Maria Ma - IR Shawn Qu - Chairman, CEO & President Huifeng Chang - CFO and SVP.

Colin Rusch - Oppenheimer Philip Chen - ROTH Capital Partners Brian Lee - Goldman Sachs John Segrich - Luminus Carter Driscoll - B. Riley FBR.

Ladies and gentlemen, thank you for standing by. Welcome to Canadian Solar's First Quarter 2018 Earnings Conference Call. My name is [Evince] and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Mary Ma with Canadian Solar's IR Department. Please go ahead..

Thank you, operator, and welcome, everyone, to Canadian Solar's First Quarter 2018 Earnings Conference Call. Joining us today on the call are Dr. Shawn Qu, our Chairman and Chief Executive Officer; and Dr. Huifeng Chang, our Senior Vice President and Chief Financial Officer.

Before we begin, I remind our listeners that management's prepared remarks today will contain forward-looking statements, which are subject to risks and uncertainties. And management may make additional forward-looking statements in response to your questions.

Therefore, the company claims the protection of the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from management's current expectations.

And therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's annual report on Form 20-F filed with the Securities and Exchange Commission. In addition, any projections as to the company's future performance represent management's estimates as of today's call.

Canadian Solar assumes no obligation to update these projections in the future, unless otherwise required by applicable law. At this time, I would like to turn the call over to our Chairman and CEO, Dr. Shawn Qu. Shawn, please go ahead..

Thank you, Mary. We appreciate everyone taking their time to join us today. We are pleased with our results for the first quarter. Both module shipments and net revenue for the quarter exceeded our guidance. We have made progress on monetization of our global solar project assets in the quarter.

The net revenue for the solar energy and total solutions business as a percentage of the total net revenue reached a record high of 64.2%. Despite our encouraging results, we hit a slowdown in a solar module demand in the first quarter, partially due to the typical seasonality. However, the Section 201 import duty decision by the U.S.

government also had a major impact. In addition, many solar project developers in India were waiting for definitive decision from anti-dumping treaties launched against solar modules from China and a safeguard case similar to that in U.S.

We believe our commitment to technology; our strategy of steady conservative investments gives us a competitive advantage to weather the turmoil. I am happy to report that, we are on track in our shifts from the PIII to PIV technology.

The PIV technology combining diamond wire-saw wafering, black silicon cell processing and PERC cell technology concern the review manufacturing costs will increase the multi-crystalline solar module efficiency. We are about to ramp up production of multi-wafer, cells and module, which will gradually replace both our busbar cells.

The multi-buffer cells can further increase module efficiency and reduce manufacturing costs. Besides, our high power, high efficiency HDM module based on the latest Mono-PERC technology help us to gain market share in premium markets, such as Japan.

On the energy business side, we continue to execute and are encouraged by our achievements in project monetization, we’ve sold 482 megawatts of solar power assets in Q1. The highlights are the transaction to sell three solar power plants in U.S. totally 309 megawatts through KEPCO.

Another highlight was the sales of 141 megawatt of solar power plants in UK, to Greencoat Capital. Demand remains strong for our solar project, given the high quality of our development and EPC work.

We expect additional sales in 2018 partially work to get an attractive return to our Company and shareholders, by redeploying capital into new opportunities. One of the more recent transaction was the sales of our 80.6-megawatt Guimarania, solar project in Brazil, the global power generation which we completed in April.

Our portfolio of solar power plants in operation totaled 948 megawatt, with an estimated retail value of $1.1 billion U.S. dollar at the end of April. As part of our strategy to redeploy capital we further expanded our global late-stage project pipeline, and diversify geographically into Australia, South Korea and Argentina.

These are some of the developing markets where the next phase of industrial growth is expected. Our global footprint is correctly aligned with these developing markets given our competitive advantage and valuable head start. We have been investing in this market and building a foundation through brand awareness for several years now.

For example, on Monday we announced we’ve secured an 8-megawatt project in South Korea and in March we acquired a 97.6-megawatt solar project in Argentina. In April, we won three solar projects totaling 364 megawatts in Brazil A-4 auction.

Our late stage solar power project pipelines increased to 2.3 gigawatts including those in construction at the end of April. Now let me comment on our guidance for Q2 2018. We currently expect total Q2 module shipment to be in the range of approximately 1.5 to 1.6 gigawatts including 100 megawatts of shipment from our own utility-scale solar project.

