you could speak to.
What's the expected margins might be.
For 'twenty, three especially as you.
Drive some costs down in 'twenty, three maybe some of the headwinds abate touch and.
Then.
The repricing can stay relatively flat.
Flattish and then finally.
Talks about new products in your Opex investments.
Through some of her work it seems like you might be exploring some.
D G and Rajiv solar opportunities. So I was wondering if you might be able to talk through.
Whether or not you see some concrete.
Opportunities there.
Could that be a new product for you as you rollout.
<unk> new plant in Ohio.
So what.
What kind of volume could that be.
It is a nice market with <unk>.
Healthy asps.
So any color there would be very helpful. Thanks.
Alright to fill I guess on the pricing.
Okay.
There is a little bit of potential pricing upside.
2022, but not overly significant.
To the extent that the.
Sales there are about 30% of the volume we have in 2022 has some sales rate adjustments of which book product appropriately.
Okay.
Comply with the obligations under the contract and therefore.
Adjusted.
The cost is about the capital, which we agreed to so that could impact it.
We are able to.
For example through the temperature coefficient.
On our current product and theres potentially some opportunity that could be monetized in 2022, but there is not a significant increase in <unk>.
And ASP opportunities offshore.
What you see and I think the contracted backlog that will show up in the K that is going to be somewhere right around I think 27 sets or something or something like that and that relates to the 22 gigawatts or so that we do have contracted as you go into 2023.
That.
What I said in the call is that.
Essentially the.
The Asps are relatively flat I think were down about.
Three tenths et cetera, or something like that 'twenty three relative to 'twenty two but there is about three.
Of adjustments, there is a penny or a little bit north of a pending module, but the delivery of the module.
So if you think about what our pricing.
Net pricing is today is just for the module you take caused 2000 or so which is only in the K at the average and you pull <unk> out of that so that effect, we said that our net module pricing.
It was about 22.
If you do that same analysis for the revised contracting structure that we have you would take the 2007 and back off about two five sets. So youre going to see structure. There is a potential of Q&A absence of higher ASP model.
Innovation in 2023, then we have in 2022 because of how we structure the contracts now only about 70 or so percent of the contracts in 2023 have that structure all of the bookings that we've done that whole 12, gigawatts that we just referenced.
As an example have.
Modification formula effectively and embedded in that or a customer may access.
Export type of pricing therefore, we don't take the freight risk and they're responsible for it as an example, so theres opportunities. If you take the 2007 and if you include the SaaS right and if you include.
The.
Price adjusters for the technology, which could be bifacial temco could be higher higher Ben so on that you could see significant increases in 'twenty sort of make your own assumptions does it get into the thirty's or not.
There is a potential to start pushing upwards of that.
And again, depending on how we structured the risk profile on.
On the sales rate you can see individual opportunities that we will have three having rosatom for various reasons of how we structure and how we contracted.
As it relates to expected margin I can't give you the absolute numbers on that but what I can say is that.
<unk>.
There is upward opportunity in Asps based on what I referenced.
Alex indicated that will continue we just six 6% of cost per watt down in 2021 'twenty over 'twenty and then there is other.
Single digit type of opportunity of reducing.
22 over 21, so as you do your math carry it forward.
You can see that there is still a trajectory even in the environment that we're dealing with right now that is very challenging.
Jack.
How we described it during the call.
On the Asps as well as the cost side.
Bob.
On the comment about <unk> been saying.
For.
For a while now that we are looking at tandem structures and high efficiency.
Modules that can drive.
An opportunity to expand they are traditional utility scale segment of the market in which we currently now.
<unk>.
We think through that roadmap and that product evolution and clearly it does open.
<unk> <unk> type of opportunity that could.
Hello, and enable an entitlement of higher asps, but but Phil as you know we got it on a path to get 16 gigawatt.
If we're doing let's say 500 megawatts, maybe even a gigawatt, yes, it's a great market.
