First Solar (NASDAQ:FSLR)
Q4 2013 Results Earnings Conference Call
February 25, 2014, 4:30 p.m. ET
David Brady - Vice President of Treasury and Investor Relations
Jim Hughes - Chief Executive Officer, Director
Mark Widmar - Chief Financial Officer, Chief Accounting Officer
Patrick Jobin - Credit Suisse
Vishal Shah - Deutsche Bank
Paul Coster - JPMorgan
Krish Sankar - Bank of America Merrill Lynch
Brian Lee - Goldman Sachs
Rob Stone - Cowen & Company
Edwin Mok - Needham & Company
Good afternoon, everyone, and welcome to the First Solar's fourth quarter 2013 earnings call. This call is being webcast live on the Investors section of First Solar's website at firstsolar.com. [Operator instructions.]
I would now like to turn the call over to David Brady, Vice President of Treasury and Investor Relations for First Solar, Inc. Mr. Brady, you may begin.
Thank you, operator. Good afternoon, everyone, and thank you for joining us. Today, the company issued a press release announcing its financial results for the fourth quarter and full year 2013. A copy of the press release and the presentation are available on the Investors section of First Solar's website at firstsolar.com.
With me today are Jim Hughes, Chief Executive Officer, and Mark Widmar, Chief Financial Officer. Jim will provide an summary of our achievements in 2013 and an update on significant business and technology developments. Then Mark will discuss our fourth quarter and full year results and provide updated guidance for the first quarter of 2014. We will then open up the call for questions.
Most of the financial numbers reported and discussed on today's call are based on U.S. Generally Accepted Accounting Principles. In the few cases where we report non-GAAP measures, we have provided a reconciliation to GAAP equivalents at the back of our presentation.
This call will also include forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from management’s current expectations. Please review the Safe Harbor statements contained in the press release and the slides published today for a more complete description.
It is now my pleasure to introduce our Chief Executive Officer, Jim Hughes. Jim?
Thanks, David. Good afternoon and thanks for joining us for our fourth quarter 2013 earnings call. Today we announced another significant milestone for First Solar, a new record for CdTe cell efficiency at 20.4%. This record was set using materials and processes used in a manufacturing environment certified as the Newport Corporation’s Technology and Applications Center PV Lab and confirmed by the U.S. Department of Energy’s NREL.
This breaks the previous record of 19.6% set by GE Global Research in 2013. Last April, First Solar and GE announced a solar technology partnership in which First Solar acquired GE’s CdTe solar intellectual property and secured a collaborative research partnership with GE’s R&D team.
The partnership was formed to accelerate innovation in PV technology and accelerate solar module performance at manufacturing scale. This record marks another achievement in our mission to unlock the industry-changing potential of CdTe photovoltaic.
First Solar’s new CdTe research cell conversion efficiency matches the research cell efficiency record of multicrystalline silicon, another technology used in the PV solar market. We are demonstrating improvement in CdTe photovoltaic performance at rate that dramatically outstrips the trajectory of conventional silicon technologies which have already plateaued near their ultimate entitlements.
The synergy realized in our partnership with GE also demonstrates the value of our consistent and strong investment in R&D. The advanced technologies and process that we developed for this record-setting cell are already being commercialized and will positively impact performance of our future production modules and power plants. Based on this new record, we will be updating our efficiency roadmaps at our analyst day in March.
Now turning to our 2013 performance, at our previous analyst day in April last year, we announced several ambitious targets for 2013, and I’m pleased to announce that we have met many of those goals. With respect to our technology, we stated that we would lower our average cost per watt from $0.70 in 2012 to between $0.63 and $0.66 in 2013.
The average cost per watt came in at the lower end of this range at $0.63, a decline of 10% year over year and our largest such decline since 2010. We also forecast that the average efficiency of our modules would rise from 12.6% in 2012 to 13.1% in 2013. The actual average efficiency rose to 13.2%.
Switching to bookings for the year, backfilling our pipeline with solar projects as we’ve constructed our existing projects was a key concern we planned to address by establishing a book to bill target of 1:1 for 2013 and I’m pleased to announce that thanks to the efforts of our global project and business development teams, we have met and even surpassed that goal.
On the financial front, we set aggressive targets for revenue, earnings and cash flow. Revenue was lower than forecast, primarily due to several projects that were expected to be completed in 2013 but are now being held through construction into 2014.
This delay in project sales is compared with the announced use of proceeds from our June equity offering and will result in improved project economics. The total revenue associated with projects being held through construction is approximately $400 million.
However, we beat our earnings target, which, adjusted to the new share count, was $375 million to $425 million, compared to a full year EPS result of $435 million on a non-GAAP basis. And finally, operating cash flows were $856 million, well within our range of $800 million to $1 billion. In summary, in spite of the lumpiness of the results we have seen on a quarterly basis, this has been a tremendous result overall for the year.
Now, turning to our book to bill performance, slides six and seven show the total outstanding bookings in gigawatts and revenue and the change in those bookings that occurred year to date. This data represents our total business, which includes a relatively small percentage of third-party module sales, in addition to our advanced systems project pipeline.
Total outstanding bookings rose over the course of the year to 2.7 gigawatts DC, which resulted in a book to bill ratio of just over 1:1. We had 352 megawatts DC of bookings in Q4, which more than offset the shipments in that period.
The new bookings consisted of a recently signed agreement to build a 150 megawatt AC solar power plant in California. Additional details will be provided at a later stage. We also announced back in November that we had signed PPAs with member cities of the Southern California Public Power Authority for electricity to be generated at the 40 megawatt Kingbird solar power plant in Kern County, California. First Solar is developing and will construct the project.
In addition, we booked a 22 megawatt project to be developed, constructed, and owned by First Solar in Pecos County, Texas in the western zone of ERCOT. Texas represents 10% of total U.S. energy consumption, the largest electricity market in the U.S. We will own and operate this power plant for at least an initial operating period. This reduces both the construction and performance risk of the project, and thereby increases the expected return on any sale.
This also provides us with the opportunity to sell energy into the market real-time and capture revenues from spot market price spikes triggered by capacity shortages. The project is expected to be completed in mid-2014 and will position First Solar as a leader in this key developing market.
The balance of the bookings consisted of several smaller deals that included the agreement with JX Nippon Oil & Energy Corporation for the distribution of our modules in Japan through April 2015.
Turning to outstanding bookings and revenue terms on slide seven, given the lower system ASP environment, our net book to bill [declined] $500 million over the course of the year to $7.5 billion. However, we have seen a large increase in our opportunity set, which is discussed in detail on the next slide.
The purpose of this metric is to provide a useful indicator of the overall level of activity that we’re seeing in the marketplace, which remains strong. The total opportunity set rose significantly to 10.6 gigawatts during the quarter, primarily due to the inclusion of sites in Japan and sites globally that we are evaluating or have control over with the potential for future development.
The potential projects are included in our early stage opportunity set. We expect this opportunity set to increase further in the future and thereby facilitate significant growth of our foreseeable demand. The number of mid and late stage deals was 1.1 gigawatts, and would have been higher if not for the conversion of the aforementioned deals in the firm bookings this quarter. However, early stage opportunities have risen to 9.5 gigawatts, which means that the majority of these projects will have a development cycle of 12 to 24 months and consist primarily of our own captive project assets.
Slide nine shows the breakdown of demand by geography. Our opportunity set outside the U.S. is now 5.9 gigawatts, a significant increase on the prior quarter, and represents 56% of the total. This is a great illustration to date of the progress that we are making in sustainable markets and gives us confidence in our ability to replenish our pipeline going forward.
Turning to slide 10, we recently announced that we will be holding an analyst day on March 19 in New York City. We will take this opportunity to lay out the following: full 2014 guidance on financial and business metrics; the global strategic update and a discussion of our business segments; our competitive positioning relative to our peers, including updated efficiency roadmaps and production plans, with time set aside for participants to ask questions of myself and the executive management team. This entire event will also be webcast to the public at large.
I know that both myself and my team look forward to speaking with you then and sharing with you our plan to continue to develop a world powered by clean, affordable energy while providing long term value to our shareholders.
Now I’d like to hand the call over to Mark, who will discuss our Q4 and 2013 financial results in detail, and provide our guidance for Q1.
Thanks, Jim, and good afternoon. Turning to slide 12, I would like to begin by highlighting the fourth quarter and full year 2013 operational performance. Production in the quarter was 444 megawatts DC, up 4% on a sequential basis. This decrease reflects the continued revamping of production lines that have undergone planned equipment upgrades. When completed, these upgrades will facilitate the achievement of near term targets on our module cost and efficiency improvement roadmaps.
Comparing production year over year, on a consistent basis, production increased 7%, and was driven by higher module efficiency and throughput improvements on the same number of production lines.
In the fourth quarter, we ran our factories at approximately 83% capacity utilization, up 3 percentage points from the prior quarter. As Jim highlighted earlier on the call, we’ve made great progress toward achieving the efficiency and manufacturing cost targets that we provided during our analyst day in April. Module manufacturing costs per watt decreased to $0.56 from $0.59 last quarter, a $0.03 per watt or 5% reduction quarter on quarter.
This represents a combined decline of $0.11 or 16% in the past two quarters, which has been driven by good balance of efficiency gains, throughput improvement, and variable cost reductions. For the full year, average module costs per watt decreased to $0.63 from $0.70 in 2012, a 10% reduction.
Excluding the impact of underutilization, cost per watt fell to $0.54, a $0.03 decline from the prior quarter. During Q4, our best plant’s manufacturing costs at full utilization was $0.53 per watt.
Looking at the fundamental manufacturing costs of our best plant, which excludes freight, warranty and EOL, our Q4 cost per watt was $0.47, $0.06 lower than Q4 of 2012. This ongoing improvement of our manufacturing costs highlights the ability of our world-class R&D and manufacturing teams to implement efficiency and manufacturing improvement programs in order to achieve the company’s cost targets.
The average conversion efficiency of our modules was 13.4% in the fourth quarter, which is up 50 basis points year over year and 10 basis points higher quarter over quarter. In Q4, our best line produced with an average efficiency of 13.9%.
We continue to make significant improvements in our module efficiencies with our best line, now running at 14.2% efficiency, which is 110 basis points higher than our lead line was running at this time last year.
110 basis points is one of the largest efficiency increases we have experienced in a 12-month period, and represents the momentum and R&D and operations team have in delivering against our efficiency improvement roadmap.
Now, moving to the P&L portion of the presentation on slide 13, fourth quarter net sales were $768 million, compared to $1.3 billion last quarter. The sequential decrease was due to lower systems revenue and a lower systems volume to third-party module customers.
The decreased systems revenue was attributed to the initial revenue recognition of Desert Sunlight and the sale of the ABW projects in the prior quarter. As a percentage of total net sales, our systems revenue, which includes both our EPC revenue and solar modules [use and assistance] project remained flat from the prior quarter, at 95%.
For 2013, net sales were down slightly to $3.3 billion from $3.4 billion in 2012. Relative to our full year guidance, updated on the Q3 earnings call, net sales were slightly lower, as certain projects expected to achieve revenue recognition did not meet all the required criteria in Q4 and now will be recognized in 2014.
Gross margin in the fourth quarter was 24.6%, down from 28.8% in the prior quarter. The decrease was due to the lower average selling price in our module-only sales and a decrease in the cost of sales in Q3 related to a reduction in the estimate of our end of life recycling obligation.
On a full year basis, 2013 gross margin increased 0.8 of a percentage point to 26.1% versus 25.3% in 2012. This increase is primarily attributable to the mix of systems revenue, reduction in module and balance of system costs per watt, partially offset by lower average selling prices for our modules and systems.
Fourth quarter operating expenses including restructuring and asset impairment charges decreased $27 million quarter over quarter to $129 million. This decrease is attributable to a pretax asset impairment charge of $57 million related to the third quarter sale of the company’s facility in Mesa, partially offset by a pretax impairment charge in the fourth quarter of this year of $25 million related to a further writedown in the company’s idle Vietnam facility. In the fourth quarter, a change in our marketing strategy to accelerate the sale of the Vietnam facility was undertaken, which resulted in the asset writedown.
Excluding asset impairment, total operating expenses in the fourth quarter increased approximately $5 million compared to the prior quarter. The increase in operating expenses was related to a temporary increase in relocation expenses related to the exit of our Mesa facility and higher investment in research and development expenses in order to accelerate next-generation technologies.
For the full year 2013, operating expenses, excluding restructuring and asset impairments, were $407 million versus $421 million in 2012, representing a 3% decrease. The prior year benefitted from a significantly lower stock based compensation associated with restructuring related [unintelligible] grants. Excluding stock based compensation expense, operating expenses declined from $408 million to $370 million in 2013, a 9% decrease.
On a reported basis, fourth quarter operating income was $60 million compared to $208 million in Q3. The decrease is primarily attributable to the initial revenue recognition of Desert Sunlight and the sale of the ABW projects in Q3, partially offset by lower operating expenses including restructuring and asset impairment charges.
Full quarter operating income excluding restructuring and asset impairments was $455 million. In comparison, 2012 operating income was $487 million, excluding costs in excess of normal warranty, restructuring, and asset impairment charges.
Fourth quarter GAAP net income was $65 million, or $0.64 per fully diluted share, including after tax restructuring and asset impairment charges of $0.25 compared to $1.94 per fully diluted share in the third quarter. Excluding the asset impairment charges of $0.25, our fourth quarter non-GAAP earnings per fully diluted share was $0.89.
Q4 EPS also benefited from a lower effective tax rate. The effective tax rate in Q4 was lower than anticipated due to jurisdictional income mix from lower profits and higher tax jurisdiction, in addition to the one-time tax benefit recorded for post-tax holiday deferred taxes.
Turning to slide 14, I’ll review the balance sheet and cash flow summary. Cash and marketable securities increased by approximately $232 million, reaching $1.8 billion. The increase was driven by cash received from customers for the continued buildout of our [captive] systems projects and module sales. In addition, we received proceeds from the sale of our Mesa facility in Q4.
Our net cash position, which provides a competitive advantage, increased by $238 million to approximately $1.5 billion. Compared to the end of 2012, total cash and marketable securities increased by approximately $760 million and net cash increased by $1.1 billion.
Accounts receivable, trade decreased by approximately $12 million quarter over quarter to $136 million, is due to collections related to several of our systems projects and continued collections from module-only sales.
Unbilled accounts receivable retainage balance increased by $84 million, reflecting the reclass of retainage related to the Topaz and Desert Sunlight projects from not current to current. This increase was partially offset by collection of the majority of the retainer on our Agua Caliente project.
Inventories, including balance of systems parts, increased $70 million due to higher inventories in our systems business to support increased project activity and due to lower third-party demand as we did not sell through our Q4 production.
Project assets increased $136 million, primarily due to construction activities related to our Solar Gen and Macho Springs projects. Deferred project costs decreased by $201 million, principally due to continued revenue recognition of the Desert Sunlight project, which was partially offset by increases associated with the construction activities on our AGL project in Australia and the Campo Verde project, which has not yet achieved revenue recognition.
Other assets, including noncurrent retainage, decreased by $265 million versus the prior quarter, primarily related to the reclassification of the retainage related to the Topaz and Desert Sunlight projects. Such retainage amounts relate to construction work already performed, but which are held for repayment by customers as a form of security until we reach certain construction milestones.
Quarter over quarter, total debt decreased to $223 million, a sequential decline of approximately $6 million. Operating cash flow in Q4 was $192 million, compared to $375 million in the third quarter. Free cash flow was $137 million, compared to $284 million in the prior quarter.
Capital expenditures totaled approximately $56 million for the quarter, and were primarily related to production upgrades, which are expected to increase module efficiency and throughput. Depreciation for the quarter was $62 million compared to $60 million in the prior quarter.
Turning to slide 15, I will now cover the guidance section of today’s call. Consistent with last year, we will provide complete annual guidance at our analyst day, which as Tim mentioned is scheduled for March 19. While it is not our practice to provide quarterly guidance, given that it is a couple of weeks away until our analyst day, I will provide guidance on key elements of our expectations for the first quarter.
First quarter guidance is as follows: We expect net sales in the range of $800 million to $900 million, earnings per share in the range of $0.50 to $0.60 per fully diluted share, cash used in operations activities to be between $300 million and $400 million.
There are several factors driving the operating cash flow used in the fourth quarter. The primary use of cash of approximately $300 million is related to ongoing construction of projects which have not yet been sold. In addition, continuing investments in global project development activities, including the initial build of our [beryllium plant] and finally the timing of some expenditures from the fourth quarter of 2013 are driving the operating cash flow use in the first quarter.
Please note also that these first quarter numbers, particularly operating cash flow, are not indicative of the full year profile, as we expect to receive proceeds from the sale of projects on the construction in the later portion of the year. Full year guidance will be discussed in more detail at the company’s analyst day.
Now moving to slide 16, I will summarize our progress this year. 2013 was an outstanding year, as we have continued to execute on our technology and manufacturing cost roadmaps. More detail on our future technology advances, facilitated by our just announced record cell efficiency of 20.4%, will be covered at the analyst day.
In 2013, we continued to replenish our pipeline of bookings of 1.7 gigawatts DC. We remain committed to continue to build our project pipeline and we have an opportunity set in excess of 10 gigawatts to enable us to do this, with particular focus on expansion into global sustainable markets.
From a financial standpoint, we exceeded the earnings estimate provided during our analyst day this year. In addition, we continue to strengthen our balance sheet which provides a competitive advantage as we seek to execute on our strategic objectives.
With that, we conclude our prepared remarks, and open up the call for questions. Operator?
[Operator instructions.] And we’ll take our first question from Patrick Jobin with Credit Suisse.
Patrick Jobin - Credit Suisse
I’ve noticed in the past on your pipeline of projects, that most of the projects you have there are already sold. I was wondering if you could talk about your plans for a potential yieldco maybe next year and if you need to build out additional projects that have not been sold for a potential yieldco.
We continue to evaluate what a yieldco would look like for the company, looking at what the characteristics of what the vehicle would need to be to have acceptability in the marketplace, what we think it would trade at from a financial metric, what the impact of that trading valuation would mean for the company, what it would mean for the drop down or transfer price economics, it all paints a very complicated picture, including the likelihood that we would ned to consolidate that vehicle, which makes for very, very complicated financials.
Several things are clear from our analysis, one of which is that we believe we have available to us an adequate portfolio of projects that would work in the marketplace. That’s a long way from a decision that we’re going to go use those projects to form a yieldco, but that is not a barrier that we believe we face. We believe that we have enough in hand to make that work.
There’s a lot more work to be done, there’s significant impact on the structure and appearance of our financial statements that we have to take consideration of, and we’re still, I would say, quite a ways away from a decision, but that’s not one of the barriers that we see should we decide that’s something we want to pursue.
And we’ll move next and take our next question from Vishal Shah with Deutsche Bank.
Vishal Shah - Deutsche Bank
I just want to follow up on the yieldco question. Maybe could you guys give any kind of indication of how many megawatts you could drop into a yieldco or potentially sell to yieldco investors?
I think that’s a degree of specificity we probably are not comfortable going into at this time.
Vishal Shah - Deutsche Bank
And maybe on a different line, could you give us an idea of where PPA prices are today, or where you’re seeing them?
I don’t think we can generalize. When we look, even within the U.S. versus globally, it’s a very wide range, with a whole bunch of project specifics that dictate the outcome. And I don’t think I can give you any information that would really be meaningful.
And we’ll move on next to Paul Coster of JPMorgan.
Paul Coster - JPMorgan
First, just a quick clarification. The quarterly guidance for Q1 was just a one-off, we shouldn’t get used to seeing that going forward? Is that right?
Yeah, it’s indicative of what we see the first quarter, and I think as you know, a lot of our quarters have movements from one quarter to the next, which also needs to be taken into consideration on how we see the annual guidance, which is what we’ll provide in more detail in the analyst day here in a few weeks.
Paul Coster - JPMorgan
I meant mainly are you going to split the annual guidance, you’re not going to issue quarterly guidance?
Yes, that’s right. This is the same process we used last year.
Paul Coster - JPMorgan
And then just switching gears, can you just give us your thoughts on [unintelligible] and what we should expect from that in the near future?
We’re moving ahead with the pilot production facility and we’ll expect to talk a little bit more about that at analyst day. The impact in 2014 will be relatively small as the facility will just be starting up. So no big major impact. And anything further we’ll talk about at analyst day.
And we’ll move next to Krish Sankar of Bank of America.
Krish Sankar - Bank of America Merrill Lynch
It doesn’t sound like you’re writing off the yieldco by any means, but just curious what else might be out there from your point of view that you guys could leverage from the cost of capital point of view to go out and further pursue utility scale solar development, should you not choose to do a yieldco?
There’s lots of discussion and activity throughout the industry on a variety of capital structures, and there are a lot of things that have been discussed in publications and by the industry broadly, including partnerships with institutional type providers of funds that would be interested in the long term stable cash flow nature of the assets, similar to what the investors in a yieldco would be interested in.
There have been discussions of continued securitization through bond offerings, similar to what’s been done on some of the large projects. I think that over the coming year or a couple of years, one thing you may see is you may see people beginning to aggregate smaller utility scale projects into groups that are then financed on a single basis.
One of the issues you have as you move down in project size, transactions costs do not diminish on the same factor as size. So the cost to finance a 20 megawatt project is not significantly different than the cost to finance a 200 megawatt project. So I think one of the things that we can do and others may do is begin to see, rather than standalone financing, you’ll see the aggregation of assets into groups, which provides a little more efficiency and reduces the cost of capital.
So I think broadly, what I expect to see is when I look at the cost of capital that’s being applied to solar assets, I continue to see a delta versus mature thermal assets, and I think that will disappear over time as you get more projects out there and you get an operating history underneath them, and you get a comfort on the part of the investing community with the stability of the cash flows and the long term performance of the facilities, you’ll just see the risk premium demand shrink, and I think we expect to see that continue over the next couple of years.
I think the other thing is that in general what you continue to see is that the constraint in the market is the actual asset. And there’s a very competitive environment associated with that asset, and so we’re starting to see, as Jim has indicated, and we expect to continue to see, return expectations to normalize, maybe more comparable to other assets that you may see out in the market. And some of that is starting to happen.
The other thing, whether we participate with a yieldco or not, those of you who follow it know that there’s a pretty heavy dependency around growth, so not everybody is going to have a sole sponsored yieldco. They’ll most likely look to buy third-party assets. So whether we control and own the vehicle, or we participate in that environment, given the constraint in the market, largely the asset, we think we’ll have access to very competitive cost of capital.
We’ll move next to Brian Lee with Goldman Sachs.
Brian Lee - Goldman Sachs
I missed a bit of this, but what was the mix of projects versus modules only for the roughly 400 megawatts or so of incremental bookings in October? And then my follow up was on backlog timing. If I look at the projects that you have contracted but not yet sold in backlog, most seem to have CODs in 2016. Is there flexibility to pull that forward in any of those contracts so that you could actually deliver power sooner? Or is that not an option given your customers’ needs?
On the first one, in terms of the mix of the booking, I think as Jim indicated, 150 megawatts was associated with a project that was awarded in California, the 40 megawatts was associated with Kingbird. But I think you could infer from that a high percentage of the mix was system related volumes.
The other one in terms of the backlog that you’re requesting, and the timing, obviously there’s always opportunities to move or flex schedules. A lot of times you have to understand where you are in the permitting process, with the interconnection data. There’s a lot of other variables that have to be evaluated and determine whether or not projects move forward or get pushed back.
But we typically will look at whatever we can do to optimize the return against that asset and if something makes sense, either to delay or to pull forward, those are things we take into consideration to optimize the return on capital.
We’ll move next to Rob Stone with Cowen & Company.
Rob Stone - Cowen & Company
If you could, just a little more color on you said that there were some projects where the revenue recognition criteria weren’t met in Q4. Can you add anything to that?
Yes, we had a couple of projects that we included in our initial guidance, and anticipated that we would close everything out by the end of the year. They slipped, and now we’ll start to recognize them in ’14. We’ve said this before. The timing of being able to discretely determine exactly when an asset, especially if you’re selling out of COD, which both of these assets would be, the revenue recognition can move by a few weeks. And if it does, it can fall out of the quarter.
Now, we’ve also said in the past that we would not be held hostage to trying to deliver against a particular guided revenue number or EPS number in forego economics. So we’ll be very patient as it relates to that, and [unintelligible] transactions, and in this case we had a couple of projects that we had anticipated initially to fall into the quarter and now they fall into 2014.
And we’ll take our final question from Edwin Mok with Needham & Company.
Edwin Mok - Needham & Company
Can you tell us how much of the $400 million that you talked about in the fourth quarter will come in in the first quarter? That’s my first question. And follow up, in terms of system costs, any color in terms of how much of a decline to the quarter for the year on system costs?
We’ll talk about that in more detail when we get into the analyst day, when we can give you a better view of each of the quarters and what we think the year is going to shape up like. So we can defer that discussion until then. In terms of the system [VOS] costs for the year, we continue to make good progress.
We indicated at our analyst day, I think we were going to exit the year, including module, fully installed system costs, of $1.59. And we actually ended up better than that by about $0.03 or $0.04. So we delivered against the [unintelligible] and overdelivered against our expectations, and so we continue to make significant progress in driving down the total cost of the system.
And everyone, that does conclude our question and answer session at this time, and our conference call. We do thank you for your participation.
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