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spk01: Good day, ladies and gentlemen. Welcome to the Maxion Solar Technologies first quarter 2021 earnings call. Currently, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to our host, Mr. Gary Dvorak of the Blue Shirt Group. Sir, you may begin.
spk09: Thank you, Operator. Good day, everyone, and welcome to Maxion's first quarter 2021 earnings conference call. With us today are Chief Executive Officer Jeff Waters, Chief Strategy Officer Peter Aschenbrenner, and Chief Financial Officer Kai Strobeck. Let me cover a few housekeeping items before I turn the call over to Jeff. As a reminder, a replay of this call will be available later today on the investor relations page of Maxion's website. During today's call, we will make forward-looking statements that are subject to various risks and uncertainties that are described in the safe harbor slide of today's presentation, today's press release, the 6K, and other SEC filings. Please see those documents for additional information regarding those factors that may affect these forward-looking statements. To enhance this call, we have also posted a supplemental slide deck on the events and presentations page of Maxion's investor relations website. Finally, we want to point out that the comparisons to the first quarter of 2020 reflect a carve-out of Maxion's results while it was still part of SunPower last year. We began operating as an independent company on August 27th. With that, let me turn the call over to Maxion's CEO, Jeff Waters. Jeff?
spk08: Thank you, Gary, and good day, everyone. I'll start by giving a business overview and covering recent accomplishments. Kai will then review our financial performance and outlook, and we'll conclude with Q&A. On our last earnings call, I explained our three pillars of profitable growth. These are our leading panel technology, our unique focused approach to the utility scale business, and our strong global brand and BG channels. The entire company is focused on the execution of these pillars, and we're making exciting progress. First, on our leading panel technology. Two days ago, we unveiled Maxion Air. a novel ultra-thin, ultra-light, and flexible panel technology that eliminates glass and aluminum framing. This innovation is disruptive in many dimensions. At nearly half the weight of conventional panels, Maxion Air will enable solar deployment on low-load commercial rooftops that are not engineered to accept the weight of a conventional panel. We estimate this unserved market to be over 4 gigawatt just within Europe alone. Using a strong factory-applied polymer backing, These peel-and-stick panels are easy to install and are therefore expected to measurably reduce installation time and cost. You can learn more on the Maxion website. In addition to low-load commercial applications, we plan to extend Maxion Air to other markets such as residential rooftops and large-scale floating power plants in the future. We believe the competitive moat around Maxion Air is substantial. and that this form factor will not be easily replicated by our competitors because it's predicated on the unique capabilities of our proprietary IBC cell technology. In addition to superior efficiency, low power degradation, and leading reliability and durability, Maxion IBC solar cells also have the unique ability to share current and reverse bias while shaded, thus avoiding damaging or dangerously high temperatures. This feature is particularly important where panels are adhered directly to the rooftops. IBC cells also have superior corrosion resistance and the ability to bend without harmful cracking. This feature is particularly important to the Maxion Air platform with its lightweight and bendable non-glass super straight. Maxion's unique IBC technology is therefore a key enabler for this new product platform. Let me shift gears to another key pillar of our strategy, namely our large-scale business and specifically our U.S. market performance line initiatives. As you know, we announced this planned expansion in early April, and we have already made meaningful progress. Earlier today, we announced a definitive agreement to supply close to one gigawatt of performance line panels to PrimerG's Gemini project. Shipments will take place over a four-quarter period starting in the second quarter of 2022. We are pleased to have been chosen as the module supplier for the Gemini project, a