Revenue for the second quarter of 2018 is expected to be in the range of 690 to $730 million with gross margin expected to be between 20% to 22%. Let me now turn the call over to our CFO, Huifeng Chang for a more detailed review of our results for the first quarter. Huifeng, please go ahead..

Thank you, Shawn. Net revenue for the first quarter of 2018 was 1.42 billion, up 28.5% sequentially and up 110.5% compared to the year ago period. Gross profit in Q1 was 143.9 million, compared to 218.6 million in Q4. Gross margin in Q1 was 10.1%, compared to 19.7% in Q4.

The sequential decrease was primarily due to the low margin associated with the 309 megawatt of US solar power plant sold to KEPCO combined with higher blended module manufacturing costs with a partial offset from an increased module average selling price in the first quarter of 2018.

We expect a considerable improvement in Q2 with guidance in the range of 20% to 22%. Total operating expenses was 65.7 million in Q1 compared to 88.2 million in Q4. Income from operations was 78.2 million in Q1 compared to 130.2 million in Q4. Operating margin was 5.5% in Q1 compared to 11.7% in Q4.

Foreign exchange in loss in Q1 was 8.5 million compared to foreign exchange in loss of 9.5 million in Q4. We recorded a gain on change in fair value of derivatives of 4.5 million in Q1 compared to a gain of 7.6 million in Q4. Income tax expense in Q1 was 4.1 million compared to income tax expense of 28.9 million in Q4.

Net income attributable to Canadian Solar shareholders for Q1 was 43.4 million or $0.72 per diluted share compared to net income of 61.4 million or [$1.01] per diluted share in Q4. Moving on to the balance sheet. At the end of Q1, our balance of cash and cash equivalents was 567.4 million compared to 561.7 million at the end of Q4.

Our restricted cash balance was 624.4 million at the end of Q1 compared to 628.5 million at the end of Q4. Trade accounts receivable balance was 354.3 million at the end of Q1, down from the 358.1 million at the end of Q4. Accounts receivable turnover was 26 days in Q1 2018 compared to 38 days in Q4, 2017.

Inventories at the end of Q1 2018 were 414.1 million compared to 346.1 million at the end of Q4 2017. Inventory turnover was 28 days in Q1 2018 compared to 35 days in the fourth quarter of 2017. Short-term borrowings at the end of the Q1 total 1.86 billion, compared to 1.96 billion at the end of the Q4.

Long-term borrowings at the end of the Q1 was 328.1 million, compared to 404.3 million at the end of Q4. Total debt at the end of first quarter of 2018 were approximately 2.45 billion, of which 785.7 million was non-recourse. Senior convertible debts outstanding totaled 126.7 million at the end of Q1 compared to 126.5 million at the end of Q4.

Short-term borrowings and long-term borrowings directly related to utility-scale projects, which include 708.4 billion of non-recourse borrowings, totaled 1.12 billion at the end of Q1 compared to 1.38 billion at the end of Q4.

The value of our build-to-sell product assets at the end of Q1 was 1.1 billion compared to 1.9 billion at the end of Q4 2017. We are pleased with our significant success in monetizing our solar power assets globally. We are working to secure approval for the sale of 3 other U.S.

solar projects totaling 399 megawatts with the potential to close with the coming months. Our continued success actions are enhancing our balance sheet and allow me as to leave before our capital to supported profitable growth of our business and to build balance for shareholders. With that, I would now like to open the call to your questions.

Operator?.

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from the line of Colin Rusch from Oppenheimer. Please ask the question. .

Thank so much. So, you have gone through a lot of these cycles in the past with the policy changes and looking at what's going on. In India, navigating the U.S.

market, how do you think about incremental capacity, where it goes and how you're going to manage that as you go through the balance of this year and it's obviously been important market for folks just as a kind of a back stop for volumes.

But what's your expectation and thought process and decision-making process as you go through the balance of this year and meeting all the needs of these markets?.

Yeah, Colin its good question. I've gone through several cycles I could guess. But every cycle is different. For example, this time the U.S. Section 201 trade decision, it immediately slowed down the new module shipments and purchase in U.S., in fact it's quite dramatic. So, I guess people already have commented on that.

Some of the comments that there must have already been quite significant module inventory in the U.S. shifting before the Section 201 decision. So probably now all the distributors I guess working through those products. Now India is interesting. It's an interesting from phenomenon.