We want to participate we've got some great partners, we've had some conversations and in that regard, but still going to be relatively small percentage of the overall business. So just one thing to add on the 'twenty two to 'twenty three on top of that.
Asps and Tuscola indication of the market is that when you get into 'twenty three we can add on.
In AFP entitlements, you can achieve.
Already reflected in the backlog in some cases, but in some cases it may not be so maybe some upside from that but it also has a 1% <unk> cost advantage.
Based on one of our sales rate, so youre going to get the benefit of that coming through as well in 2023.
Thank you. Our next question is from Joseph Osha Dugan.
Doug in time partners.
Hello, gentlemen, congratulations on continuing to represent American solar manufacturing so well.
212 questions for you first I'm wondering given the relatively soon shift in policy, we've seen VB 201, the bifacial exemption.
Have you seen that manifest in terms of pricing conversations for your more recent bookings and then secondly, mark.
Perhaps you could clarify obviously, you're sort of pushing forward with Ohio, but.
I think.
I think I heard some comments.
There'll be 2023, and some maybe fluidity to the plans there depending on policy. So if you could clarify that that would be great.
Yes.
Okay.
On the policy side just in general.
201.
And clearly we were disappointed with the bifacial.
Exemption that was provided that the reality is for me the way I look at this the module has many different attributes, but every module base could take photons, thanks electronics and how you choose to do that.
We talk about our attributes of what we talk about our spectral response on our ability.
The damaged as it relates to <unk>.
Mr in the air and humidity.
We talked about our temperature coefficient, we talk about our.
Shading response.
As an example.
Those are all attributes which take.
Vantage of your technology beyond just the labeled Watson, turning photons into electrons and the bifacial Audi is nothing more than that it is just another attribute that allows for additional energy generated from from a module that takes photons and electrons. So there's to me there's no common sense rational reason why.
Bifacial modules would be exempt it would be no different than if somebody took any attribute it could be larger degradation in our long term degradation are you could say that if you have a long term degradation rate. That's below X then you'd be exempt from the 201 duties, which to me would make any sense, nor does the bifacial exemption and that itself make any sense.
The.
As it relates to our customers our customers.
The value that the relationship with first solar they value our willingness to deliver and to honor our contracts and to stand by them.
Times that were challenged in right now and Thats why we refer to our customers as partners and we partner in times of when things are going well and when things are more are more challenging right. We're going to work together and we'll find solutions that we can enable each other's success as we look to this is again a marathon a long term generate journey of which we're just on the front end of the world of electrification.
And all of that world of electrification starts by turning photons into electrons and we'll do that with us and so yes. There is some policy angst ebbs and flows but nobody can look around the corner and say for certain that any of our competitors again, Vasily Chinese competitors will be able to to standby.
Our partners through their journey.
And the uncertainty of the things that could happen. So it does play to our strength is just look at our I mean, we just booked 12 gigawatts we have a mid to late stage pipeline of 2007 Gigawatts. After those 12 Gigawatts booked we've got.
Including early stage, we've got 55 Gigawatts both of those.
Pipeline metrics are up about 10 gigawatts from what we talked about during the last earnings call and we just booked 12 gigawatts.
So theres lots of opportunity.
Our value proposition, our unique <unk> technology, our growth plan, our expansion being American solar company, along the lines drove what you referenced.
Means a lot in the market that we're in right now so I think it plays to our strength as it relates to growth what I've mentioned, we talked before about growth we've got.
Capacity expansion for two new factories, one here in Ohio, and other and in India. We mentioned that we are working to evaluate further expansion and is this pipeline.
Our backlog of bookings and the pipeline of opportunities continues to grow we get to one where we're going to need to start evaluating expansion beyond what we've already committed to and is there. Another factory of three gigawatts of another two factories. So it could be six gigawatts to be determined, but it's all driven off energy fundamentals of demand in the marketplace our relative position.
<unk> and our ability to sell forward. So we will keep you updated although we're trying to do is let people know that hey, we're working through that and we're working very closely with our tool suppliers to enable that opportunity if it were to come about.