gigawatt-scale solar plus storage project located in southern Nevada. We believe it will be one of the largest solar power systems in the U.S. when installed. This order covers a large fraction of the expected first-year output of our new in-house performance line capacity. In our opinion, this win confirms the value of Maxion's product offering in the U.S. market. Our primary focus in the U.S. is now on converting our substantial large-scale sales pipeline into additional bookings for delivery in 2023 and beyond. Moving to the final pillar, our global brand and DG channels. We saw continued progress in the first step of our beyond the panel strategy, namely our recently introduced AC modules. Maxion AC modules are currently available in Europe, the US and Australia. Demand is strong and we're not experiencing any significant microinverter shortages. Despite recent COVID lockdowns in several European countries, we continue to expect that AC modules will grow to over 20% of our DG sales outside of the U.S. as we exit 2021. The value of factory-integrated AC modules, combined with our knowledgeable channel partners, is compelling for customers. Given that, we're expanding our AC module portfolio to also include a performance line version. Initial shipments are planned for this summer. More broadly, on the back of our industry-leading panels, brand and channel, We saw record Q1 bookings for DG globally. I'd like to specifically highlight the European region where we saw record DG shipments for the first quarter, up 25% year on year and up 84% versus Q1 of 2019. We also saw continued strong growth from our marketing partner in the U.S., SunPower. While DG is strong, we still face challenges in our large-scale business outside of the U.S. Despite a large and growing pipeline outside of the U.S. and China, we're still proceeding cautiously in finalizing orders as we await better clarity on evolving industry supply chain costs. We expect increasing visibility as we move into the second half of the year. But for now, we're still releasing most of our near-term large-scale performance line allocation to our HSPV JV for sale in China. That said, our confidence remains high for Maxion's long-term prospects in large-scale. We're taking action to adjust the near-term realities of disruptive cost pressures in the industry supply chain. The shipments this year in our large-scale business are unlikely to match our expectations coming out of this spin last summer. However, with our global reputation as a trusted supplier and with our innovative technology, we're confident we'll achieve strong traction in global markets once the upstream supply chain normalizes. Cost reduction remains paramount, and we are redoubling our efforts to reduce costs and optimize our manufacturing footprint. As we phase out our legacy Maxion II technology, our European and Asian modcos supporting that line will be repurposed or otherwise rationalized. We believe our Malaysia cell factory loading will improve substantially as we ramp the U.S. performance line program. And we expect operating expenses to decline sequentially once we roll off the lingering SunPower separation expenses later this year. Kai will discuss our cost optimization efforts in more detail shortly. As we look into 2022 and beyond, we're very enthusiastic. As we execute over the next 12 months, at this time next year, we expect that we'll have robust growth of Maxion Air and Maxion 6, an increased percentage of sales driven by AC modules, and a pilot line in production for Maxeon 7. For large scale, the performance line will be shipping into the U.S., and upon supply chain normalization, our non-U.S. business will be able to track to the kind of demand growth we expected it to spend. As well, our factory footprint and operating costs will be further optimized, and positive operating leverage will have started taking hold. And last but not least, we will have the completion of our out-of-market polycontract in near sight. This vision of what Maxion can be just one year out is energizing for the Maxion team. Now I'll turn the call over to our new CFO, Kai Strobeck. You met Kai briefly on our last earnings call when he had just started. The transition is complete, and Kai is now running our finance function. We're excited to have a CFO of Kai's caliber with us and are impressed with his early contributions over the past few months. Kai, let me turn the call over to you.