It looks like the module importer who are waiting because they didn't want to be caught with the tariff decision when the module is underwater. That's the [comment] that hurt. But if you think about it how can developer say they already have a project in hand, how can so many developers wait for 3 months, 4 months facility.

So, it's -- just every cycle is somehow different. Now your question on the capacity, well we do see a capacity like we think the capacity is allowing the value chain is not level. It looks like at this moment, there is more of a supply demand balance on polysilicon side, but that might probably start to change moving to the second half of this year.

And now Canadian Solar hasn’t touched the polysilicon yet. I guess we will continue this practice after we leave the polysilicon to the polysilicon suppliers. And in [wafers] we are seeing some significant announcements in India especially the mono-crystalline silicon India expansions.

So, we try to avoid that so from the capacity effect which we updated in this earnings call, you can see that we’re still quite conservative in terms of the inlet capacity.

It looks like the solar cell especially the high efficiency solar cell, still that supply remains well balanced and that’s why we are adding some capacity with our proprietary cell technologies which is multi-crystalline focused, P4 technologies which combine the black silicon with the PERC technologies and also the bifacial solar cell.

So that’s where we add some capacity and then on the module side, I’m holding module capacity announcement is just not large scale as the inlet. So, we’re also adding some module capacity but we only have the module capacity with advanced technologies.

So, in the call, I mentioned that we start to deploy the multi-wafer solar module, that kind of [indiscernible]. So, we are shifting from the [indiscernible].

You know Canadian Solar has always been on the leading front of the margin technology, we are one of the first to move from 3 bus star to 4 bus star and then from 4 to 5 bus star and lead the shift upgrade from the five-bus star to multi-bus star. And we have been producing more and more bifacial solar modules.

So, I guess that's how we see the supply, demand situation on the value chain, and how we plan our capacity works. .

Thanks so much. And then just I want to follow up on the comment around the bifacial, because we continue to see kind significant interest in that.

What’s your view on how quickly that technology gets adopted and how much market share you’re going to take over in the next couple of years?.

We believe, we have marked the process for our bifacials. So, we are producing both multi-crystalline and mono-crystalline bifacial modules based on P-5 PERC technology whereas we have been producing those products while we have started to produce those products markedly and in Q2 we will produce over 100 megawatts of bifacials.

I don’t know how other module companies are doing but for us the Canadian Solar we have marked the bifacial technology, we believe in it and we have projects to deploy our bifacials in a marked way. .

Thank you. Our next question comes from the line of Philip Chen from ROTH Capital Partners. Please ask your question. .

First one is on ASPs. I think in your release, you talked about how your Q1 ASP increased. Can you talk about how that happens, which geography or what was the key driver of that? And then how do you expect the ASPs to trend into Q2 as well? Thanks. .

Yeah Philip, the binding and channel [indiscernible] really helps. We secured many of our Q1 orders back in Q4, and during Q1 although the market slowdown that our customers, they receive value I guess. So, they stay with us is fixed to the price. And I guess the investor and the bank also want them to stick with Canadian Solar.

So, we end up at almost the same ASP slightly up. But I would say almost the same slightly up from Q4 level. However, moving from Q2, the ASP will go down. And we don't guide the future ASP, but I guess the general trend is that Q2 with the ASP of module will go down.

But fortunately, the material volume from polysilicon to wafer, the material price also went down. So, our margin percentage is okay in Q2. .

Great, thanks Shawn. Shifting to the balance sheet a bit and specifically interest expense. You gave us some detail on your debt levels. That said, I want to ask the question about will you expect interest to be going forward.

Do you expect it for example to be lower than Q1? And then if you can give us what the Q2 interest expense might be, that will be great. .

I think you're talking about interest expense, right?.

Yes. .

So, I would expect the interest expense will go down because if that level goes down that will pay down a lot of debt. We pay down significant debt when we sold our solar project. So, I would expect the interest expenses to go down. .

Okay, great. Just want to confirm. And then in terms of Japan, can you update us on that region for you especially the projects that you planned to dropdown and see your JV.

So how many megawatts could you dropdown in '18 and '19? What specification and also perhaps what might be the timing of the 2018 dropdown to be?.

So, from our pricing ASP, the update of our COD plan 2018 and 2019, COD plan, I would say our dropdown plan is in fact with the COD plan, it's largely COD. We will either drop down or resell, it’s a small project let’s say 1 megawatt project, that 1 megawatt project you can assume that we will prefer to dropdown, dropdown into day rate.

