SunPower Corporation (SPWR) Earnings Call Transcript & Summary

Good afternoon. Welcome to SunPower Corporation's First Quarter 2020 Earnings Call. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions] I would now like to turn the call over to Mr. Bob Okunski, Vice President of Investor Relations at SunPower Corporation. Thank you. Sir, you may begin.

Thank you, Latif. I would like to welcome everyone to our First Quarter 2020 Earnings Conference Call. On the call today, we will start off with a strategic overview from Tom Werner, CEO of SunPower, who will also provide an update on our SPES business; followed by Jeff Waters, CEO of SPT and Maxeon, who will discuss our international business. Manu Sial, our CFO, will then review our first quarter 2020 financial results before turning the call back to Tom for guidance. As a reminder, a replay of this call will be available later today on the Investor Relations page of our website. During today's call, we will make forward-looking statements that are subject to various risks and uncertainties that are described in the safe harbor slide of today's presentation, today's press release, our 2019 10-K and our quarterly reports on Form 10-Q. See those documents for additional information regarding those factors that may affect these forward-looking statements. To enhance this call, we have also posted a set of PowerPoint slides, which we will reference during this call, on the Events and Presentations page of our Investor Relations website. Please note, we have provided a number of additional data slides in the appendix of our presentation deck. In the same location, we have also posted a supplemental data sheet detailing some of our other historical metrics. Finally, I'd like to highlight that Maxeon Solar Technologies is planning to host a Capital Markets Day prior to the close of the spin transaction and we will provide details on the timing as we get closer to the event. With that, I would like to call -- turn the call over to Tom Werner, CEO of SunPower. Tom?