spk04: Thank you, Jeff. And hello, everyone. I appreciate the kind words. I am excited to be part of this team of highly passionate and talented people who are driven by Maxion's mission of powering positive change. I also look forward to meeting all of you, our analysts and shareholders, in the weeks ahead. Before we dive into the results, I'd like to discuss a few changes that we are making to the presentation of our numbers. We want to provide a more consistent and meaningful picture of Maxion's operational performance to our investors. First, starting now, we will report adjusted EBITDA excluding the mark-to-market fair value re-measurement of our prepaid forward and physical delivery forward. This re-measurement gain or loss on those instruments will be excluded because it is not considered part of our core operating activities. Nor do these gains or losses contribute to a meaningful evaluation of our current, past, or projected operating performance. Secondly, also starting now, we will report non-GAAP cross-profit and non-GAAP operating expenses by excluding stock-based compensation expenses and restructuring charges. We have always excluded stock-based compensation expenses and restructuring charges from adjusted EBITDA, so this change complements that practice. Adjusted EBITDA, non-GAAP gross profit, and non-GAAP operating expenses are how we evaluate operating performance internally. We believe that consistently presenting these measures will aid your understanding of our business. For more details, including a reconciliation of GAAP to non-GAAP financial measures, please refer to the section Reconciliation of Non-GAAP Financial Measures in our Form 6-K filed today. With that, let's now turn to our financial results. I will discuss the drivers and details of our first quarter performance and then provide guidance. As expected, Q1 results tracked the outlook we offered about six weeks ago. The team at Maxion executed well, and we are pleased with our accomplishments and progress in the first quarter. Q1 revenue of $165 million was slightly above our projection of $160 million. The 33 percent sequential revenue decline reflected the expected seasonality in DG and the pause in large scale. In addition, note that the fourth quarter of fiscal 2020 was a 14-week quarter, while Q1 of 2021 was a regular 13-week quarter. The 28 percent decline in revenue versus last year's Q1 is mostly the result of the large-scale pause. The revenue declines both sequentially and year-over-year tracked shipments, but were offset in Q1 by higher ASPs versus the prior quarter. Overall ASP was up 16% sequentially. By product line, IBC revenue per watt increased to 53 cents from 49 cents sequentially, while performance line revenue per watt increased to 28 cents versus 25 cents. The sequential increase in overall ASP resulted from a combination of factors, a mixed shift to a higher share of IBC sales driven by DG, as well as favorable Euro versus US dollar exchange rate, and some price increases as we passed on higher supply chain costs where possible. Now let me take a moment to cover the revenue breakouts, which are shown in the supplemental slides. By end market, DG dominated the shipment and revenue mix, not surprising with a pause in large scale. Large scale made up only 16% of quarterly revenues, down from 32% in the previous quarter. Similarly, by product, IBC increased in the mix since it sells mostly into DG. Performance line was down substantially due to the large scale pause. with most remaining sales going into DG. Finally, by geography, the sequential 13% decline of sales into Europe was driven by a 30% decline in large scale, but supported by DG sales that were almost flat, underlining our strength in this very attractive market. Asia-Pacific sales decreased by 64% sequentially due to the completion of some large power plant projects and lower demand in Japan, DG, due to a resurgence of COVID-19. Gross profit was slightly better than forecast. Non-GAAP gross profit was $1.3 million or 0.8% of sales, a sequential decline versus 3.1% in the previous quarters. The gross margin decline was due to lower volumes and higher supply chain costs that are starting to flow through our P&L. This was partially offset by higher ASPs and better product mix as we paused large-scale sales. First quarter gross profit includes a $13.3 million loss from the out-of-market poly contract, which is about 8% of revenue. We estimate that raw materials and logistics costs increases compared to the first quarter of 2020 adversely impacted our first quarter 2021 gross margin by five percentage points. Gap operating expenses were $37.2 million, slightly lower than our guidance of approximately $38 million. Non-gap operating expenses were $35.1 million. The sequential increase was a function of lingering expenses associated with the separation from SunPower. We are tightly controlling our OPEX while still investing in R&D and sales and marketing to support the exciting initiatives Jeff discussed. As we put the spin-off expenses behind us, our predominantly Asia-based cost structure will become apparent. Therefore, We expect quarterly non-GAAP OPEX to be below the Q1 level for the remainder of the year. Net loss attributable to stockholders was $38.8 million. Adjusted EBITDA was a loss of $25.7 million compared with a loss of $17 million in the previous quarter. The larger loss was mainly attributable to the lower gross profit and higher OPEX versus Q4. Adjusted EBITDA excludes stock-based compensation, restructuring charges, and a gain of $8.4 million for the mark-to-market re-measurement of our prepaid forward. Recall that adjusted EBITDA includes the $13.3 million loss from the out-of-market polycontract. Now let us turn to liquidity and capital investment. We ended the quarter with $131 million in cash. Net cash used in operating activities was $50.8 million, driven by the net loss, a seasonal working capital adjustment, and partially offset by some non-cash items included in the net loss. CapEx for the quarter was $11 million, mainly spent on two items, First, equipment in the Malaysia factory to upgrade production for Maxeon 2 to Maxeon 5 and 6. And second, on R&D and pilot line for the new Maxeon 7 technology. In April, we raised $170.9 million to the sale of ordinary shares that will primarily fund growth initiatives. We now expect capex of $170 million in 2021. In addition to our planned investments I just covered, we will purchase machinery and equipment for performance line capacity to serve the U.S. market. We anticipate attractive return on the performance line investments. They are intended to optimize our existing factory footprint and increase our exposure to the growing and profitable USDG and large-scale markets. Now, let me discuss our expectations for the second quarter of 2021. A table summarizing our outlook is in the earnings release and supplemental slides. We expect shipments in a range of 415 to 475 megawatt and revenue in a range of 165 to 185 million dollars. As we mentioned in our last call, because of DG seasonality, we expect first half revenue to represent about 40% of the total for the year. In our large-scale business, the pricing dynamic naturally plays out over a longer time frame due to the lengthier project cycle times. The sustained supply chain cost pressure in China is causing customers to gradually accept higher prices. This should enable us to begin converting our pipeline into firm bookings in the second half of this year and is expected to lead to a resumption of large-scale sales in early 2022. Gross profit is expected to be a loss of $5 million to $15 million. This includes out-of-market polysilicon costs in the range between $16 million to $19 million. This expected sequential decrease in profitability is attributable to higher raw materials and freight costs from previous quarters that are flowing through the income statement. We expect gap operating expenses of $38 million plus or minus $2 million, and non-gap operating expenses at $31 million plus or minus $2 million. We are in the process of closing our module factory in Toulouse, France, and expect to incur restructuring charges of $5 to $6 million in the second quarter, which are included in our guidance for gap operating expenses. The closure is expected to reduce fixed costs by about $1 million per quarter, the vast majority of which is cash. To complete the financial projections, Adjusted EBITDA for Q2 is expected to win the range of a loss of $30 to $40 million. In conclusion, the team at Maxion is focused on creating value and delivering profitable growth. New initiatives will open market opportunities to fuel growth while we simultaneously reduce costs and optimize working capital. These initiatives are designed to positively affect both top and bottom line performance. Furthermore, we look forward to the conclusion of the out-of-market PolySilicon contract in December of 2022. This has been an ongoing drag to profitability to the tune of more than $80 million per year, as well as on our cash flows. With that, I'll turn the call back to Jeff to summarize before we go to Q&A. Jeff? Thanks, Guy.
spk08: We have great confidence in a growing and increasingly profitable Maxion. This confidence is predicated on three unique pillars of growth, each of which has the ability to transform us. Over our first few quarters as a company, you're seeing tangible execution for each of these pillars that should provide confidence and excitement in our potential. For decades, we've had the world's leading panel technology, and now you're seeing us extend that capability with both Maxion 6, the world's highest efficiency panel available on the market, and with Maxion Air, a disruptive solar technology that has the potential to change the way the world deploys solar. And with our focused approach to the large-scale business, you're seeing us quickly establish traction in the U.S. market because of who we are as a company and the performance, quality, and reliability that comes with that. And those same attributes also set us up well for a successful return to the large-scale market outside of the U.S., once the supply chain returns to normal. And lastly, with our strong brand and unique global DG channels, you're seeing us continue to outgrow the market in key regions like Europe. You're also seeing us make progress on our beyond-the-panel strategy as we begin monetizing our channel and brand by selling integrated microinverters with more system products to come. All of us at Maxion are energized by the progress we're making and are focused on execution. A year from now, we'll look like a very different company, and we'll see our execution making its way to our top and bottom line. We thank you for coming along with us on the journey. Now let's go to the Q&A session. Operator, please proceed.