If we COD this project 13, 15-megawatt big project, then we have more often, we can drop down to an investor in a single transaction. Actually, in Q1 and Q3, you will probably see some announcement of a couple of large projects in Japan which will either tell in a single transaction or drop down to the day rates..

And you said Q1 and Q3 I think, do you mean Q2 and Q3 and when do you expect this?.

Q2 or Q3, you’re right. .

Okay, good. Drop downs or some sales in the coming quarters.

Okay, one last one, in terms of China what do you expect the Chinese market to do year-on-year? Do you expect it to be flat in the last 53 gigawatts or with the discussion out there about DG being a potential risk factor for the down side? Could China be smaller, could the inflations in 2018 be down year-on-year relative to ’17, what’s your overall view on the Chinse market now?.

I believe you’re being in China in 10 days right, so you will find out. This moment my guess is as good as yours. I think the most probably scenario will be almost flat, that luckily if the government makes a major announcement with respect around DG and if they make an immediate cut the volume could shrink.

You know the current job of the NDA politics that the DG project already registered with a provincial agency will continue, will continue to be allowed, that is what the job polity.

The job there for the final policy some times change, let’s say if they believe this particular line then I don’t know what people do with the DG project they will register. Today I will read on the industry or some of the industry website that the China gigawatt of DG project is registered.

That seems to be the new number I guess plus what people rush to register after the job policy was announced, right. So, a year also [indiscernible]. Let's see how they react to the situation. .

Thank you. [Operator Instructions]. Our next question comes from the line of Brian Lee from Goldman Sachs. Please ask your questions. .

Hey, guys. Thank you for taking the questions. Maybe just quick housekeeping one. Are you making any changes to the full year revenue or module shipment targets? I didn't see any updates in the release..

Well, no. .

Okay. And then in your prepared remarks, Shawn. You mentioned some demand softness on modules. If you were to exclude shipments to your own projects, how much where your volumes down versus Q1 of last year? And I guess similarly if you exclude expected shipments for projects in Q2, what rough rate of decline are you forecasting versus last year.

I guess just trying to get a sense of where organic volume demand levels are turning to your first half of the year?.

Our Q1 this year, our total shipment is 1.37 gigawatt as you see from our press release. We also give you the reference of the Q1, 2017 as a reference. I believe that reference is 1.33 gigawatt. So, you can say that, hey, this Q1 is almost same level of last Q1. I think that reflects the analysis. So, there is not a big supply.

Usually Q1 is a slower season, it's just another slower season like Q4. However, it also means at least in our case there was no growth, no significant year-over-year growth this year over next year. And in the past, you always expect growth.

But I think the fact that with no growth the reason is probably the all those trade decisions like the Section 201 from U.S. and all those trade challenges in India.

Did I answer your question?.

Yeah, I guess maybe just to clarify a little bit.

What number of megawatts did you ship to your own projects in Q1 of last year and also for the just reported Q1 of this year? I'm just trying to normalize for those to get to a sense of what your third-party module shipments were year-on-year? And then same question for Q2 just sort of what's the third-party shipment level forecast implying on a year-on-year basis?.

I don't have that number on my fingertips. But I think most of the Q1 shipments is third party. So, we can assume maybe 90% or 95% or even more of our Q1 shipments will be third party. Because Q1 is [indiscernible] so if other people help their utility to grow in the construction will also help. .

Okay, fair enough, I’ll take it offline. Second question is just around the margin outlook for 2Q.

Can you -- it’s quite a big increase from what you just reported, can you speak to some of the mix assumptions or geographic exposure assumptions that you’re embedding in there for the rising gross margins for 2Q?.

The manufacturing business is more or like stable in Q1, our manufacturing gross margin we’re seeing in high teens and in Q2 we also see that in the high teens level. So, the growth we have a good ability to maintain the manufacturing cost on price structure if the price slow down we’re managing to reduce the cost as well.

And the difference from Q1 to Q2, all comes from the solar project we sell in the quarter. In Q1, we try and expect some of that we completed, include some US projects, some of the US projects which we trade in 2015. At that time, the business model of the industry was yieldco, so we also accumulate some projects.

But now there's no yieldco, Yieldco is not a factor anymore in US. Therefore, we are selling those projects, those sales have low margins. As before mentioned. We also mentioned that in the press release. Now in Q2, we’re also starting some projects in Q2. those are new projects, the project we newly developed last year, we sold in Q2.