Thanks, Bob, and thank you for joining us. On this call, we will provide an overview of our first quarter performance, address how we are managing during the COVID-19 disruption and highlight why we are well positioned to emerge from the current environment in a strong competitive position. Let's start with a recap of our first quarter performance. Please turn to Slide 3. We executed well in Q1, exceeding our guidance by posting positive EBITDA in a seasonally weak quarter. Our U.S. channels business continued to outperform its strength in all 3 segments, residential new homes, residential retrofit and the commercial dealer channel. Internationally, we saw a strong year-on-year shipment growth in spite of the COVID impact starting late in the quarter. We took rapid action, both internally and externally, to manage our cost structure and ensure supply chain continuity. In spite of the disruption, we continue to invest in our industry-leading technology, including next-generation Maxeon technology, Equinox storage and digital. Finally, I want to reiterate that the planned spin-off of Maxeon is expected to be completed by the end of the second quarter, pending regulatory approval and the signing of financial facilities. Now I would like to spend a few minutes highlighting the actions we have taken to address the current COVID disruption. Please turn to Slide 4. First, our primary focus during this pandemic is the safety and well-being of our employees while working closely with our partners to continue to serve our customers. Some of our key actions include: implementation of a work-from-home program for over 1,500 employees; a rapid and comprehensive transition to online sales in our residential business; continued investment in our industry-leading technology to position the company for future growth; and finally, implementing actions to streamline our 2020 cash flow and cost structure by up to $100 million with up to $500 million in available liquidity over the next 12 months. I would like to spend the balance of my time explaining why New SunPower is well positioned for success after the Maxeon spin. Please turn to Slide 5 for a review of Q1 performance in our SPES channels business. Our channels business delivered a very strong quarter, primarily driven by our U.S. residential business. Installs rose 50% year-over-year and delivered strong gross margins in what is historically a seasonally [Audio Gap] Residential bookings increased 10% year-over-year and our new homes backlog expanded to greater than 45,000 homes. Our installed base now exceeds 2.5 gigawatts and 317,000 customers. Finally, we are confident we have sufficient tax equity and project finance capability to meet our residential and commercial financing needs through 2020, including our recently announced $1 billion loan partnership with Technology Credit Union. On Slide 6, we outlined our leading position in the transition to online sales as well as our success in digitizing the customer process from end to end. We have been investing in digital tools for years and significantly ramped our investment in this area 2 years ago. Over a year ago, we began direct-to-customer online sales and refined the technology and process to improve close rates. This head start has positioned us well for the COVID pandemic as we were able to quickly train over 2,000 members of our dealer network using our existing tools and training procedures. As a result, our channel has been able to transition quickly and comprehensively to an entirely online approach. More than 95% of SunPower-generated appointments are now conducted virtually and subsequent installations completed with little or no customer contact. Additionally, we recently rolled out a "$0 Down + 6 Months On Us" lease and loan program to drive further demand through our online channels. Our rapid transition to online sales was enabled by the SunPower Design Studio application that allows homeowners to design solar systems on their own groove in real time. Since rolling this out in Q3 of last year, SunPower customers have already completed more than 40,000 designs. SunPower Design Studio reduces design turnaround times from 30 minutes to 30 seconds, allowing homeowners and their virtual sales representatives to create and review a variety of solar design options in real time. Finally, we recently launched our mySunPower dealer portal across all our channels, enabling digital signatures on all documents necessary to complete a system sale. Also, we are working closely with local jurisdictions to accelerate remote site inspection and permitting as part of mySunPower platform. In summary, our investments in digital are driving lower customer acquisition costs, streamlining sales and installation process and providing our customers with a superior experience. As we look forward to the current quarter, our digital platform is playing a key role in our efforts to manage the business through the current disruption. While we expect Q2 to be challenging, we are encouraged. If demand trend had stabilized by mid-April, we'd have shown improvement over the last few weeks. I'd now like to review some key elements of our strong competitive position in the U.S. residential small commercial channel and new homes markets. Please turn to Slide 7. First, our unmatched residential and commercial dealer network. Our dealer network now exceeds 500 partners nationwide, including 35 SunPower-branded Master Dealers. Our Master Dealers accounted for a record 50% of our revenue in the first quarter. We added 3 new Master Dealer partners during the quarter and expect this group of loyal partners will continue to drive a large portion of our sales. We also continue to see significant expansion of our unique small commercial dealer network where Q1 '20 volume was twice the same quarter as last year. Next, let me review our continued leadership in the new homes market. Our market share in the new homes market remains above 50%, with strong growth driven by the California new homes mandate. Our contracted new homes backlog exceeds 180 megawatts. This leadership position is built on sales to 18 of the top 20 California homebuilders. We have over 600 active home communities in development right now. This past quarter, we reached a major milestone with KB Homes where we installed our 10,000th system. Despite the current disruption, new home installations are proceeding and we expect to top 50,000 cumulative installations by the end of the second quarter. To further our lead in this market, we are developing an array of new products specifically designed for the new homes market that we will be announcing shortly. Please turn to Slide 8 where I'll provide an update on our Equinox storage solution. Equinox storage is the next major evolution of our Equinox energy platform, giving homeowners more freedom from utility outages and expensive peak electric rates. With Equinox, homeowners can store energy for full or partial home backup during blackouts and reduce daily peak electricity consumption. Most importantly, Equinox storage is the only fully integrated residential system designed, engineered and warranted by a single company. Equinox storage also offers residential customers significant advantages compared to our competition, including longer lifetime, fewer boxes on the wall, modular footprint and a superior warranty. Equinox storage is expected to have a significant incremental impact on our residential business beginning the second half of this year. Customer demand for our solution is very high, particularly in California. We are beginning sales and installations through our direct channel this quarter and will expand to our dealer network early in Q3. Finally, I'd like to briefly cover our Commercial Direct business on Slide 9. We undertook a major restructuring of our Commercial Direct business starting in the second half of last year, and we are beginning to see the benefits as the business outperformed our forecast in the first quarter. We expect sequential improvement through 2020. For the quarter, we achieved a number of important milestones. The business was close to breakeven on an EBITDA basis and we expect profitability in the second half of the year. We significantly improved the overall cost structure of this business. We continue to add to our backlog. We now have more than 90% of our forecasted 2020 business currently contracted. We are on track to achieve our target model of margins in excess of 50% and are driving a positive cash flow by the end of the year. Demand for our Helix storage product remains high with attach rates in excess of 30%. We expect that this program will drive material adoption in storage with new customers across our -- and across our 1.5 gigawatt installed base. Finally, we are seeing minimal COVID impact on our commercial business, given the longer lead times and essential services status with local authorities. With that, I would like to turn the call over to Jeff Waters, CEO of SPT and future CEO of Maxeon. Jeff?