Thank you. Our next question is from Keith Stanley with Wolfe Research.
Clarifications on that 2022 guys.
Much to the Japan, and O&M business operations contribute to earnings for the year separate from the gain you've noted and I just want to confirm that.
Yearend cash balance includes the planned sales.
Yes, so theres very limited assumes.
Contribution from the O&M business and the Japan business. The assumption is that it wouldn't sell any assets.
All of that will be reflected in the sale of the business coming through and the gain on sales. So youre seeing that full number the $2 70 to $2 19 is about an additional $10 million of value associated with the sale of the <unk>.
The O&M business, but you're seeing limited associate of ongoing revenue and earnings for the time that we keep that business.
The view that being that gets OLED.
On the sale.
From a cash perspective, yes, the assumption is there.
The value and the cash from that sale is in the cash number at year end.
Perfect. Thank you and our next question is from J B Lowe with Citi.
Hey, Mark Alex.
The question was.
Mark you mentioned <unk>.
About.
Your 2023, Asps being down on a net basis from freight.
It will be up about a sudden I'm just I'm just wondering.
Can you just walk through.
The puts and takes.
That piece and then my other question was just on given what we.
I have seen so far out of Europe in terms of risk.
I used this over there have you had you.
I know, it's only been two.
Key dates or the like.
Have you guys been engaging with customers in Europe , potentially I mean disclose kind of the expansion question, but even ahead of that have you been engaging any further.
The west.
Customers.
And I guess new.
Or unexpected places.
I'll start with thanks.
Yes.
On the on the ASP at the way the way I would look at it is there is about it's about 30% of our contracts and.
In 2022 that have some.
Adjusted again, just to put it back in perspective to look at where we were a year ago in Q1.
2021 sales freight will be reported in our number was about two five.
We've gone from two assets in Q1 of last year to <unk> a lot. So.
So we didn't really.
And we generally have assumed historically around <unk>, that's kind of what our implied assumption, but thats what its been historically and as we continue to drive lots up dilutes. The average freight dollars to improve your central lot and everything else. So we saw this dramatic shift starts to happen in kind of Q2 of 2021. So we started modifying our contracts such.
We weren't carrying that entire freight risk and so theres adjustors now not all of the benefits of adjusters flow into 'twenty two they flow protect flow into a much higher percentage of about 70% or so of 'twenty. Three we'll have greater gesture and then really everything forward from 'twenty. Three we will have some form of trade adjuster associated with them. So when you think about it you've got <unk>.
As a headwind this.
This year's results, but youre going to recover some nominal amount back from the customer and so you will see some adjustments to ASP as we progress throughout the year, maybe ends up being about a penny and a half somewhere or excuse me about a half a penny.
So youre going to see our Asps will trend up from whats in our backlog right now as the sales rate adjusters are reflected for 2022 shipments, but when you do that same math and looking how we structured our freight rate there is about a penny and a half that will come through in 2000.
23, so the year on year, when you look at apples to apples asps.
Cause of that recovery on the sales rate is is going to go up about a penny so you're thinking about your 27. This year is probably going into the full year closer to 27, five and then you got about a penny of upside to that ASP going into into.
Into 2023 now this all assumes that a gesture is going to be higher because I'm still only really carrying about $2.05 of the Tulsa sales rate, whereas my customer is going to pay me a company for anything above and beyond that.
And then the other piece that will be accretive to asps as we go into 2023.
We refer to them as these technology our platform adjusters right. So we've contracted with customers just to look at a baseline product basically align product basically is what we're producing today call. It a 465.
Standard cure product, but we do anything about that the bends get better.
The ZIP code gets better the LTR gets better it becomes bifacial or whatever it may be series seven will have a premium on it and that starts flowing into 2023 as well so all of those become incremental to the ASP.
And because while they're structured contractually that way, but we don't have certainty yet the exact product that will be delivered we can't reflected into our contracted backlog those will be realized over time, and then youll see those those benefits improve the contracted backlog that that's the point, we're trying to make.