Those projects have healthy margin, therefore the blended margin averaged above 20%. .

Okay, no that’s very helpful, maybe last question on that same topic. I missed it, [Hussain] I think said in the next month or next several months but is the Shenzhen energy sale of the recurring assets the second slug of recurring assets.

Is that baked into your 2Q forecast or is that later in the year?.

Well we shall say that we haven't released the name of our future sales, so you can guess that we don’t make that -- we haven’t released that information yet. .

The final outcome before it happens is number one, [never sure].

However, we remain optimistic in the result like every other cases take several months to get approval and because [city] is short of staff, but the fact that we have been getting a lot of efforts, the fact that we got approval from KEPCO, so you can guess we are making progress every week.

We’re getting close, we don’t know eventually the final results when to come out. We believe and we are hopeful for a yes, even approval or disapproval once it happens we will report to the investors. Thank you. .

Okay.

Yeah, I just -- you've made several comments in past calls and on this call that the margins on those projects are expected to be on the lower end so I'm just wondering if the 20% to 22% gross margin guidance for 2Q captures the potential for those projects to be sold, or if those margin targets would not actually reflect that, that was all I was trying to get at.

.

Well that I need to clarify that guidance for Q2 does not assume the close of the deal in the other 3 solar projects in Q2. However, it may happen, that just to conservative, we have not included that in Q2 guidance. .

Thank you. [Operator Instructions]. Our next question comes from the line of John Segrich from Luminus. Please ask your question. .

Hi, guys. Just a couple of more housekeeping questions.

Could you give us the amount of CapEx in the quarter? And then, secondly can you just give us a sense of how much project revenue is included in 2Q? And then finally maybe just can you walk through which project booked is revenue and which were booked as other income in 1Q so we can try to piece in the part?.

The first one. [indiscernible]. John, I can show [pre-reported] numbers. The CapEx for the quarter was around $80 million for Q1. $80 million. And then for most of [indiscernible] we saw in Q1, breakout in revenue, don’t breakout because we are ubiquitous as [indiscernible] generate [electricity].

We all expecting rate maybe to know to your call we decide to add the other income in Q1. The numbers I can provide to you after the call. For Q2 I think maturity almost 100% of the project is currently in our forecast was relevant.

And almost all of them are the sale of projects, including those in Brazil and some of them in other area but for that big one, the 3 US, 3 big solar items in California we have not included that yet. .

Got it, okay.

So, of the 690 to 730, about how much will be project, just ballpark?.

Okay. On the 50 million, they have project sales in the Q2. .

So, 115?.

Well 140 million..

Thank you. Our next question comes from the line of Brad Meikle from AMPAC Research. Please ask your question. .

Hi good morning and thanks for taking the question. I think about a year ago you had target of $0.25 a watt by 2020 as your outlook.

Is that still your targeted cost per watt and can you just discuss so the non-silicon cost per watt reduction drivers and how you see that over the next three years?.

Yes, we still see $0.25 as our cost target in solar module for 2020. .

What are the main technology paths that you see for driving non-silicon cost per watt down over the net medium term?.

First of all, we think that the polysilicon process technology has improved a lot and so that drove the cost down and many of the new polysilicon factories are built in low electricity regions. As you know electricity is a big part of the cost for polysilicon. So, we think that polysilicon will see some healthy polysilicon price reductions.

Well the leading poly silicon factories can still make money even with significant price reductions, that’s number one. And then on the manufacturing side the cost efficiency improved, the solar cell and solar module efficiency improved, the cost also reduced and some technology directly reduced the cost.

For example, we mentioned the multi-busbar technology, the solar module technology in the call. That technology helped us to reduce -- not only the improved efficiency but also reduce the silver paste usage. And silver is the biggest consumables in the solar cell process..

Okay, thank you.

And sorry if this is asked already, what’s your outlook on ASPs for the rest of year on module ASPs?.

I don’t have the outlook because I don't guide, that was guide my customers to negotiate with me. .

Well. Can you speak to your level of visibility on the year, how much of your capacity has been sold from bookings for the rest of the year? Thank you. .

As this moment, we have sold the majority of our Q2 capacity. That's how we give guidance. For Q3 and Q4, we also sold significant percentage of the capacity. I don't have the exact percentage on my fingertips, but our guidance, our annual guidance we have good confidence. .

Thank you. Our last question comes from the line of Carter Driscoll from B. Riley FBR. Please ask your question. .

