Fluence Energy, Inc. Q1 FY2023 Earnings Call

Good day and thank you for standing by. Welcome to the Fluence Energy Incorporated First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Lexington May, Vice President, Investor Relations. Please go ahead.

Thank you. Good morning. And welcome to Fluence Energy’s first quarter 2023 earnings conference call. A copy of our earnings presentation, press release and supplementary metric sheet covering financial results along with supporting statements and schedules, including reconciliations and disclosures regarding non-GAAP financial measures are posted on the Investor Relations section of our website at fluenceenergy.com. Joining me on this morning’s call are Julian Nebreda, our President and Chief Executive Officer; Manu Sial, our Chief Financial Officer; and Rebecca Boll, our Chief Product Officer. During the course of this call, Fluence management may make certain forward-looking statements regarding various matters relating to our business and company that are not historical facts. Such statements are based upon current expectations and certain assumptions and are, therefore, subject to certain risks and uncertainties. Many factors could cause actual results to differ materially. Please refer to our SEC filings for our forward-looking statements and for more information regarding the risks and uncertainties that could impact our future results. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today. Also, please note that the company undertakes no duty to update or revise forward-looking statements for new information. This call will also reference non-GAAP measures that we view as important in assessing the performance of our business. A reconciliation of these non-GAAP measures to the most comparable GAAP measure is available in our earnings materials on the company’s Investor Relations website. Following our prepared comments, we will conduct a question-and-answer session with our team. During this time to give more participants an opportunity to speak on this call, please limit yourself to one initial question and one follow-up. Thank you very much. I will now turn the call over to Julian.

Thank you, Lex. I would like to send a warm welcome to our investors, analysts and employees participating on today’s call. This morning, I will provide a brief update on our business and then review our progress on our strategic objectives. Starting on slide four with the key highlights. I am pleased to report that we recognized $310 million of revenue during the quarter. More importantly, we improved gross margin for the quarter both on an adjusted and GAAP basis. Our demand was strong across all three of our business lines and new orders were approximately $856 million, highlighted by the 1200-megawatt hour contract with Orsted we announced on our December call. Furthermore, our signed contract value as of December 31st was $2.7 billion, a quarter-over-quarter increase of more than 20%. Importantly, over 70% of our backlog is with non-related parts. Lastly, our recurring revenue businesses, which consist of our Services and Digital business, continued to grow during the quarter. Our service attachment rate was 11% for the fourth quarter. However, our deployed service attachment rate is rated at 90%, which is based on our community service contracts relative to our deployed storage. Most of our customers wait to sign service agreements closer to the point where the storage solutions come online. Thus, there is usually a lag between storage contracts and service costs. We believe the deployed attachment rate is more reflective of our true service attachment rate due to the contracted lag that I just mentioned. Moving forward, we will be providing you with both our contracted and our deployed attachment. Additionally, our Digital signed more than 800 megawatts of contracts since the fourth quarter, providing us visibility to future revenue. Turning to slide five. I would like to discuss the five strategic objectives that we headlined in our last earnings call and provide you with an update on our progress. First, on delivering profitable growth. I am pleased to report that we are raising our fiscal year 2023 guidance for both revenue and adjusted gross profit. As Manu will discuss in more detail, we are able to raise our guidance due to incremental demand and better supply chain visibility. Second, we will continue to develop products and solutions that our customers need. As such, we are now ready to begin offering Northvolt ACT batteries in our Gen 6 Cubes. This provides our customers with more optionality when looking at solar solutions and helps to diversify our battery supply by adding a European battery vendor. Third, we will convert our supply chain into a competitive advantage. I am pleased to say we have all our fiscal year 2023 battery requirements either in-country or in-transit, both providing us high confidence for execution and achieving guidance. As you may recall from last year, one of the challenges we faced was getting our batteries on time from our battery vendors. They were often delayed and as a result, we incurred liquidated tariffs. Our team has done a tremendous job in mitigating this risk for 2023 by ensuring that all our battery needs are within our control. Where we stand today, we don’t foresee supply chain issues that could derail our fiscal year 2023 expectations. We continue to implement our risk management processes and maintain confidence in those providers. Additionally, if we identify any issues that could cause us to deviate from our plans, we will act swiftly to mitigate the risk. Fourth, we will use Fluence Digital as a competitive differentiator and margin driver. I am pleased to announce two significant milestones in our Digital business. First, we entered the ERCOT market with our Mosaic Bidding application and awarded an initial contract with a non-related global IPP Energy. ERCOT is a rapidly expanding market and provides a significant number of opportunities for our Mosaic application. Mosaic now operates in three markets: Australia NEM, CAISO, and ERCOT. As we discussed last time, we are looking to expand to four additional markets in the next three years. Additionally, we have successfully launched Nispera on its capability on battery services. This offering now provides those customers with a renewable asset portfolio, allowing them to utilize one asset performance management platform for all their assets rather than multiple platforms. Lastly, our fifth objective is to work better. We are continuing to see successful execution on our transformation, including enhancing our risk management capabilities, improving our project execution, and optimizing our cost structure, which I will touch on a little later. Turning to slide six. Demand for energy storage continues to accelerate. In fact, our pipeline now sits at more than $10.3 billion, nearly four times our current backlog of $2.7 billion. As you can see from the chart, our funnel reflects some early projects that are attributable to the Inflation Reduction Act (IRA). We expect to see some of these projects turn into signed contracts beginning in the second half of this year. Additionally, our project leads are at an all-time high, which is a good indicator of potential opportunities. As such, we expect the IRA to drive our U.S. revenue growth in 2024 to 40% to 50%, indicating consolidated revenue growth of 35% to 40%, predicated on timely issuance of the IRA guidance. While the exact timing of the IRA guidance is unclear, we are hopeful that some initial commentary will be released this year. Continuing with demand, we are becoming increasingly important due to actions coming out of Europe. Earlier this month, the European Commission built its Green Deal Industrial Plan, which aims to increase spending and reduce regulations in order to accelerate the expansion of renewable energy and sustainable technology. While still early days and the details of the plan have not been shared, we applaud the efforts of the European Commission as they take serious steps towards securing their energy independence by increasing their share of renewable energy, including battery energy storage. On slide seven, we have highlighted some reasons why our customers choose us to provide their energy storage solutions. For instance, they are looking for someone who can provide them with a safe product. We are proud to be one of the market leaders in safety and have surpassed industry standards. Time after time, our customers tell us that safety is their top priority when selecting energy storage. We will continue to make safety our highest priority when developing additional solutions. Second, performance. Our customers demand not only a safe product but one that performs at a high level. To that point, we are pleased to have deployed the world’s fastest responding battery and storage facility. Our team has achieved demand response times below 150 milliseconds on assets deployed. Third, bankability. This is critical to our customers, especially for larger projects which are becoming increasingly common. Banks and financial institutions have told our customers they feel confident in underwriting projects with Fluence Battery Energy Storage Solutions. Additionally, in December year-on-year, we conducted Fluence's Battery Energy Storage System Cost Survey, which rated 185 industry participants. One of the survey questions asked participants to rank the bankability of 15 integrators and providers. We are proud to be ranked at the top for bankability, reflecting our successful track record. Fourth, supply chain assurance. Our customers want someone who can deliver their projects on time. This comes only with an efficient supply chain. We are proud to say that we have all our battery needs for the remainder of the fiscal year either in-country or in-transit. This significantly reduces the risk of project delays. Our track record of safety and performance, understanding with banks and other lenders, and the steps we have taken to significantly reduce supply chain risk allows us to continue attracting some of the world’s largest infrastructure players as our customers. These customers are seeking long-term relationships that begin with our storage solutions and open up the opportunity for long-term Services and Digital contracts that provide recurring revenue. This is evident as greater than 90% of our community storage deployed has a long-term service contract. Turning to slide eight. We continue to expand our Digital offering in order to help our customers maximize their profit. First, we have officially entered the ERCOT market with our Mosaic Bidding application. This is now the third market for Mosaic alongside Australia NEM and CAISO. More importantly, we have been awarded our first contract in ERCOT. We signed a framework agreement with an unrelated global IPP and Utility to optimize ERCOT BESS brought online in the next three years. The first allotment totaled 289 megawatts. This is a significant award as it establishes our product in a new market with a blue-chip customer. Second, as I briefly mentioned, we have officially launched Nispera storage on our performance management platform. This is a major milestone. The Nispera platform is one of the first Asset Performance Management systems in the world to be deployed across all four major renewable asset classes: wind, solar, hydro, and now battery energy storage. Nispera’s additional battery capabilities include providing real-time monitoring of the battery subcomponent, data performance analysis of the system, and ticketing for service requests. The advantage Nispera brings is that many of our customers own more than one renewable asset class. Nispera can now provide one APM for all renewable assets in their portfolio, eliminating the need for different APMs for each asset class. Similar to our Mosaic offering, the overall objective of Nispera is to maximize our customers' profits by providing an asset performance management platform that reduces the total cost of ownership for our customers. Turning to slide nine. As we have seen from our financial results, we are making tremendous progress in our operations. As we briefly discussed on our last call, our transformation is focused on three main areas. The first is enhancing our risk management. We have implemented a set of managerial and commercial initiatives to ensure we identify all materials and manage risks more efficiently and effectively, quantifying and mitigating them throughout the product lifecycle. A more robust risk management framework allows us to be more confident in our prospective financial results. As these processes continue to mature, we will provide further clarity on our prospects. There is still some way to go in our endeavors, but I am confident in our ability to continue progressing. Second, improving our execution. A major driver of our execution is our product availability and capability. We recently revised our product roadmap initiative, breaking down our product development projects into smaller units, moving away from the concept of generation output to concentrate on improvements we know. The smaller projects are easier to manage, more efficient, and faster to market. Additionally, our recently established best-in-class facility allows us to test each new improvement at a system level and identify problems before customer deployment. Third, optimizing our cost structure. As we mentioned on our last call, we have been increasing our resources in the India Technology Center. We have adopted a competitive workforce strategy, reducing resources in higher-cost countries and increasing resources in lower-cost countries. As part of this strategy, we are utilizing our India Technology Center for necessary support functions and to retool our Digital class. I am pleased to report that we are making significant progress in this endeavor and plan to double the number of employees in India by the end of our fiscal year. As a result, we expect India to represent 10% to 15% of our talent, which provides us with the necessary resources for our significant growth. By focusing our resources in lower-cost countries like India, we are able to reduce our operating leverage. Overall, I am pleased with the achievements of the first quarter. Although we are mindful that there’s still a lot of work to be done, we will look to continue this momentum as we progress for the remainder of the year. This concludes my prepared remarks. I will now turn the call over to Manu.

Thank you, Julian, and good morning, everyone. I will begin by reviewing our financial performance for the first quarter and then discuss our outlook and guidance for fiscal year 2023. Please turn to slide 11. In the first quarter, in addition to having the highest order quarter in our history, we delivered $310 million in revenue, representing an increase of 78% year-over-year. We continue to effectively manage our global supply chain and execute on our backlog, including working through our legacy backlog. Greater than 95% of our first quarter sales were made up of legacy backlog, and we expect to be materially complete by the end of fiscal year 2023. Moving to gross profit. I am pleased to report that we generated positive gross profit in the first quarter. We continue to strengthen our contract compliance controls and risk management practices, and our gross margin number in the first quarter includes the recovery of net claims worth $18 million we made against one of our battery suppliers, which we previously disclosed and was accounted for as a reduction in cost of goods sold. The important takeaway is that we are still strengthening our contract compliance procedures to enable us to recover damages per our contractual results if necessary. Regarding operating expense and adjusted EBITDA, first-quarter operating expense, excluding stock compensation, was approximately $54 million, in line with the fourth quarter of 2022. As Julian mentioned, we are executing on our plan to optimize our global workforce, leveraging our India Technology Center. Our previously communicated model holds operating expense growth to less than 50% of revenue growth. We expect full-year 2022 operating expense as a percentage of sales to represent the high watermark. This model helps create operating leverage and will drive improvement in adjusted EBITDA that we expect in 2023 and beyond. Turning to our cash balance. We ended the quarter with approximately $460 million in total cash, including short-term investments and restricted cash. This figure is in line with our comments on our Q4 earnings call. Rounding out the balance sheet discussion, inventory increased by approximately $400 million from the prior quarter as a risk mitigation strategy to provide us with supply chain assurance for our 2023 revenue guidance. As Julian mentioned, all of our battery needs for 2023 are now either in-country or in transit from China. The inventory increase in the first quarter significantly de-risked our 2023 revenue guidance, with a significant portion funded by customer advances and milestone payments. Given our planned inventory build in the first quarter, we expect our cash usage in the second quarter to be slightly higher than in the first quarter. Furthermore, we expect inventory turns to improve as we exit 2023 and end 2023 with liquidity greater than $500 million between cash balance and undrawn revolver, in line with our previously communicated cash framework. We do not believe we need to raise any additional capital to meet our needs. Please turn to slide 12. As we briefly mentioned, we are increasing our fiscal year 2023 guidance for both revenue and adjusted gross profit. We now expect our total revenue to be between $1.6 billion and $1.8 billion, up from our previous revenue guidance of $1.4 billion to $1.7 billion. Additionally, we now expect our adjusted gross profit to be between $85 million and $115 million, up from our previous adjusted gross profit guidance of $60 million to $100 million. The guidance increase is due to incremental demand and better supply chain visibility. We provided more detail in our appendix similar to last quarter. We are entering the second quarter with 99% of our 2023 expected revenue in our backlog, providing us high visibility to achieving our guidance. In terms of revenue seasonality, we still expect approximately 40% of revenue in the first half and 60% in the second half of our fiscal year. As Julian briefly touched on, we expect the IRA tailwinds to benefit order growth in the second half of 2023, with a benefit to topline revenue and gross profit largely occurring in 2024 and beyond. We have not included any IRA impact in our 2023 revenue and gross profit guidance. Before I turn the call back to Julian for final remarks, I would like to reiterate that we are committed to and on track to be adjusted EBITDA positive in 2024. With that, I will turn the call back over to Julian.

Thank you, Manu. In closing, I want to reiterate what I consider the main takeaway from this quarter's results. First, we had a strong quarter in terms of our financial performance, with our highest order intake in history, providing us with a solid base from which we can launch the strong growth we foresee for our company. We continue to make significant progress on our risk management, most notably this quarter, reducing our supply chain risk through several actions as reflected in our 2023 battery needs in-country or in transit. We continue to expand our offerings and concentrate our efforts on developing new products and solutions that create value for our customers, especially relevant this quarter, the new Nispera battery management software. All the efforts covered in today’s call provide us with high confidence to increase our total revenue and adjusted gross profit guidance for fiscal year 2023 and achieve positive EBITDA in 2024. This will conclude my prepared remarks. We will now open it up for questions.

Thank you. And our first question comes from James West with Evercore ISI. Your line is now open.

Hey. Good morning, guys.

Hey, James.

Hey, James. Good morning.

Julian, obviously, really strong order intake this quarter and you raised guidance, very positive moves there. I am curious what you are seeing in terms of pricing, because demand is running well ahead of supply in the market. And thinking about your drive here, you and Manu’s drive to profitable growth, are you at the point where you can exert some pricing power onto the market?

We observe that demand is strong and prices are supporting our margin of 10% to 15% as we have previously indicated to the market. Within that margin, some segments are performing better than others, while some are at the lower end. Overall, we align with that margin outlook.

Okay. Okay. Understood. And can...

Yeah. The only thing I will add is, you can start to see that in the new deals we are signing. Those are double-digit margins as well.

Okay. Okay. Makes sense. And then maybe a follow-up for me, a little bit related but on the software side of the business. There was good uptake on Mosaic, and Nispera is seeing some progress here as well. What’s the go-to-market strategy with those software packages? Do you sell them as a package, or do they go individually? How is that process run?

As we communicated in the last earnings call, remember, we are integrating our sales channels better. The Nispera product is global, so we can sell it worldwide. Mosaic is a market-specific product working in Australia, California, and now in ERCOT.

Okay.

So we cannot integrate the two together directly since they serve different markets, depending on each customer’s business case. However, we are working on integrating our offerings to enhance efficiency in how we sell them. You will see a closer integration of our APM or Nispera offering into our product sales as we continue moving forward.

Okay. Understood. Got it. Thanks, Julian. Thanks, Manu.

Thank you. Thank you, James.

Thanks.

Thank you. One moment for our next question. Our next question comes from the line of George Gianarikas with Canaccord Genuity. Your line is now open.

Hey. Good morning, everyone, and thank you for taking my question.

Hey, George.

Good morning, George.

I’d like to ask about gross margins. I don’t want to put the cart before the horse, but you have done a really good job getting them back into the mid-single digits, and previously, you had guided for your hardware business to be somewhere in the mid-teens, I believe. Given that there have been multiple structural changes to the way you contract, is there a potential upside to that mid-teens gross margin target long-term?

Our view hasn’t changed. We are still seeing the 10% to 15% lower-teens margin across various segments, some doing better and some facing tighter conditions. We are closely monitoring our segments to identify where we can capture better margins, but our current perspective remains.

Thank you. And maybe as a follow-up, we continue to read about auto companies not only building battery cells but also investing in lithium mines. I am curious, strategically, over the next couple of years, I know you have enough supply currently, but is getting deeper into the supply chain something that interests you?

Last quarter, we announced that we were going into module production, which exemplifies our strategy for vertical integration to commoditize cells and open up additional supply options while reducing lead times to integrate sales. We currently don’t have plans to go further down the supply chain, but that is our approach.

Thank you.

Thanks, George.

Thanks, George.

All right. Our next question comes from the line of Maheep Mandloi with Credit Suisse. Your line is now open.

Hey. Good morning. Hi, everyone. Thanks for taking the questions here.

Thank you.

Good morning, Maheep.

Yeah. Absolutely. And maybe just to start with, could you just talk more about the supply chain improvements you are seeing here? Is this something you are seeing throughout the year, or is it from a timing perspective? How should we think about that going into next year? And can we expect an earlier, faster ramp to your gross margin target?

One of the reasons why we are able to raise our guidance for the year is that we feel more confident in our supply chain. At the end of last year, there were concerns about disruptions stemming from the COVID policy in China, which did not materialize. We took significant measures to secure our battery needs early, leading to our current confidence. Today, we have seen no disruptions, and logistics issues that were major last year have normalized. We hope for continued improvements.

I would emphasize that we have narrowed the range and increased the midpoint in our revenue guidance due to confidence in both our backlog and supply chain, which is also reflected in our projections for 2024.

Got it. That’s really helpful. And then maybe just on manufacturing. I know you talked about all the benefits from IRA, but could you remind us about the module manufacturing you discussed on the last call and the timing on that?

As we mentioned last time, we are developing the technology and putting in place the manufacturing capacity. We expect to be ready by summer 2024, and the update from the team has been very positive.

Got you. Thanks for the update. I will jump back in the queue. Thank you.

Thank you, Maheep.

Thank you. Our next question comes from the line of Brian Lee with Goldman Sachs. Your line is now open.

Hey, Brian.

Hey, guys. Good morning. Kudos on the execution here.

Hi, Brian.

A couple of questions. I appreciate all the additional disclosure and color around the guidance here, even the first look at 2024. Most of it is focused on volume demand and revenue upside as you factor in the IRA. I think you alluded to also embedding some impact on profit margins. Can you elaborate a bit on what you are assuming in 2024 in terms of the impact of IRA, whether it’s pricing or something on the COGS side? It sounds like there’s some margin uplift you are assuming. Can you give some clarity on that?

Our core view on the IRA remains the same. The increases in revenue guidance for 35% to 40% reflect our confidence in volume growth, but we are not at a stage where we can commit to margin increases. We are maintaining a target range of 10% to 15% margins, with some segments higher and some lower currently. As our new contracts come into play, we anticipate better rates.

Okay. Fair enough. We will look out for more color. I guess second question for me, I will pass it on. On the contracted backlog, a healthy number here, $2.7 billion. You clearly have the revenue guidance in your sights for 2023. Can you remind us how you define backlog? What does the $2.7 billion comprise, and why wouldn’t it translate to a potentially higher revenue opportunity in 2023 than the $1.6 to $1.8 billion you are guiding to today?

Manu will provide more details, but essentially, our backlog translates into revenue over a 12 to 18-month cycle, sometimes longer. We are executing effectively. While we may aim to capture more revenues in 2023 from that backlog, our current revenue guidance reflects our confidence in our operational execution and management capabilities.

From a layering perspective, if you take the remaining three quarters of the year and our first quarter actuals, that’s roughly $1.4 billion, translating from the $2.7 billion into this year. The backlog represents a dollar number tied to the value of projects that layer into our revenue based on our recognition methodology.

Okay. Fair enough. I will pass it on. Thanks, guys.

Yeah. Thanks, Brian.

Thank you. Our next question comes from the line of David Peters with Wolfe Research. Your line is now open.

Good morning, David.

Yeah. hey. Good morning, everybody.

Good morning.

So on slide six, you are pointing to the IRA driving revenue growth of 40% to 50% in the U.S. Just on the consolidated topline growth you are pointing to, I think that implies international growth just above 20%. I’m curious if you could speak to the visibility there and if most of that growth is coming from Europe or Asia?

It’s a combination of both markets being similar in size from our perspective. Certain markets may progress faster than others, but we see significant growth potential in the U.K., Australia, Taiwan, the Philippines, and Germany.

Okay. Great. And just specifically, what unique clarifications on the IRA do you need by April or in spring to ensure that 2024 growth expectation in the U.S. materializes? What specifics are you waiting for?

The clarifications we are looking for should not affect our 2023 revenue but could influence 2024. We are waiting for confirmation regarding U.S. manufacturing content to ensure we can effectively capture value based on the guidance.

Okay. Great. Thank you.

Thank you. Our next question comes from Ryan Levine with Citi. Your line is now open.

Hi. Good morning.

Hey. Good morning, Ryan.

Regarding the Mosaic entrance into the ERCOT market, can you speak to how the product is differentiated for ERCOT versus CAISO, and should we expect additional markets that you will be entering in the near term?

The Mosaic product provides foresight regarding market conditions with high accuracy. While it requires some adaptations per market, we look to re-platform the tool, enabling us to enter new markets more cost-effectively.

Excellent. And as the product continues to evolve, are you seeing specific types of customers being more appropriate for this software package?

We are working consistently with large global IPPs. As we enter ERCOT and CAISO, we continue engaging with the same customer segment.

Okay. Thank you.

Thank you, Ryan.

Thank you. And our next question comes from the line of Ben Kallo with Baird. Your line is now open.

Great. Thank you, guys. Good quarter.

Hi, Ben.

On the supply chain, could you talk to us and remind us about your cell supply relationships and the intent on expanding those relationships? How do you think about geographic risk in that supply chain and mitigating it?

Currently, we buy modules and plan to start buying cells once we commence our module production by summer 2024. We are actively working to diversify suppliers beyond China by engaging European and Korean manufacturers.

Okay. Thank you. Just on slide seven, you talk about bankability. I am wondering if the leadership you show here makes a bigger difference with the IRA and tax equity perspective?

Bankability is crucial, especially in the U.S. market where larger projects may be more complex. We are one of the few players who can manage these projects in line with IRA benefits, which positions us favourably in our pipeline.

Thank you.

Yeah. Thanks.

Thank you, Ben.

Our final question comes from the line of Julien Dumoulin-Smith with Bank of America. Your line is now open.

Hey, Julien.

Hey, guys. Good morning. It’s Alex Guevara actually on for Julien. But thanks for taking our question here. I appreciate it. So, this one is probably for Manu. It’s a little bit in the weeds, but trying to make sure we understand. When we look at the deployed gigawatts, it’s up modestly, whereas revenue recognition is much higher. I noticed unbilled receivables also shot up. Could you clarify the nuances there between revenue recognition and deployed numbers, as well as what’s reflected in the contracted backlog?

Sure. To clarify, deployed projects are those that have achieved substantial completion. For revenue recognition, we use a percentage of completion perspective, which allows us to recognize revenue in phases. This dual consideration helps in tracking both operational progress and financial performance effectively.

I appreciate that. I know it’s an in-the-weeds question. On sourcing from Northvolt, it’s impressive that you highlight everything in-country or in transit, and with the line of sight on the backlog. Do you have a heuristic regarding how long you anticipate this backlog to be sustainable?

Our current confidence stems from our 2023 battery needs being met, and our operational strategies provide us with a clearer view of what to expect moving forward. Our strategic plan emphasizes IRA benefits and securing local manufacturing.

Okay. That’s helpful. I’ll take the rest offline. Thanks, guys.

Thank you.

Thank you. I would now like to turn the conference back over to Mr. Julian Nebreda for closing remarks.

Thank you. Thank you very much. Thank you everybody for participating. We are very, very happy with the quarter. I mean, I think that we have seen the initial effects of our turnaround. There’s a long way to go. There’s a lot of work we need to do. We need to continue maturing, capturing our objectives, continue growing this company to capture the value through scale, supply chains, derisking, diversifying, capture the IRA and continue developing products that make our customers' lives easier. There’s a lot of work, but we are happy. We will celebrate today, but our celebration will be more of an impulse to continue working hard. Thank you all for participating, and hope to talk to you all in the next few weeks. Bye-bye.

This concludes today’s conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.