Thank you. Our next question is from Ben <unk> with Baird.
Okay.
Thanks for taking my question.
Bob.
Any of this.
The freight costs.
Sure.
<unk>.
Has that changed any of your.
Thoughts around doing long term contracts.
Yes.
Look out.
24.
Could you talk to us about how you are selling.
Okay.
Or is it more localized when you get out.
I'll go for it.
Then.
My third question and final question is just can you talk to us about.
Georgia, Bifacial and how do you make that decision and what it means.
ASP.
Cost perspective, thank you.
Asked about Europe , and what are we seeing anything about Europe , there has been and I forgot to answer it I just answered the ESP is it.
Nice to hear if there's been we've had ongoing discussions with Europe Europe is evolving in their journey similar to what we saw in India as well as what we're seeing here.
Ron hit creating domestic capabilities around manufacturing. So we are engaged we have some we have had conversations in Europe .
<unk>.
Manufacturing there. So it's one of the opportunities that were evaluated along with the U S and India. For example for any further craft expansion, we've got to cover that one.
So <unk> been on our freight cost again, what we're doing is just think of it.
Telling the customer that are based prices Act.
And we'll take two and a half sets. So as we go into volumes that go out into 'twenty, four and 'twenty five.
Any volatility to that number.
Is really the results in a variable ASP so if it stays at <unk>.
As I go out into 2020.
Four and five there'll be incremental ASP such that.
Our customer will actually then.
Cover that incremental sales freight costs are largely ours is fixed at two and a half said, we think that the manageable position to take as we contract forward and our partners see it the same way that there should be some element of risk sharing and given the uncertainty of what's going on in the market and who knows how long that will continue so I do think that we've come to a reasonable.
Balanced approach around how were thinking about sales rate in how we're contracting as we go forward.
India pipeline, there's a lot going on there is a lot of opportunity.
India.
Generally book out in as far as the horizon, Youre, not really going to see them, maybe looking to procure modules about a year out.
In terms of when the expected deliveries are needed.
Still looking second half of 'twenty three so we're we're more than a year out to when the factory will be up and running and we're being a little careful with loading the front end production with selling that volume through at this point in time.
It could be.
Potential delays unanticipated events got two volumes with our customers. So we're leaving the front end and stay in the first quarter kind of open right now until we have a higher level of certainty. We're further along in the construction as well as the install of the tools.
<unk> bonds with our customers, but it's not for lack of interest in demand we've got a lot of <unk>.
Opportunities in the pipeline and I think youre going to see multiple gigawatts of bookings before the end of the year for India.
Bifacial it.
It's really it's a.
It's an energy gain right.
You look at it it should get let's say.
<unk> is going to be a little bit lower than.
Then where crystalline silicon is right now, but we're still gonna give probably in the range of 1% to 2% of energy.
And energy depending on what markets you're in is worth say three quarters of a penny to about a penny and a half so you've got an ASP opportunity.
Opportunity premium for bifacial reality and call. It in the range of 2% is going to be a penny and half if you get.
One <unk> for 1% of energy at something close to <unk>, So youre somewhere between a penny and a half and three on ASP.
Yes.
No different than crystalline silicon there'll be some trade offs some of them some of the balance of system costs because of.
Rowe space and other things that you may need to do to capture the full benefit of the bifacial already there may be some some incremental.
Pos cost, which will actually can pull from that ESP entitlement, but but as we currently see it right now.
It would be accretive it will drive a higher ASP.
And as another value of energy and we sell energy, it's not labeled losses, the actual energy profile that comes out of the module.
Thank you presenters that's all the time that we have for today. This concludes today's conference. Thank you again for your participation and have a wonderful day you may.
Disconnect.
Okay.
Yes.
Okay.
Yeah.
Alright.
Sure.
Okay.
Right.
Okay.
Yes.
Sure.
Yes.
Yes.
Okay.