spk03: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star then 1 on your touch-tone telephone. Again, if you would like to ask a question, please press star then 1. One moment for our first question. Our first question comes from Brian Lee of Goldman Sachs. Your line is open.
spk00: Hey, guys. Thanks for taking the questions. I guess just first off on, you know, the gross margin trajectory, I know, you know, a year out from now, mix is going to help a lot. You get some scale. But in the interim, it seems like you, alongside the rest of your peer group, is facing a lot of cost pressures. Margins are down ticking. Everyone's trying to figure out what, you know, what the bottom is. Is Q2 the bottom for you or... Do you think, you know, we continue to sort of see margins stay at these depressed negative levels through the balance of the second half? Just trying to get a sense of what you think is a reasonable cadence in the margin recovery to be thinking about or modeling. And then I had a follow-up.
spk08: Sure, Brian. Thanks for the question. This is Jeff, and I'll add a little bit of detail, and then Kai can maybe add some more. Now, I'd say in general, we, like everybody, are keeping a very close watch on the supply chain. I would say it's encouraging in that recently we are seeing some of the supplies and costs start to stabilize. So glass is a good example of that. Where we are, we see that has peaked and it's now actually coming down again. We're not quite at the pre-COVID spike levels, but it's heading in the right direction. I'd say the same thing with logistics. We're seeing improvement there. Again, not exactly where it was a year ago, but making progress. I think given that, it's really, obviously, we're all watching to see how quickly that comes back in the second half. I think we're cautiously optimistic that we will see costs improve in the second half, and certainly that will be helpful on the margin side. You know, there are other pieces that we're doing, as you mentioned. We do have new products coming in. So, Maxion 6 will start to ship as we get into the Q3 and Q4. That'll help with margins. We're always working on cost reduction. So, we're not just sitting back, but I would say from a supply chain perspective, we're cautiously optimistic. Kai, anything else you'd like to add to that?
spk04: Yeah, I think that's right. So, of course, there are, you know, those headwinds that Jeff described that are not really under our control, but there are also other things that work in our favor, the seasonality and the things that we are doing internally with MAX 5 and 6, the AC panels, the DG business in general that go in our favor. So, of course, we also have the out-of-market polycontract that can be sometimes a little bit lumpy at times, how it hits our P&L, but again, I think there is a possibility that we'll see margin improvement in the second half, probably due to the internal factors more pronounced towards the back end of that half, but cautiously optimistic, as Jeff said.
spk00: Okay, fair enough. And then I guess a second question here just on the the pause in large scale and China, you're talking about 2022 sort of getting back to some level of normalcy in that business. Can you maybe elaborate a bit on, you know, what you're seeing out there right now, why you don't expect that to maybe recover faster, and then what gives you, you know, whether it's visibility or orders you're seeing, what kind of gives you the confidence that 2022 you'll see that pause sort of really ease up? Thanks, guys. Sure.
spk08: So I would say that we're starting to see the pricing overseas and the supply chain costs start to hit closer to an equilibrium. So as we look into Q4, I would say if you go back to maybe a quarter ago, there was a huge mismatch in the overseas market outside of China with where the costs were. We're seeing that now come much closer and I would say it's a dynamic situation we continue to assess, but things are definitely trending in that right direction and you would expect that even if supply chain costs stay where they are, that overseas costs or pricing would start to fall in line. That's why we're confident with 2022. We're still waiting and seeing on what happens here as we get into 2021. There are deals that we're actively engaged in. We're a very attractive supplier to most of the planet and So we do have a very large pipeline. We get visibility into a lot of great opportunities outside of China. And I would say as we get toward the end of 21, we're more optimistic. 22, I would say our optimism is strong.
spk03: All right, thanks a lot. Thank you. Thank you. Our next question comes from Phillips Chen of Roth Capital. Pardon me, the line is open.
spk06: Hi, everyone. Thanks for taking my questions. Congrats on the Primergy 1 gigawatt P-series deal into the U.S. Just curious if you guys increased pricing on your P-series product recently as a result of the supply chain challenges, or did the market pricing increases kind of put your P-series product in a more relative competitive positioning, if that makes sense. And so it became a more natural and easier answer for customers to buy the P-series here in North America. Thanks.
spk08: Yeah, thank you, Phil. I'd say the pricing, we have a very strong pipeline and very strong demand in the U.S., again, for our product on the P-series side that we just announced last month. And when we look at the pricing that is coming in from customers, it is in line with the costs that we're seeing. So we had spoken when we first talked about this USP series effort that we would expect to see gross margins for the whole plant being in line with our 2023 target of 15%. I mean, there'll be a ramp up over that time, but when you think about that 2023 timeframe, we expect the gross margins in the 15% range. We're still seeing that. And if anything, I would say the pricing in the U.S. has been pretty consistent with those price increases that we've seen in the supply chain. So it's equilibrated quite nicely.
spk06: So fair to say the price increases in the U.S. did help the value proposition for P-Series near term.
spk08: Yeah, I suppose. I don't know that I would necessarily think about it like that, but when we think about what we bring to the party as a company that has a plant right down in Mexicali, as a company that is a US publicly listed company with a strong brand and reputation. I think that's really what's driving the funnel for us. It's not really so much the rising costs that are coming maybe from some of our Chinese competitors. It's really, I think, the difference in just who we are as a company, which makes us fairly unique in that space. So I'd think about it more along those lines. I don't think things would have been that different without the supply chain disruption that we've seen.
spk06: Okay. Thanks. As for Maxionaire, that seems like a very interesting, unique product with a unique value proposition. I was wondering if you could share how you think that pricing, the cost structure kind of lines up relative to your – other products? You know, perhaps if you can't talk about the absolute cents per watt, maybe perhaps you can talk about it on a relative basis.
spk08: Yeah, it is a very exciting, very exciting product. So, and it is, I would say, you know, really the, one of the many parts of the magic of it is that it really does lower installation costs. And so that will really give us the ability to, get decent pricing on it, we'll be able to capture the value, or at least a percentage of the value that comes from the lower installation costs. So, we would expect ASPs for the Maxion air product to be higher than what we're seeing with like products going into like markets on IBC. So, again, I think it's a great product, and we expect also, given that we're going to be going after projects and, you know, low-load commercial rooftops, at least in the near term, with a product that nobody else can really compete with. We think it's going to allow us to sell at healthy ASPs with good profitable margin, but in a way that will help grow the deployment of the product.
spk06: Graham, where do you expect to manufacture the Maxion Air?
spk08: It will start in France. One of the beauties of Maxion Air is that it can be quickly transported to any of our factories. It borrows significantly from our current module assembly. We are producing in France. That is, I would say Europe is the initial market that we see for the product, but we have the ability to flexibly put it into any one of our machos.
spk06: Great. And from a bankability standpoint and encapsulant standpoint, are you using the traditional EVA or, you know, can you talk about how bankable the product is now and what kind of volume could we see sold in 21 as well as 22?
spk08: So let me take the first end of that, and then I'll have Peter Aschenbrenner speak maybe a little more specifically on EVA. So the way we think about Maxion Air, we are going to have pilot production going now. We have already tested it on different, at least in five different sites across different continents. In 2022, you'll see the initial ramp of the product. And then in 2023, I think that's when you're really going to see it kick into high gear when Maxion 7 cells become available. Maxion 7 cells bring better performance, even better performance than what we get with our current cells when it comes to reverse bias breakdown and heat that can get generated in shaded situations. So we expect, I would say, a steeper ramp once we get into the 2023 time frame. Peter, do you want to cover the EVA part of Phil's question?
spk07: Sure. Phil, this module does not use EVA encapsulant. As a matter of fact, we don't use that in any of our products. We've been doing a fair amount of encapsulant development work over the past five-plus years, and this non-glass product uses a new stack of materials that is atypical for glass panels. In terms of bankability, we've been working with many of the testing agencies and with some of the membrane suppliers in Europe, and we feel good about bankability currently as we're launching these first pilot installations the second half of this year.
spk06: Okay, great. Thank you both. I'll pass it on.
spk03: Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then 1 on your touch-tone telephone. Our next question comes from . Your line is open.
spk05: Thanks for taking the question. As you know, we have seen spot price of polysilicon, you know, double roughly year to date, more than $20 a kilo now. And yet, your above market cost on your contract is actually going up. in Q2 versus Q1, a little counterintuitive. Can you just explain how the math works?
spk04: Yeah, Pavel, let me quickly go through that. So the out-of-market polysilicon is really two things. One is what we're using in production, and one is the ancillary sales that we sell. some of that material that we're not using internally. And that can be sometimes the lumpy part that we're doing. We're looking for opportunities to sell it. Of course, we're selling it at a loss because the contract is locked in way above market prices. But we expect some of those sales in the second quarter to come in. And that explains that lumpiness that's not exactly tracking, as you say, maybe the volumes or where market prices are going. And also, you know, we are periodically reviewing the baseline for those market prices and then adjust accordingly what we consider out of market.
spk05: Okay, understood. In Q1, there was a loss of $2 million on the non-controlling interest line. I assume that's from the joint venture in China. Given the premium module pricing that you guys have talked about because of the demand in China recently, why would that JV be at a loss?
spk08: Yeah, so maybe just to speak on that, the JV itself is currently in ramp mode. So as you know, this We initiated volume production at 2 gigawatt. That is scaled to 5 gigawatt, and it's also in the process of scaling up to 8 gigawatt. So you really are seeing a lot of transition costs as the factory begins to expand. I think that's partially contributing to what you see. We are on a great trajectory within the JV to have a low-cost product. We've got some new derivatives of the P-series that will be coming out toward the end of this year. And that, coupled with the scale that we're getting as we scale up the factories, we expect to see better results coming out of the JV in future quarters. But I think what you're really seeing here is more of a transition as we're beginning to scale.
spk05: Got it. Now, that's helpful. And final question, this one also on China. As you're well aware, a lot of conversations about the forced labor issue in Western China and in the Uyghur community as it relates to polysilicon supply. Can you just talk about your sourcing of poly for the Chinese operations and the steps you're taking to avoid any linkage to the forced labor concerns?
spk08: Yes. So, you know, as you know, for the IBC products that we produce out of Malaysia and the Philippines, who are fabs, we source all of that poly from the United States. For the JV operation out of HSPV, you know, going back only close to five years ago, we implemented a tracing protocol for polysilicon and for the supply chain. And it was really driven by some of the low carbon footprint business that we were taking out of France and some other markets. So we have a process in place to be able to trace that. And that's something that we're now expanding within the factory, within the JV, so that we have the ability to give assurances to U.S. customers and even beyond, say here soon, even beyond U.S. customers for the product. And that includes what comes out of China but also what will happen out of the joint venture that we have with our Eagle joint venture, excuse me, with our US P Series joint venture out of Mexicali in Malaysia. The wapers coming into that will also have that same traceability. So I'd say that coupled with all the discussions that we've had with our direct suppliers, we feel really confident about our position and certainly as a company, You know, we've signed the United Nations Global Compact, which also includes commitment to the elimination of all forms of forced and compulsory labor. So as a company, we feel really good about our position.
spk05: Good to hear. Thank you, guys.
spk08: Thank you, Pavel.
spk03: Thank you. Thank you. Again, if you'd like to ask a question, please press star then one. One moment, please. As there are no further questions, we will now conclude the call. Thank you all again. You may now disconnect.
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