Earnings Call Transcript - CSIQ Q1 2020

Operator, Operator

Ladies and gentlemen, thank you for standing by. Welcome to Canadian Solar's First Quarter 2020 Earnings Conference Call. My name is Amber, 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'd now like to turn the call over to Isabel Zhang, Director of Investor Relations at Canadian Solar. Please go ahead.

Isabel Zhang, Director of Investor Relations

Thank you, operator, and welcome everyone to Canadian Solar's first quarter 2020 earnings conference call. Joining us today are Dr. Shawn Qu, Chairman and Chief Executive Officer; Yan Zhuang, President and Chief Operating Officer; and Dr. Huifeng Chang, Chief Financial Officer. On this call, Shawn will provide an update on the market impact from COVID-19 and perspective on Canadian Solar's long-term position; followed by Yan who will review our recent progress and outlook; and Huifeng will then review our financial results and actions we have taken to further improve our balance sheet and liquidity. We will then have time for any questions. Before we begin, may I remind listeners that management's prepared remarks today as well as the answers to questions will contain forward-looking statements that are subject to risks and uncertainties. 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. Any projections of the company's future performance represent management's estimates as of today. Canadian Solar assumes no obligation to update these projections in the future, unless otherwise required by applicable law. A more detailed discussion of the risks and uncertainties can be found in the company's annual report on Form 20-F filed with the Securities and Exchange Commission. Management's prepared remarks will be presented within the requirements of SEC Regulation G regarding Generally Accepted Accounting Principles or GAAP. Some financial information presented during the call will be provided on a GAAP and a non-GAAP basis. By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends. Management uses non-GAAP measures to better assess operating performance and to establish operational goals. Non-GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP. At this time, I would like to turn the call over to Canadian Solar's Chairman and CEO, Dr. Shawn Qu. Shawn, please go ahead.

Shawn Qu, Chairman and CEO

Thanks everyone for joining us today. Over the past two months, the number of COVID-19 cases and economic closures has steadily expanded globally. Needless to say, a lot has changed since we last spoke at the end of March. At Canadian Solar, we moved quickly and took bold measures to protect and support our employees, customers, and partners first in China and then in the rest of the world. We have not only implemented strict preventative protocols but have also taken steps to support the local communities in which we operate across the globe. According to the latest data, the worst seems behind us now. Here, I hope that you and your families are safe, healthy, and I wish you all the best. Now let me give you an overall picture of the current market situation and some color on our long-term view. In 2020, global demand for solar equipment is expected to decline for the first time in 20 years. Recent market reports forecast global demand to be somewhere between 95 to 100 gigawatts, compared to last year's estimate of approximately 120 gigawatts. Meanwhile, supply-side capacity is expected to grow, which will lead to additional ASP pressure and market consolidation. These effects will likely be felt across the supply chains causing input costs to decline as well. On the flip side, currently contracted solar projects are expected to benefit from the lower equipment ASP with the deployment of solar becoming even more attractive relative to other energy sources given the lower CapEx cost. Regionally, the U.S. and the Latin America market has been the most volatile around COVID-19. In the U.S., the biggest impact has been on a reduction in the availability of tax equity financing and the increase in the cost of capital for certain project buyers. This sets up potential delays in 2020 project sales. In Latin America, the impact has been amplified by a sharp depreciation of the local currency, prompting the local market to delay purchases and installations of USD-priced solar modules. On the positive side, local impact has been limited in Europe, Japan, and Korea. China was able to reopen and now appears on track to have strong demand in 2020, supported by favorable policies and a healthy transition towards grid parity. In general, the execution of commercial and utility-scale projects has been relatively smooth with delays mostly driven by permitting and other frictions caused by the lockdown. While we expect near-term volatility, the long-term growth drivers remain strong. We remain optimistic about the industry and Canadian Solar's long-term prospects. Global efforts to decarbonize will continue, if not accelerate, especially as the cost of clean energy becomes increasingly competitive. The cost and performance of battery storage continues to improve, which will be critical as solar-plus-storage reaches grid parity across a growing number of markets and a lower or longer interest rate environment means that solar power plants will become even more attractive investment assets for investors seeking stable, contractual, cyclical, and climate-friendly yields. Canadian Solar's globally diversified revenue and manufacturing bases, strong relationships with customers, suppliers, and financing partners, and our healthy balance sheet and liquidity position give us significant competitive advantages. We continue to strategically invest in R&D and innovation, gaining significant momentum as a key solutions provider in the solar-plus-storage solutions market. In the downstream energy business, we are positioning ourselves for long-term growth. We will continue to grow our global backlog and pipeline while selectively retaining ownership in solar projects to capture new sources of recurring and predictable cash flow. We're in the process of executing our solar project monetization strategy that we shared with you last quarter, preparing ourselves for the recovery that is bound to come. Taken together, Canadian Solar is well-positioned to weather the near-term uncertainty and capture long-term growth opportunities to deliver sustainable returns to shareholders. Before I turn the call to Yan, I'm pleased to announce that Yan has been appointed as President and Chief Operating Officer of Canadian Solar. I'm grateful for Yan's leadership and his incredible dedication during his nine-year tenure at Canadian Solar. I look forward to working closely with Yan and the entire team at Canadian Solar. With that, I would like to pass the line to Yan. Yan, please go ahead.

Yan Zhuang, President and COO

Thank you, Shawn. As always, let me start with some key takeaways from this quarter. Firstly, we achieved strong financial and operating results for Q1 2020, with revenue and profitability both above our expectations. We were affected by manufacturing disruptions in China, but the overall COVID-19 impact was limited. We expect a more significant impact in the second half, as Shawn noted. Near term, our approach is to conservatively manage a healthy balance sheet and preserve cash through this period of volatility. We have a strong track record in doing that. Longer term, we are reinforcing the company's position for growth. An area we are excited about is the solar-plus-storage market. We see a window of opportunity from the declining battery storage costs, higher capacity needs, and accelerating retirements of old fossil fuel plants across the world. Canadian Solar is uniquely positioned to benefit from this, as we leverage our competitive manufacturing base and large captive markets. In fact, we have built a solid 2.5 gigawatt-hour storage pipeline and a 320 megawatt-hour backlog. We're currently in advanced negotiations on various projects and look forward to sharing more information with you as we reach key milestones. Furthermore, we continue to grow and monetize our solar assets. Currently, we have 956 megawatts in projects under operation, 807 megawatts under construction, 3.7 gigawatts in backlog, and 12 gigawatts in pipeline. This quarter, we are sharing with you for the first time our five-year growth plan for the energy business. We've made strategic and organizational decisions to ensure we maximize value capture in the asset monetization process. Our plan is to selectively retain minority stakes in key markets with strong energy demand, attractive power prices, and stable capital markets. Over time, this will allow us to generate higher margins and capture stable and recurring sources of cash flow while recycling a large portion of the capital invested. This strategy has been one of our key successes in Japan, so we intend to replicate it in certain other markets. We're in the process of executing this strategy and look forward to updating you with exciting developments. Now let me go through our Q1 results. On the energy business side, Q1 revenues were $238 million, with a 37.7% gross margin. Revenue and profit growth saw a significant contribution from the sale of the 56 megawatt solar power plant in Japan as well as the sale of an 80 megawatt portfolio of subsidy-free solar plants in Italy. Meanwhile, we continued to secure project financing and execute on our project backlog. For example, in Italy, we secured $60 million in a bilateral revolving credit facility with Intesa Sanpaolo. This will be used to fund the construction of our 151 megawatt portfolio of solar projects, which is expected to break ground in the coming months. In Brazil, we secured $55 million in non-recourse project finance from BNB for the 151 megawatt Lavras project, which started construction in Q2. We closed several additional project financings since Q1 ended, mainly in the Latin America region. This further demonstrates the strong bankability of Canadian Solar developed projects. Additionally, we expanded our presence in the distributed generation market. In Australia, we made significant inroads in the commercial and industrial segment, recently signing a milestone PPA with a global e-commerce player in Chile. We acquired a portfolio of small distributed generation projects currently still under development totaling 48 megawatts to bring clean and reliable energy to rural areas in the country. On the module and system solutions or MSS side, shipments in Q1 were 2.2 gigawatts in line with guidance. Q1 revenues were $690 million, up 47% year-over-year and down 10% sequentially. The sequential decline reflects COVID-19-related manufacturing closures and lower ASPs. As a result, gross margin also declined sequentially to 21.6%. We remain committed to research and development and continue to innovate. For example, in Q1, we opened a new R&D center in Jiaxing, China. The new center is focused on cutting-edge heat reduction technology, and we will be putting down fast lines over the next few months, setting ourselves up for mass production next year. Now let me comment on guidance for Q2 and outlook for 2020. For the second quarter of 2020, we expect total module shipments to be in the range of 2.5 to 2.7 gigawatts, including approximately 200 megawatts of module shipments to Canadian Solar's own projects that may not be recognized as revenue. Total revenue is expected to be in the range of $630 million to $680 million, with gross margin expected to be between 18.5% to 20.5%. For the full year of 2020, we continue to expect total module shipments to be in the range of 10 to 12 gigawatts. However, COVID-19 has caused significant uncertainty regarding business conditions in the second half of 2020, especially related to the timing and the scale of ASP and cost declines and the timing of certain project sales. Therefore, we are withdrawing our 2020 financial guidance. Looking beyond the near-term uncertainties, we are confident that Canadian Solar's competitive position will allow us to capture a greater share of the industry's secular growth opportunities. Our long-term outlook remains optimistic, as we continue to execute our strategy and create value for the company and its shareholders. Now let me turn over the call to Huifeng for additional color on our financial results and latest risk mitigation strategies. Huifeng, please go ahead.

Huifeng Chang, CFO

Thank you, Yan. As both Shawn and Yan noted, we delivered a strong quarter on revenue and profit, despite the sharp decline in the market ASPs. We continue to command higher pricing than the overall market, given our strong brand and customer and channel relationships. Q1 results also benefited from a large product sale in Japan, where the revenue and profitability pull-up is several times that of other regions. Note that for our divisional results, we reclassified our operations and maintenance subdivision from MSS to the Energy business to better reflect the logical structure of our business and operations. You will find the details in our press release. Total operating expenses were $110 million during the quarter, 9% higher year-over-year but 7% lower than last quarter. Selling expenses were higher sequentially, mainly due to higher shipping and handling costs from the logistical challenges in Q1. However, we have put a tight lid on all discretionary spending, so G&A expenses were lower in the quarter. During the quarter, we recorded an income tax benefit of $29 million, which included a $49 million tax benefit from the net operating loss carry-back provision under the U.S. Coronavirus Aid and Economic Security Act. Combining all of this, we generated a Q1 2020 net income of $111 million and a diluted EPS of $1.84. Moving on to the balance sheet, we have maintained healthy leverage and liquidity levels, pursuing a more cautious than usual approach, as we communicated in the last quarter. We reduced our total debt to $1.87 billion and further reduced our short-term debt level. As we noted last quarter, the majority of our short-term debt is rolled over annually with Chinese banks, where we do not see any material risk. Likewise, there are no major principal repayments due in 2020. Our credit facilities were increased to $3.4 billion, of which $1.1 billion remain undrawn. Our non-GAAP total debt to trailing EBITDA declined to 3.4 times, while the trailing EBITDA to net interest coverage increased to 8.3 times. Both metrics are at their healthiest level in the past five years. We remain focused on managing our working capital. Although inventory days at the end of Q1 increased to 92 days, it primarily reflects our strategic decision to increase module inventory in the U.S. to qualify for all the investment tax credit. Overall, our cash recycle remains robust at negative 20 days. Capital expenditure spending in Q1 was $42 million, with our plan for the rest of 2020 being approximately $270 million. While we are committed to investing to support long-term growth, we are also cautious and prudent with our capital expenditures, especially in the current environment. So we marginally reduced our capacity expansion plans for this year. However, this is not set in stone, and the final CapEx plan for 2020 can be adjusted up or down depending on the external market circumstances. Finally, we have suspended our share repurchase program to preserve cash and maximize liquidity in the current market environment. All in all, we are confident that our strong balance sheet and liquidity will allow us to navigate the market uncertainty and prepare us for the macroeconomic recovery. With that, I would like to open the call to your questions, Operator.

Operator, Operator

Thank you. Ladies and gentlemen, we'll now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Colin Rusch from Oppenheimer. Please go ahead.

Colin Rusch, Analyst

Thanks so much, guys. Can you speak to the pricing dynamics and channel inventory levels for both the direct sales channel as well as the bifacial modules that you have going on right now?

Yan Zhuang, President and COO

Well, this is Yan. First is the bifacial. We just heard the news actually, yesterday. So, well, it certainly helps both on our side and the customer side. So, but we also understand that this is not forever. So while we're actually benefiting from this new progress, we're also preparing for the end of this. So – but yes, for the next few months, I believe two to three months we don't know maybe even longer. We will have significant benefits from this policy change. And on the direct sales channel, I am looking for pricing and kind of channel inventory levels. I'm trying to get a sense of sell-through on that part of the business. For our direct sales into the residential and DG market, we have been experiencing a downside because of COVID-19. But what we are seeing is this is actually moving up. It's actually improving in recent weeks. We have been actively contacting our customers and monitoring the inventory level. It was on the uptrend for quite a while. There are some customers that had payment difficulties, so we reduced our shipment into that channel late in Q1 and early Q2 to manage the payment risk. However, in the past two weeks, it's been improving, the sell-through is improving. Pricing-wise for the residential market, the price drop is less than the utility-scale projects. So it's still better pricing than utility.

Colin Rusch, Analyst

Okay. Thanks. And then on the storage side, we're trying to get a sense of the real technology position that you guys have relative to some of the other solutions out there. Can you speak to your battery management system performance cycle time, and how you're performing against some of the other solutions that are out there as you're outbidding on some of these PPAs and other projects?

Yan Zhuang, President and COO

I think our main strength is actually, we have the ability to develop such projects, PV plus storage. So we already have a pretty significant pipeline on the ground. And we have over the past years, we've accumulated experience from the past project executions on EPC and O&M. So we learned we have the ability to execute solar projects. And the solar-plus-storage is the space that we need to create our business model, the value chain, supply chain, economic and financial modeling, risk management, and how to provide the wrap-up service for total solutions for these projects. So in terms of technology, I don't think we have time to go into details, but we are actively working on closing the first solution for our first project in the U.S. It gets a little delayed because of the COVID-19 crisis, but it's coming.

Operator, Operator

Thank you. Our next question comes from the line of Philip Shen from ROTH Capital. Please go ahead.

Philip Shen, Analyst

Hi, everyone. Thank you very much for sharing your five-year plan for your energy business. I think it's very helpful for everybody. So just was wondering if you could give some additional detail on that plan. Specifically, with your targets of annual project sales in 2020 and 2021 and so forth, I was wondering if you could speak to the geographic mix that you expect there. I'm guessing it's largely based clearly on your pipeline and your backlog, but I was wondering if certain years may have a greater emphasis in certain geographies. And then also similarly for the projects expected to be retained, for example in 2020 the 30 megawatts. I'm guessing a lot of that is Japan, but was wondering if you could speak to the geographic mix for 2020, 2021, and 2022 as well for the projects retained on the balance sheet.

Shawn Qu, Chairman and CEO

Philip, this is Shawn speaking. For 2020, most of the project macro-wise is going to go into the U.S. projects. And we have a good premium on the 10 projects in terms of megawatts, although the megawatt size is not big. But of course, each megawatt in Japan contributes a lot more than the U.S. project. Moving into the future, let's say in 2023 and 2024, we expect the EMEA projects to catch up. We also have some projects in Latin America, namely Brazil and Mexico. As you know, we expect to connect those projects more or less in 2021. In terms of projects retained, as you said, Japan we have the CSIF, and so most of the projects are expected to drop into CSIF as long as the yields support. Sometimes, the private fund market provides even better pricing than we might sell those projects into those funds. But sometimes we hold position in those funds as well. For the U.S. market, at this moment, we don't plan to hold any positions because the ITC scheme, on one hand, helps to support the U.S. project, but on the other hand, distorts the cash flow. As a Class B investor, we don't get much cash flow in the first five, six, or seven years. So unless we can put some discount on future cash flow to the near terms, we don't plan to hold too many U.S. projects. On the other hand, the ITC is phased out a few years from now, so I expect that going into 2024 and 2025, we are going to hold more and more U.S. projects.

Philip Shen, Analyst

Great. Thanks for the color there, Shawn. Shifting over to the scrutiny on Chinese companies listed in the U.S., I was wondering if you guys could speak to that, given the expected requirements from an accounting standpoint as well as disclosure of investments. I was wondering if you could address that and how it might impact you, and then how, if at all?

Shawn Qu, Chairman and CEO

Can you repeat your question? What accounting shows?

Philip Shen, Analyst

Sure. Yeah. Given for Chinese companies listed in the U.S., the Senate and House have passed a bill that is going to Trump now to increase the scrutiny of these Chinese companies listed in the U.S. exchanges. So they're trying to get the PCAOB to -- the PCAOB wants to collaborate more closely and get access to accounting documents with the CSRC.

Shawn Qu, Chairman and CEO

Okay. I understand now.

Huifeng Chang, CFO

Sure. Phil, thank you for asking this question. First of all, as Shawn has said, we are a Canadian company. From day one, we were legally registered in Canada, and the business started in Canada. It's like many other international companies. Many years ago, Shawn, when he started manufacturing, opened a factory in China. So this is the fact with a very clear legal track record. Now you may ask, then why our company is on the PCAOB list? That was because a lot of operations of our company are based in China. So when we were considering hiring which auditor to audit our books, we chose the auditor who has an office in China. For that, we also indicated every time we file our Form 20 with the SEC that PCAOB at this point cannot regularly access the working paper at our auditor. However, we have been in the market for many years. This issue of auditing, first of all, it's the third time this issue came to the market, and some investors were spooked, and later on, the issue went away. This time, the Senate passed it -- the House needs to vote. We don't know how the White House will handle this issue. If that happens, according to the latest bill, there will be a three-year window time for a company to address this issue. For us, of course, we can switch to an auditor based in Canada, and then we are on par with many other U.S. companies in terms of PCAOB compliance. Now, what do I mean by that? Taking, let's say, Tesla as an example, Tesla has a huge factory in Shanghai. For the auditing process of their Shanghai factory, it has to be done by a China-based auditor. For those accounting books, PCAOB will do the same as they audit our books that is a deal. PCAOB and SEC signed with Chinese regulators five years back that with Chinese regulators first to filter the documents for any national security concern, then PCAOB can get whatever paper they want. This has been an ongoing process for several years. At the administrative level, it has been working very well. Actually, more than 10 companies in the same auditing structure, where their paper filed with the SEC was done by an auditor based in China, and then PCAOB had no problem in getting those working papers. If you pay close attention to whatever in the media and in Congress, you'll notice that there's no word from PCAOB or SEC stating that they cannot get what they need from the Chinese auditor. We need to take this issue from a factual basis and also look into history. Right now, we are watching the development of this issue. Because we are a Canadian company, we have the flexibility to address this issue if it becomes a reality. I don't think our investors should be concerned or worried; we will continue to be a U.S. NASDAQ-listed company. Thank you, Phil.

Philip Shen, Analyst

Thank you, Huifeng. Hey, one other quick question here; just a follow-up on the pricing question earlier. I think we roughly calculate pricing for Q1 to be roughly for this module at $0.28 per watt. I was wondering if you could comment on if that is, first of all, correct? And then how do you expect that ASP to trend on a blended basis for Q2 and into Q3? Thanks.

Shawn Qu, Chairman and CEO

I think Yan will answer your question better. Yan, please?

Yan Zhuang, President and COO

I think the price movements vary from market to market. For example, the price erosion in the U.S. and Japan is much lower, and the price erosion in the residential DG market is lower than utility-scale projects. The pricing for big utility projects in other markets is going down faster, at different paces. So going from Q1 to Q2, it's the pricing and into the second half, I think the price will go down and then stabilize. Some very low pricing sub $0.20 pricing; that’s the bottom. If you're talking about ASP, some other channels the price may continue to move. But for the lowest pricing segment, I think it's likely to stabilize towards the end of this year. So Q1, our ASP is around $0.27 and for Q2, we expect it to come down a little bit. The reduction has slowed down, and we believe in Q4 the market may warm up; it will recover the demand. So pricing is likely to stabilize.

Philip Shen, Analyst

Great. Thank you. I will pass it on.

Operator, Operator

[Operator Instructions] Our next question comes from the line of Brian Lee from Goldman Sachs. Please go ahead.

Brian Lee, Analyst

Hello everyone. Thanks for taking the questions. Yan, maybe if I could just follow up there. I know you don't want to give specific numbers, but the directional color on pricing is helpful here. So Q2 is going to be down from Q1. It sounds like based on your comments Q3 pricing will also be down from Q2, and then Q4 may be stable to even better. Just based on the directional trend you sort of articulated. Given where spot pricing is today and kind of given the lag between when you contract volume and ship, it seems like the worst pricing impact in the year may be in Q3. Is that a fair assumption that Q2 is down but then Q3 could be down even more before you start to see stability at the very end of the year?

Shawn Qu, Chairman and CEO

Well, it's more or less the trend. But I wouldn't oversimplify the situation. It's out of the $0.01 in recent months, so we've been seeing some super low prices. I would say, those super low prices will not go down anymore; less likely because it's just panic pricing. Also, the residential market is coming back, and as that market recovers, proportionally if there's more volume shipping into that channel the overall pricing down situation will be eased. So this can be complicated. Overall, I agree Q3 prices cannot be better than Q2, but Q4 will stabilize.

Brian Lee, Analyst

Okay. That's helpful. And then maybe just related to that from a gross margin perspective, obviously, Q2 is down here based on the guidance. Fair to assume that Q3 is also softer on a sequential basis before you maybe see some margin stability or improvement in Q4? And I'm specifically speaking to the module segment, not the project side.

Shawn Qu, Chairman and CEO

Yes. I think the uncertainty, the reason we're withdrawing our financial annual guidance is because of uncertainty, significant uncertainty caused by this situation. We're not sure how ASP and cost is going to coordinate in the next couple of quarters. So in terms of gross margin, I really cannot give you clarity at this moment. But I can say that Canadian Solar has more share of our shipments into the rooftop market as well as more share into the high-price market. More proportion of our shipments goes to Japan, Korea, and the U.S., and also the residential market and to our own projects. So I think maybe our position is slightly better.

Brian Lee, Analyst

Okay. That's fair. And then last question, I’ll pass it on here. I think last quarter you guys mentioned that the residential market rooftop was seeing impact from COVID. But my read was that you weren't seeing any real impact as of that point in the utility-scale segment. Your comments today suggest that’s kind of changed where you've seen impact across all buckets of your business. So can you maybe help quantify? I know you can't give us guidance for the year, but quantify what sort of impact you're expecting here in the utility-scale segment. I guess if I look at the 1.1 gigawatt to 1.3 gigawatt range for project sales for 2020 in your five-year outlook. How much would you say that’s changed owing to incremental COVID uncertainty since the last quarter?

Yan Zhuang, President and COO

I think the impact is mainly in the U.S. and some projects in Latin America as well. On the margin side, the impact is delayed. In Q2, we have certain volume gets delayed from both the residential market and also the ground mount utility projects. The utility part is I would say, it's more like two-thirds of the volume. On the project sales, the similar reason is delays in project sales and project financing delay, some of them are because of the lockdown. Our current five-year plan already reflects that. If you're talking about the impact compared to the end of March, we do see some impact on the pace and speed of our financing closures and project sales. However, we are trying to fix that. Whatever impact it is has already been incorporated in our five-year plan. So we're working on solutions to deal with that.

Shawn Qu, Chairman and CEO

Hi, Brian, this is Shawn speaking. The current number of 1.1 to 1.3 already takes into account some of the potential delay in project sales into 2021. It looks like some of the project sales closing will end up in Q4 at this moment, but Q4 means a little bit of delay will become Q1 next year. So for those projects, we would rather put into next year than this year. So 1.1 and 1.3 is the number we are reasonably comfortable with at this moment. But of course, things change. That's why we say uncertainty. We'll update you again by August.

Brian Lee, Analyst

Okay, no, that's fair. I mean, 1.1 to 1.3 I know that's your most reasonable projection at this point in time. But is that sort of embedding a 10% slippage from 2020 to 2021 or is it a larger percentage of that? I guess, just trying to get a sense of how much things have moved out to the 2021 timeframe if it's a modest amount or if it's maybe more significant?

Shawn Qu, Chairman and CEO

Yes. In terms of management estimate, we always take a conservative view. So we moved more than 10% of previously planned for 2020 to 2021. But maybe we will be able to close it before December 31, then you'll get a pleasant surprise.

Operator, Operator

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