So, in terms of 2Q gross margin guidance, just I'm circling to the get to the figures.

So is it reasonable to assume the first thing is just you no longer are going to have the sale the 309 that obviously pull down the recurrent sales in the quarter, maybe a geographic shift with the lower contributions from some of our price sensitive markets like the U.S. and India.

Maybe a little bit more penetration some of the newer markets is namely directionally am I thinking those are the big components on a Q2Q basis that are we can be improve gross margin?.

Well, first of all, I answered to the previous question that we included above 140 million into the Q2 guidance. So that gives you a figure exceeding of the level of projects also we have in Q2. And we also mention that we didn’t have the sales of level 3 sort of project in U.S. in Q2 indeed happened into that as well.

And if that happened we'll let you know once its complete. But to be on the safe side, we didn’t include that in assumption, but if it indeed happen, then we see the revenue jump but AOC drop just like in Q1. And so that the direction for the energy business for the solar project business. On the solar module side, the shipment into U.S. was low.

And the new shipment into U.S. was low after the Section 201 announcement. U.S. was a high margin market last year. So yes, you're right that high margin market also improved the volume. Well it's still exciting, we have some inventories. So, we also have some inventory in the U.S. So, we do have some sales. We have the modules to support our customers.

But the volume is low. And in Q2, there will be significant volume into China. So, you can say that we’ve almost shift the main volume shift is more from US to China. .

That’s helpful. Thank you, Shawn. Are you seeing any upward pressure on project financing at least in the debt component, just with the gradual raising rates are you expecting anything material in the back half of the year, maybe a little bit in the fore heads this year.

Do you expect any at least in the U.S.?.

For the project we budgeted to deal for this year, we don’t see the pressure of financing, not really. .

And then on the newer markets that you mentioned earlier Shawn, Australia, Argentina and Korea which of those -- if I remember correctly you were one of the first to aggressively go after Brazil, non-Brazilian.

And of those three could any of those kinds of mimic maybe not quite the same scale as Brazil but surprisingly upside in terms of where it could grow incrementally outside of your current targeted areas?.

I think Australia has lots of potential and we also have a significant pipeline in Australia. I believe we made an announcement of the pipeline acquisition back in Q1 that is going to have that product’s release if we desire of our pipeline in Australia. Argentina, I’m not sure. on one hand that country also has lots of sunshine.

However, whereas the current prices in Argentina maybe will not grow as quickly as Brazil. But again, just speculating, we are working on our first project in Argentina and let’s see how Argentina government can handle this current, this couple of issues. .

If I remember correctly you are pushing 100% capacity utilization in your Chinese facilities but non-China, has that changed materially you are allocating or building more outside of China at all at least on a sequential basis or planning to this year.

Could you give us a rough figure of what utilization was to remain in Chinese front in the quarter?.

First of all, Q1 both China and non-China has some capacity standard utilization. In China it was more due to holiday, due to the Chinese New Year holidays and outside China it was because there was trade policy change.

Now moving into Q2, since improving as you see that our volume also improved but we still have some underutilization outside China, in some of the factories outside China. .

Okay, but not enough that its materially changed your year-end capacity expansion plan?.

Well it's all including it, if the capacity is underutilized then the per unit depreciation will be higher. So, all that impact is included in the Q2 margin guidance. So, I'm pleased that although, even with some facility utilization we still maintained a stabilized slightly up gross margin. That shows that we have successfully stabilized the ASP.

And we also reduced our cost. Now moving forward, we are only adding capacities in the place where the capacity can be used. That's for sure. And also, we are only adding capacities with advanced technology. For example, for the module capacities we only add the multi-wafer and we believe those capacity will be fully utilized.

Otherwise, in reality we don’t have enough of those multi-wafers in solar module capacity. And on the solar cell side, our new solar cell factory will be fully capable, fully equipped to produc this people technology which is polysilicon and also fully equipped to produce bifacial cells.

So yes, there might be capacity underutilization, but if you only invest into good and new technology, hopefully our customer will take our out on that. .

Are we giving any thought to either building solar module capacity in the U.S.

after [2021]?.

We have been doing feasibility studies for several countries. But no decision on the US at this moment. .

Thank you. I would now like to hand the conference back to the management for closing remarks. Over to you sir. .

Alright. Thank you for your continuing support. And if you have any further follow up questions after today's call, please contact us. And have a nice day. .

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect..