ReneSola Ltd (NYSE:SOL) Q3 2022 Earnings Call Transcript

ReneSola Ltd (NYSE:SOL) Q3 2022 Earnings Call Transcript December 1, 2022

ReneSola Ltd beats earnings expectations. Reported EPS is $0.05, expectations were $0.01.

Operator: Hello, ladies and gentlemen. Thank you for standing by for the ReneSola Power’s Third Quarter 2022 Earnings Conference Call. Please note that we are recording today’s conference call. I would now like to turn the call over to Mr. Yujia Zhai, Managing Director of the Blueshirt Group. Please go ahead, Mr. Zhai.

Yujia Zhai: Thank you, operator, and hello, everyone. Thank you for joining us today to discuss our third quarter 2022 results. We released our shareholder letter after the market closed today and is available on our website at ir.renasolapower.com. There is also a supplemental slide deck posted on our website that we will reference during our prepared remarks. On the call with me today are Mr. Yumin Liu, Chief Executive Officer; Mr. Ke Chen, Chief Financial Officer; and Mr. John Ewen, CEO of North America. Before we continue, please turn to slide two. Let me remind you that the remarks made during this call may include predictions, estimates or other information that might be considered forward-looking. These forward-looking statements represent ReneSola Power’s current judgment for the future.

However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under Risk Factors and elsewhere in ReneSola Power’s filings with the SEC. Please do not place undue reliance on these forward-looking statements, which reflect ReneSola Power’s opinions only as of the date of this call. ReneSola Power is not obligated to update on any revisions to these forward-looking statements. Also, please note, unless otherwise stated, all figures mentioned during the conference call are in U.S. dollars. With that, let me now turn the call over to Mr. Yumin Liu.

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Yumin Liu: Thanks, Yujia, and good day, everyone. Thank you for joining our call today. I’ll give a high level summary of our third quarter results and then elaborate our recent strategic initiatives as well as provide an update our guidance. Then Ke, our company CFO, will review our financial results for Q3 in detail. After that, we’ll be joined by our U.S. CEO, John for Q&A. Beginning with our financial performance, Q3 results outperformed the high end of our guidance range and represents one of our best quarters in the last three years. Revenue grew 86% year over year to $28.9 million, gross margin was 29.6% and net income was $3 million compared to $711,000 a year ago. We achieved these results despite economic challenges and a strong dollar, which negatively impact our revenue and earnings from Europe and China by approximately $3 million.

Excluding this foreign exchange impact, results would have been even stronger with nearly $32 million revenue and over $5 million in net income. These results were driven by solid performance of our project pipeline and our IPP solar assets in the U.S. and China and the recently acquired 50 megawatt solar farm in Branston, U.K. We closed acquisition of Branston on September 30, the total transaction value was $41 million, of which $20 million was cash and $21 million was nonrecourse project finance. This acquisition marks the beginning of our European IPP strategy, which will add predictable and stable cash flows to complement our product sales business. PPA prices have been trending strongly across Europe due to energy shortages and favorable regulatory conditions.

In fact, we have already signed attractive multiyear PPA for Branston project through March 31, 2017, which we estimate will provide over $25 million EBITDA by the end of 2026. In addition to Branston, we completed the acquisition of Emeren on October 10, through an all cash deal of $16 million with earn out provisions. Emeren is an Italian based utilities scale solar power and battery storage company. They have over 2.5 gigawatts of projects under development in different stages, including over 2 gigawatt of solar projects and over 500 megawatt of storage projects. As part of our European IPP strategy, we decided to withhold 110 megawatt of project sales in Poland and Hungary that we originally planned to sell at NTP stage in Q4 2022. We will now construct these projects and operate them in our European IPP portfolio.

In October, we completed the first 10 megawatt across two solar farms in Hungary and expect the remaining 100 megawatt will be energized by Q3 of 2023. Because of the shift from sale to IPP, we will forego over $20 million revenue and $5 million to $6 million of net income in Q4 2022, but will gain significantly higher lifetime revenues and stable cash flows. We estimate the payback period for this IPP projects to be four years or less, while still retaining the optionality to sell these IPP assets in the future. Due to the strategic shift in Poland and Hungary and approximately $6 million of unexpected negative foreign exchange impact, we now expect our 2022 full year revenue to be in the range of $85 million to $90 million. We expect 2022 gross margin to be 25% to 30%.

For net income, we anticipate full year net income will be approximately $7 million to $8 million. Looking forward to 2023 and beyond, we have many things to be excited about. We have strong presence in the world’s fastest growing solar markets, thanks to growing clean energy demand, rising PPA prices and supportive government policies. In Europe we are excited about our newly acquired assets and growing IPP portfolios. For Branston, Emeren and 110 megawatts of IPP projects in Poland and Hungary, we have good visibility into 2023 and expect this assets to contribute approximately $35 million to $40 million revenue and $10 million to $15 million EBITDA. We are also aligning our China strategy to the rest of the world under one strategy of develop, own or sell.

Compared to the original strategy in China as develop, build, own and IPP. In the immediate near term, we are in the process of monetizing certain China projects and expect to close the sale before the year end. For our project development business, we expect to monetize approximately 400 megawatt of our mid to late stage pipeline in 2023. And we are targeting to achieve a total pipeline of 4 gigawatts by end of2023. To conclude, the future looks bright for solar energy and also definitely great for our company. We believe we are well positioned to capitalize on accelerating solar adoption across the world. Given our deep expertise in developing and operating solar projects, our extensive network of industry partnerships, our well-capitalized balance sheet and our unmatched track record in closing financing transactions and profitably monetizing projects, we are progressing steadily in our goal of becoming a leading global solar developer and operator.

With that, I’ll now turn the call over to our CFO, Ke Chen. Ke?

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Ke Chen: Thank you, Yumin. And thanks everyone again for joining us on the call today. As a reminder, a non GAAP to GAAP reconciliation is included in our shareholder letter. We use non GAAP measures because we believe that provider useful information about our operating performance that should be considered by investors along with the GAAP measures. Revenue was $28.9 million up 252% sequentially and 86% year over year, largely driven by our project development business in the U.S., strong EPC revenue in Poland and IPP solar assets. GAAP gross profit was $8.5 million, up from $3.7 million in Q2 2022 and $6.1 million in Q3 2021. The gross margin was 29.6%. Turning to our operating expenses. Operating expenses were $3.5 million compared to $3.9 million in Q2 2022 and $3.4 million in Q3 2021.

Net income attributable to ReneSola Power common shareholder was $3 million, diluted earnings per ADS was $0.04 compared to diluted net loss per ADS of zero in Q2 2022 and diluted net income per ADS of $0.01 in Q3 2021. Cash used in operating activity was $5.2 million, cash used in investing activity was $31.2 million and cash used in financing activity was $45.7 million. Cash used in operating activity were mainly driven by project expenditure for Poland, Hungary and U.S. NTP projects. Cash used in investing activity were primarily due to Hungary IPP and acquisition of Branston. Cash used in financial — financing activity primarily related to $42 million share repurchase transact on September 2, 2022 with ReneSola Singapore. Now let’s review the balance sheet.

Our cash balance as of September 30, 2022 was $123 million compared to $208 million at the end of Q2, 2022. The decrease was primarily due to the share repurchases, the Branston acquisition and project capital expenditure related to the construction of our IPP assets in Poland and Hungary. Our debt to asset ratio at end of Q3 increased to 12.8% compared to 8.3% in Q2 2022 as a result of nonrecourse debt acquired as part of Branston acquisition. Finally for guidance. We now expect full year 2022 revenue to be $85 million to $90 million, gross margin to be 25% to 30% and net income to be $7 million to $8 million. For Q4, we expect revenue to be $44 million to $49 million and gross margin to be 20% to 25%. Now we would like to open up the call for any questions.

Operator, please go ahead.

Q&A Session

Operator: Certainly. And our first question comes from the line of Philip Shen from ROTH. Your question please.

Philip Shen: Hey, guys. Thanks for taking my question. First one is on 2023. I know you haven’t given official guidance, but was wondering if you could talk about how much you might sell NPP next year? It sounds like you have plans to build 200 megawatts and keeping those on balance sheet in Europe by the end of 2023. So what’s the expectation for the other geographies? It sounds like China is going to be sold by this year. So what are the NPP expectations — NPP sale expectations for next year? And then total build out beyond 200 megawatts if you expect to take on assets in the U.S. that would be useful to know as well? Thanks for taking the question.

Yumin Liu: Hey, thank you, Phil. We do expect to close the year with 4 gigawatts of the pipeline by 2023. We also target to sell at NPP 400 megawatts in this pipeline. In addition, we plan to build 200 megawatts — to build a total 200 megawatts by the end of Q3, Q4 next year. That include the already existing 50 Branston and 10 megawatts in Hungary. So that means, we have 140 megawatts to go, including 100 megawatt is being planned and constructed in Poland and Hungary. And those are the big numbers. 400 megawatt sales, 200 megawatt IPP, 4 gigawatt of pipeline. And that 400 megawatt sales, including all three regions: U.S., Europe and China.

Philip Shen: Great. Okay. And then the 165 megawatts, is that expected to be sold all by the end of this year? Or do you think you’ll recognize — how much do you think you’ll recognize in Q4 in terms of the China IPP or China megawatt sales? And then how much do you think is in €˜23?

Yumin Liu: The majority will be in €˜23. We applied — as I mentioned, we applied the similar or same strategy, build — develop, build and sell or own, okay? In the past, in China, as we announced, like 18 months ago, we say, we’ll do everything in China on an IPP basis. But now we change it up to about two, three months ago, we will use the same model as we use in the U.S. and Europe. So we are in the process setting our first product portfolios in China, we will continue doing so in the year of 2023.

Philip Shen: Okay, great. And then for the 200 megawatts that you expect to build in Europe, you mentioned 50 is Branston spin and 10 is on Hungary. What’s the incremental amount of cash or equity that you would expect to invest in either that 140 or the 200?

Yumin Liu: For the first 100 megawatt in remaining part of the 100 megawatt in Poland and Hungary, we expect the equity portion of about $30 million and additional 40 to 50 megawatts that will take another $10 million to $20 million. So the total will be $40 million to $50 million for the total equity injection for the additional 140 megawatts of projects.

Philip Shen: Okay. Got it. And then historically, because your strategy before was to sell at NTP, you were not procurers or buyers of modules and tracker. Is it fair to say now that you’ll be in charge of the EPCs and you will make the module and track your procurement decisions in Europe?

Yumin Liu: Yes and no. In general, the answer is yes. In fact, even in 2020, 2021 and even this year, we are — we have been acquiring module trackers and making those EPC management, including the major procurement in Europe, not in the U.S. but in Europe and China, we do have those procurement obligations. But in 2023, we expect we’ll continue working on the necessary EPC activities, at the same time build our 100 megawatt in Poland and Hungary and continue doing either self-built or — self-develop and built 40 megawatts or more or acquire a couple of smaller size M&A — through M&A, acquired a couple of smaller sized operating projects in Europe. That is the target to go to 200 megawatts in Europe by the end of 2023.

Philip Shen: Okay. Thanks, Yumin. And then I know I’ve taken a lot of questions, but can I ask another one on €˜23? You gave us the megawatts, I was wondering if you could kind of help us understand what the revenue might be for next year? If you have 400 megawatts being sold, I’m guessing that you could generate close to $500 million of revenue. I know the China assets will be less, but the European and the U. S. assets should be close to a (ph). So just curious if — so maybe it’s close to $400 million? Are we in the bright ballpark in terms of revenue for 2023? Thanks.

Yumin Liu: We are now ready to give the 2023 detail forecast yet at today, but we will do it when we conclude the 2022 number. But in the meantime, we do know we will grow. Not only we grow from these three acquisitions we talk about, the two acquisitions I’m talking about, it’s really Branston, IPP, and plus another 150 plus megawatts in Europe and plus the Emeren acquisition. Those three, as I mentioned, will contribute around $40 million top line revenue and also about $10 million, $15 million EBITDA in the year of 2023. Other pipeline sales 400 megawatts and plus other sales and the EPC activities will absolutely help both top line and bottom line, but we are not ready to release that number yet.

Philip Shen: Okay. I can appreciate that. Thanks for taking all my questions and I’ll pass it on. Thanks, Yumin.

Yumin Liu: Thank you, Phil.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Amit Dayal from H. C. Wainwright. Your question please.

Amit Dayal: Thank you. Good afternoon, everyone. Congrats on all the progress. Just with respect to the 4Q guidance for 2022, does this factor in the monetization from China assets? Or will that be upside to the guidance?

Yumin Liu: It reflected a portion of it as we are closing the first portfolio in China. And we are working on the second portfolio right now. So it represents the understanding of the first portfolio is to be closed very, very soon. So we know the number. But the second one is still in the negotiation mode.

Amit Dayal: So that’s not in the guidance, I guess, right?

Yumin Liu: That is right.

Amit Dayal: Okay. Thank you. And then just looking at operating costs after these recent acquisitions and then moving more towards IPP ownership in Europe, etcetera, how should we think about operating cost changes going forward?

Yumin Liu: Amit, I think first of all for Branston, it is an operating project, so we don’t expect a whole lot of operating cost increase. And for Emeren, we do have additional 22 people . So again, we only expect a small increase of operating cost. Again, I would say between $3.5 million and $3.7 million, that’s what we’re expecting.

Amit Dayal: Understood. Okay. And then with respect to these recent board changes, is there any strategic implications from that that we should be thinking about?

Yumin Liu: You talk about ownership change?

Amit Dayal: Yes. With the new board appointments, etcetera. I know you have pointed towards cooperation, etcetera. Moving to the Delaware cooperation, is that still in play? And what should we be reading into those types of implications from these changes?

Yumin Liu: Okay. Let me also the first part of the story and then Ke will kick in about the next steps, which is in the process we are — in the process for access. Okay? The first one is we do have a bunch of changes. One is, the ownership change, as we explained earlier also from the press release like last month or couple of months ago. We did a share repurchase from the ReneSola Limited, Singapore, controlled by Mr. Li, the founder of the company, 6 million shares — sorry, sorry, 7 million shares. And the — so Mr. Li’s ownership goes from 22% to about 8% plus now at this time. So on the other side, the Board has also appointed Shah Capital’s Managing Director and CIO, Himanshu Shah, as our Board. In addition, we also restructured our committees of the Board.

On top of that, we are making more moves in different regions considering how to refund — how to report to our investors. On the other side, especially meeting the ICC demand requirement, I’ll let Ke to comment on this.

Ke Chen: Yes. First of all, Amit, let me point out the business first. If you look at our revenues since 2020 and 2021 and now, you will see that U.S., Europe business will account for majority of our business, this quarter almost 80%. So that’s our strategic decision about three years ago, we continue to drive the business in this direction. So this is in line with our shareholder structure change to focus on the U.S. and the European market, which is the better market right now for renewable energy. And again, with Himanshu Shah become the Chairman, we are even more focused and clearly strategically driven shareholder value here. And also, we are, again, to make the requirement to exceed the requirement and also maybe, again, become a U.S. fiber peer going forward.

Amit Dayal: Understood. That’s all I have for now guys. I’ll take my other questions offline. Thank you.

Yumin Liu: Thank you, Amit.

Operator: Thank you. Our next question comes from the line of Donovan Schafer from Northland Capital. Your question please.

Donovan Schafer: Hey, guys. Thanks for taking my questions. I’m sorry for some background noise. I’m at the airport right now. So the first question I have is just — so just to be clear for the kind of lower revenue outlook for the fourth quarter. It seems like you’re saying that was — it was not a matter of delays at a project level of push outs, but just it was a decision at the corporate level to retain them. So then there’s lower revenue recognition. And is this an incremental because you kind of hinted at this on the second quarter call, a desire to hold because of PPA pricing that made it more attractive to hold on to these assets. Was this an incremental kind of an additional tranche of assets you decided, hey, we’re going to hang on. Here’s an extra cluster of assets you want to hang on to in Poland and Hungary?

Yumin Liu: You are absolutely right, for two reasons, not only we see the demand in Europe and the PPA price going up, but also as we are so active in Europe, we want to be a local player operating the solar farms long term. Definitely, more importantly, the solar farms owning — the ownership as an IPP player in Europe give us tremendous great economic returns from those deals. So literally speaking, about six months ago the management decided not to sell those 110 megawatts in Q4 of this year and instead will keep all of them. So we do have this plan to build on in the next, I will say, 9 to 10 months. And the deals — the projects are under construction, some of them are under construction now and some are under financing now.

But in any case, this will add the stable cash flow and significant good returns to the company. And as I also mentioned earlier, that the return changing from the sale, NPP sale to IPP the payback is less than four years. And by the way, less than four years we already used a pretty conservative PPA price in merchant curve estimate in the Europe, not really counting those $300, $400, $500 per megawatt hour.

Ke Chen: Donovan, a lot of reason for lower revenue is because currency impact of weak euro. So I just want to point out that.

Donovan Schafer: Right, right, weak euro. Okay. And then I also wanted to ask if you’re seeing any kind of trends in some way kind of a follow-up on Phil’s question about for the projects you do take to COD and sell or NTP because, of course, those are still potentially parts of the strategy. I think NTP is favored to COD, but that could happen sometimes. So when you’re doing those sales, I tend to think of NTP as often being kind of in a range of $0.10, $0.20 a lot and COD sales often in the U.S. and Europe are typically around $1. But so much has been changing, so kind of just wanted to check-in on that. As you’ve been seeing and we’ve talked a lot about PPA prices, but have you been seeing significant changes or trends for the ASPs when you’re doing an NTP sale or you’re doing a COD sale? Kind of what’s — I just want to get kind of an update there.

Yumin Liu: I think you are

Donovan Schafer: And maybe you could — if you’re okay with sharing it, perhaps you could refer to the ASP you got on the Pennsylvania megawatts, if that’s all helpful? I know those were more sort of on the utility scale size. So maybe that’s lower traditionally, but I think that could be useful in ramp up.

Yumin Liu: In fact, I cannot really release the details of the project. For example, you mentioned Pennsylvania deal sales. In general, the smaller deals in some regions or some countries in Europe or U.S. normally enjoys a better per watt price, okay? But big utility scale sounds like a normally smaller — per watt price will be lower, okay? That’s number one, the big concept. Another one is, that the PPA price goes in normal cases very high in Europe, which in turn drives the sales price very high. You are right, the COD payment normally is $1 million to $1.1 million per megawatt in Europe or in the U.S. a little bit different, when you put the structure of that equity into it. But in Europe, it’s a very easy to say that people are offering $1 million to $1.2 million per megawatt.

That’s the typical price. And also on NTP, that could go as much as from, let’s say, use to per watt by cents, from $0.20 to $0.50. Okay? It really, really have a big rent and a wary from country to country. And also from the different functions of the solar farm. For example, in Italy, the industrial end, the NTP sales price can be as high as $300 to $400 per megawatt. Okay. No, I’m sorry, $300,000 to $400,000 per megawatt. But for farmland, it is around 200,000. And also in countries of Poland and Hungary, all those numbers can be different one the other side — on the other countries. But in general, all the average sales price go up in average.

Donovan Schafer: Okay. Right. Because it’s just sort of a lagging — it follows PPAs probably on kind of a lagging basis

Yumin Liu : Look, Donovan, another good thing is, we do have noticed that the supply chain is coming down. And we do have as we are continuously acquiring — procuring modules and we do have seen the module price comes down in the last couple of months and we forecast that starting Q2 next year, it will go further down. That will help our IPP initiative, also help driving our EPC activities more profitable.

Ke Chen: Donovan, I will add for U.S. communities solar projects, the price is much, much higher than you just mentioned here. So our — we also have community business here in U.S. so the pricing is pretty good right now.

Donovan Schafer: Okay, great. And if I can just squeeze in one last question. For the Emeren, for the team, if I recall correctly, I think, Yumin, you used to work with a couple of these guys back at Recurrent or that was before, I guess, Recurrent was required by Canadian. And you guys partnered with them back in July, not this July, but I guess it would be a year and a half ago now. So it seems like you’re pretty — you have a pretty good familiarity with them and they were kind of — I guess, maybe there’s sort of two questions on this where, one of you could just kind of remind me what the background is there that gives you some familiarity? And then two, what kind of — like there’s a sort of a good match here because, as I understand it, they kind of did this land to grab move in Italy where you can put on down small sort of deposits with the land rights owners and whatnot to kind of secure the site.

But then there are these to go from early stage to mid or late stage, you need more meaningful cash to put down for deposits, interconnection and whatnot. So what kind of cash requirements will that have? You have the healthy cash balance, but it seems like that’s part of what you’re bringing to the — part of what you are bringing to the party, if you will. So what would the cash need be there to help move forward today over the next 12 months, 24 months, kind of how are you going to frame it?

Yumin Liu: Okay. let me address your question — two, three questions separately. One is, you are right, the founder of the company and a couple of key guys in the company driving the development, finance and legal all used to work for me when I run the EMEA region for Canadian Solar. And they started the partnership with us back to 18 months ago, since summer last year. And we know them well, we absolutely trust their capabilities developing projects. The second point is that, Italy is one of the top three solar market in Europe. We’ve been thinking to go to Italy and driving or hiring a local team and build up the local structure to develop this market, very important market. And that is why to the point when we partnering with Emeren, we believe it’s better for those to join us.

So that comes to the conclusion of the acquisition. Another point is that, the Italy for Emeren’s structure, they have five DSA partnerships. DSA is really development service agreement. Literally speaking, that answers your question about cash flow. This company, Emeren, has a very unique structure of development. All the projects they have developed before we joined are located to the five DSA partners. And the DSA partners will pay Emeren based on the milestone achievements, milestone zero, one, two, three. And as such, the cash need is pretty minimal. But at the same time, they do have the need in short term, for example, for the land and sometime interconnection. They do need some cash in the short term before we turn those two to the SA partners.

And then after the acquisition, we decided not only we work with the DSA partners other four, but also we will develop internally our pipelines, which is about 500 megawatts internal pipelines on solar site and also another 500 megawatts storage pipeline. that stores 12,000 megawatt, not 500 megawatt hours, okay? So that is how meaningful we say this acquisition really is.

Donovan Schafer: Okay, great. Thank you, Yumin. And I’ll take the rest of my questions offline. Thanks guys.

Yumin Liu: Thank you, Donovan.

Ke Chen: Thank you.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Pavel Molchanov from Raymond James. Your question please.

Pavel Molchanov: Thanks for taking the questions. As you own and operate more power plants in Europe, I suppose you have to start thinking about these price gap in the EU and separately in the UK that governments are imposing. Is there any financial impact on any of your IPP assets from these regulations?

Yumin Liu: Great question, Pavel. I will say that the situation is still uncertain. We have news one day news the other day, especially in U.K. the current news reflected to us we can’t really say — affirmatively say, oh, it will not impact us at all. But we do have considered all those potential price gaps. As I mentioned, Pavel, earlier that the — we say our IPPs we decided not sell, but keep in part of Hungary. The payback time is less than four years and that is not based on the aggressive merchant curve power price. As the merchant curve price for the €˜23, €˜24 are still 250, 350 per megawatt hour. But we use our model pretty conservatively in consideration is vastly under potential price gaps. In U. K. the same thing, we signed the long term — not long term, multiyear PPA for Branston to secure in the market a very good cash flow.

And those PPAs as we know by far will not be impacted. And also they are reasonable nice PPAs and should not be impacted by the UK to come — to be executed price gaps.

Pavel Molchanov: Okay. That’s helpful. Turning to the U.S. opportunities. You — like every utility scale developer are watching the (ph), and the restrictions on imports from China. So just to ask the question in a general sense, are you having any difficulty importing modules for your assets?

Yumin Liu: I will turn this one to John, our North America, CEO. But as you know, we do not do any procurement in the U.S. Although we absolutely care about ABCVD case or any forced labor issues. John, please?

John Ewen: Yes. I mean, I would just echo that. I think, Yumin answer is the answer. Although it’s the same thing as when COVID’s — it’s the same type of answers when COVID started and pushed supply chain prices up. We are somewhat insulated. And the value of the development slice, I still — I maintained that — I’m not saying it’s a fixed component forever and ever, but it is a valued piece of the chain because you can’t build solar projects without development. So we’re somewhat insulated from it. I think insulated from it because we’re not the procurer directly, but we’re also insulated from it because in a competitive process, the NTP assets are valued and paid up for and some of that inflation probably makes its way to the PPA pricing. So the development slice is relatively protected on both hands.

Pavel Molchanov: Okay. And maybe just kind of accounting question, given how much M&A and buyback you’ve done recently, can you give your cash balance as of, let’s say, November 1 or December 1?

Ke Chen: Well, Pavel, we actually have very strong cash flow. We’re collecting operating cash from the project we’re selling this quarter. So our cash position is still pretty strong right now.

Pavel Molchanov: Okay. Appreciate it, guys.

Yumin Liu: Thank you, Pavel.

Ke Chen: Thank you.

Operator: Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to management for any further remarks.

Yumin Liu: Thank you, operator. We believe that our strategy is sound and our track record of execution is strong. We continue growing profitability. We are energized by the opportunities ahead and looking forward to updating you on our progress again in a few months. Thank you again for joining us today and for your continued support. If you have any questions, please contact our Investor Relations team. Wish you all a wonderful holiday season. This concludes our call today. You may all disconnect.

Operator: Thank you. Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.