Thanks, Tom. Let me start with a quick review of SunPower Technologies' first quarter performance. Please turn to Slide 10. SPT delivered strong year-on-year growth with overall Q1 shipment volume up close to 30% versus the previous year and an increasing mix of P-Series products. Overall, revenues were up 9%, driven primarily by DG market revenue, which increased 28% and comprised over 70% of total Q1 revenue. This growth speaks to the long-term fundamentals of our business and to the strength of our more than 1,000 global channel partners. Our Q1 performance saw the impact of both supply and demand reductions caused by COVID-19 disruption in our core markets beginning in March. This had us idling all of our factories near the end of the quarter as a result. I would like to now elaborate on the current status of our global manufacturing fleet. Please turn to Slide 11. With the exception of our HSPV P-Series joint venture in China, which is currently operating at full capacity, all of our factories were in warm idle for the majority of April. Just this week, we have resumed production in our factories in Malaysia, France and Oregon, and we expect that we will be resuming production in our remaining factories in the Philippines and Mexico this month. We're working closely with local governments on the safe reopening of our factories, and based on current projections, have sufficient inventory on hand to meet the vast majority of our customer commitments from the second quarter. Now let me cover our capacity expansion plans. Please turn to Slide 12. 2019 shipments totaled approximately 2.5 gigawatt, split evenly between IBC and P-Series technology. Looking forward, these charts show planned capacity expansion through 2021 compared to our 2019 capacity. Let's start on the left-hand side of the page with our IBC technology. While total capacity will increase only slightly, we will be converting our 10-year old Max 2 technology Fab 3 to our latest Max 5 technology, increasing the supply of our highest margin product by a factor of 4. Funding from TZS as part of the Maxeon Solar spin-off transaction will allow conversion of few further lines, and we expect to have 4 Max 5 line pairs in place by the end of 2021 with a capacity of around 1 gigawatt. The chart on the right shows our planned expansion of our P-Series technology through our HSPV JV. This expansion will more than double P-Series production to 5 gigawatts, with our supply allocation from the JV increasing to over 3 gigawatts in 2021. We are working closely with TZS on a highly automated Modco designed to handle the new 8-inch G12 wafer format. This technology will enable us to produce industry-leading 500- to 600-watt panels targeted at the global power plant market. Finally, the capacity expansion shown on this slide will be achieved with a total CapEx expenditure as a small fraction of the investment in our legacy fabs. We've dramatically improved our historical capital productivity via a combination of process innovation, reuse of existing fabs and use of a capital-light manufacturing partnership model for our P-Series technology. Looking forward, let me articulate some of Maxeon's key objectives post-spin. Please turn to Slide 13. First, we believe that we are well positioned for rapid growth once we exit the current industry disruption. We serve large and growing markets with differentiated products that we believe will allow us to gain share in both DG and large-scale applications. The infusion of liquidity associated with our spin-off will provide capital to upgrade our Fab 3 in Malaysia to higher-value technology. We will also benefit from the capital-light multi-gigawatt expansion of our HSPV JV. Second, we remain committed to expanding margins, starting with the transformation of Fab 3 from our legacy Max 2 capacity to our new lower cost, higher efficiency Max 5 technology. We also plan to leverage our global go-to-market channels to expand our product offering while extending our dealer channel footprint into new markets. Finally, we believe that risk mitigation is a key attribute in an industry as dynamic as solar power. The spin-off of Maxeon Solar will allow us to accelerate our technology development and deployment cadence, maintaining our historical technology differentiation versus our competition. We believe that the diversification of our customer base, both geographically and by market, helps insulate us from country- or application-specific policy-driven disruptions. We believe that our strong base of global investors and partners provide deep industry insight, supply chain visibility and global demand market access. With that, I would like to turn the call over to Manu Sial, CFO of SunPower.

Thanks, Jeff. I'd now like to discuss the financial results for the quarter. Please turn to Slide 14. Overall, we were pleased with our financial performance for the quarter as we exceeded our EBITDA guidance, added to our backlog and further delevered our balance sheet. We believe that a differentiated business model, industry-leading technology and strong balance sheet will be a competitive advantage in the current environment and for when conditions return to normal. Additionally, we have put into place a number of cash and cost initiatives to manage our business during the disruption while continuing to invest in technology that increases our offerings to our customers and execution efficiency. Finally, we continue to focus on improving transparency by adding incremental data metrics on key value drivers of our business, including SunStrong JV. Moving on to the specifics of the quarter. Non-GAAP revenue rose more than 10% versus Q1 '19 as we benefited from strong execution in both our segments. In SPES, revenue rose year-over-year, with particular strength in our channels business with C&I direct improving and making significant progress on its initiatives. We expect C&I to be more resilient in the current disruption given the longer project cycle times, the value proposition for customers as well as the economics of storage. For SPT, we shipped approximately 580 megawatts, up 29% year-on-year. Consolidated non-GAAP gross margin was 13%. In SPES, gross margin was up year-over-year, driven by an excellent performance in residential and better execution in our C&I direct business. We expect C&I direct business to return to profitability in the second half of the year. In SPT, gross margin was in line with forecasts and up year-over-year on solid DG demand and a better mix. Non-GAAP OpEx was $69 million for the quarter as we continue to invest in our next-generation technology. We have taken a number of steps to lower our expenses and expect double-digit decrease in 2020 OpEx versus 2019. CapEx for the quarter was $6 million, consistent with the Maxeon 5 ramp at Fab 3, with our second line now in production. Post-split, we expect that New SunPower will have minimal capital needs and Maxeon Solar CapEx will be more than covered by available liquidity and enhanced capital efficiency. Adjusted EBITDA was $9 million and ahead of guidance. I would now like to discuss key financial highlights of the quarter on Slide 15. We exceeded our margin and EBITDA guidance for the quarter, showcasing the strength of our underlying businesses. In SPES, we benefited from strong execution in the channels business as the residential installs rose 20% year-over-year with CVAR megawatts more than doubling. New homes installs also rose for the quarter while bookings doubled. We remain confident in our goal of second half profitability for our C&I direct business, given its first quarter execution and a significant portion of our 2020 forecast is in backlog at the end of the quarter. Finally, exiting first quarter, we believe that we have sufficient tax equity and project financing capacity to meet our 2020 needs. For SPT, we were also pleased with our performance despite the late quarter impact of global shutdowns which hurt international demand and fab utilization. That being said, we were able to mitigate the situation given our strong backlog and ability to meet the needs of our customers through effective supply chain actions and existing inventory. Finally, in response to the COVID-19 disruption, we instituted a number of initiatives that include salary reductions, reducing discretionary spending and rationalizing our CapEx. As a result of these programs, we expect to realize cash and cost savings of up to $100 million for 2020. We also undertook a review of our liquidity position and have approximately $500 million in liquidity sources for SunPower over the next 12 months. Please turn to Slide 16 where I will provide more details on these sources. We ended the quarter with $205 million in cash, which included retiring approximately $90 million in our converts as well as our typical seasonal Q1 inventory build. Additionally, cash collections for the first quarter were below forecast given timing of payments, though we have already collect -- recovered all of these collections. Our $55 million revolver backed by Total remains undrawn. We also expect to monetize 2 million shares of Enphase stock over the next 12 months. We also expect to collect cash from noncore asset sales. Finally, we will receive $50 million in net proceeds from the Maxeon transaction. In summary, while current conditions are difficult, we believe SunPower has the right model, the right technology and a strong balance sheet to manage through this crisis and emerge as an industry leader. With that, I will turn the call back to Tom for our guidance. Tom?

Thanks, Manu. As previously announced, we continue to assess the impact of the COVID-19 crisis on our financial -- on our fiscal year 2020 forecast. As a result, we will not be providing fiscal year 2020 guidance at this time. I would now like to discuss our guidance for the second quarter of 2020. Please turn to Slide 17. Company second quarter 2020 guidance is as follows: revenue of $290 million to $330 million on a GAAP to non-GAAP basis; GAAP gross margin of negative 9% to negative 3%; and net loss of $120 million to $100 million. On a non-GAAP basis, the company expects gross margins of 0% to 6% and megawatts recognized in the range of 340 to 400. We also expect cash generation to be breakeven to slightly positive in the quarter. We expect second quarter adjusted EBITDA in the range of negative $40 million to negative $20 million, with SPT in the range of negative $25 million to negative $15 million and SPES in the range of negative $10 million to $0. In summary, Q1 was a solid quarter for the company as we executed on our strategic initiatives and position the company for a strong and profitable performance post the pandemic. With that, I would like to turn the call over for questions.

[Operator Instructions] Our first question comes from the line of Michael Weinstein, Crédit Suisse.

Are you -- can you talk a little bit more about the impact on commercial -- on the Commercial Direct business from just the financial stress on a lot of commercial customers at this point in time, especially going into at least the second quarter, if not the second half? I understand you're pretty optimistic about third quarter and beyond, but are you seeing any pressure? And also, once a sale is booked in your bookings, is there a way for a customer to back out of that?

Michael, this is Tom Werner. And on the commercial side, I would say almost 100%, but not quite, projects are proceeding. Different customers reacted differently. We -- as you know, we do business with quite a variety, with public sector being the largest. And in some cases, the customers asked us to pause construction and then we worked it out and restarted. In some cases, there was no interruption. In terms specifically to your question, there's only one example where financial crisis has caused a project to be paused, and it looks like a long-term pause. Every other project is continuing or will continue very soon. And we've already considered that one project in our prepared remarks.

That's good news. Also, with the solar and storage loan financing deal, how many megawatts of loan or lease financing do you have? And also, just in general, are you seeing any kind of change in customer preference for loans versus leases in the crisis?

Yes. So I'll say a few words and then turn it to Norm. I -- Michael, we've always allowed our customers to choose and not to direct them in one direction. To the extent that we have a program like $0 down, 6 months on SunPower, of course, that changes the mix on some, and that's happened -- it's only been in place for a short time. Norm, do you want to comment further on mix?

Yes, happy to. Michael, as far as the mix goes, I think Tom iterated the right commentary, which is we pride ourselves with giving the customers that option. We certainly chose to make an introduction of a product with the $0 down and no payments for 6 months for loan and lease because we anticipated customers would want to conserve cash more than usual. But we've -- frankly, we've always had a fairly strong contingent of cash. It might not be quite as high, but I think it will still be strong and then we expect it to come back later in the year. From a standpoint of -- your first question was around the kind of how much capacity we have, I would say on the -- with the loan deal, we have, I would say, virtually unlimited capacity between our existing partner and, of course, now our new partner. I don't think we're going to have any capacity issues for years on the loan because we just added the $1 billion financial capacity. And on the lease side, we have capacity well through Q3 and we're well on our way to signing another extension of that. So we're not concerned about our ability to provide financing options to our customers in residential.

Got it. One more question about the batteries. Maybe can you talk a little bit more about the secret sauce that you guys have in your battery systems that give them an advantage over other battery systems? And then are you -- do you have any plans to sell to third parties? Or is this only going to be exclusively done through the SunPower dealer network?

Yes, Michael. I'd say a super quick comment and then turn it to Norm, the expert. The -- we're different because yes, we are designing parts of both the hardware and all of the software ourselves. So it's a strategic decision to do it ourselves, which has benefits, of course, because we can pick the features that we're going to differentiate on that Norm will now talk about.

Yes. Thanks, Tom. I mean I think that, first and foremost, one of the benefits of offering a complete solution is we can provide the customers with a unified experience, from the software experience, to the monitoring, to the storage hardware, and we can make sure it all works perfectly together. And very importantly, that also means the customer gets a single warranty, which covers the entire system. So you don't have -- if you have an issue, there's no blaming other people or tell them to talk to another supplier. And that's been super powerful for us before in what we called Equinox, and storage really makes Equinox storage really even stronger. And I think just capably, we think we have added some unique capabilities such that we can do this solution very elegantly with 2 boxes on the wall. And then we emphasize resiliency by building the systems in such a way that it can backup more of the home really than any other solution in the market. So both peak power response and then the ability to cover more of the home are key elements that we think are super important, particularly in California. And then finally, I'd also emphasize, we've taken an approach we think is sustainable long term, which is we are battery-agnostic. We will have ability to change batteries and drive -- as the battery cost curve comes down, we can test those on to our customers. And finally, your last -- not to forget your last comment. Obviously, right now, the current plan is to sell through our dealer network, and we expect that to be a tremendous opportunity for us from a business perspective. And I would say after providing it for new systems, I think there's a great opportunity to go to our existing over 300,000 customers. So our next target market will certainly be our existing customer base. We may, at some time in the future, also pursue selling our storage system to non-SunPower customers, but that won't be for a while. Right now, the focus is mostly new customers and then our own installed base.

Our next question comes from the line of Brian Lee of Goldman Sachs.

This is Alex on for Brian. So quick follow-up on that commercial. Can you kind of speak -- in light of the strength you're seeing in commercial, can you speak to, I guess, the portion of the guidance in the channel business that will be commercial in Q2?

Yes. So there's 2 pieces to the commercial business. There's the strength in small commercial that is in -- that we call CVAR or commercial value-added reseller, that's part of the channels business. And then the large commercial, which is separated, large commercial might be 20%, 25% total and CVARs about 1/3 of channels.

Great. That's very helpful. And I guess, switching gears a bit to this cost-saving initiative. Can you provide a bit more detail on how much of that is temporary versus structural, I guess, both on the cash and the cost side?

Yes. So the way to think about the up to $100 million of cost and cash savings, about 65% of that is cost, 35% of $100 million is cash. A big portion of the cash savings is CapEx out of the $35 million. Most of -- some of that is pushed out into 2021. From a cost perspective, I would say there is a reasonable amount of cost savings that is structural in nature and would be permanent impact. As you think about our OpEx from 2019 to 2020, which is where a lot of it will manifest, you'll see double-digit decline in OpEx year-on-year.

Our next question comes from the line of Phil Shen of Roth Capital Partners.

This is Donovan Schafer on for Phil today. So yes, we -- probably similar to Brian Lee and with Alex, we're navigating 5 concurrent earnings calls. So yes, a lot going on here. The questions -- I have 2 main questions that revolve around the TZS and the spin-off transaction. So the first one, just because this is a hot investor topic, surrounds -- or is around the $325 million debt facility and the $100 million revolver that's kind of part of somewhat -- it seems to be a contingency, in some ways, in getting it closed and the MOFCOM regulatory approval. So on the financing side, can you give any color on your confidence in being able to get that secured? And then on the MOFCOM, what attributes are they looking at or thinking about? What are the kinds of things that they, as a regulatory body, are considering?

So it's Tom. I will comment just super briefly and then hand it over to Jeff Waters. On debt, we do expect to close this quarter, pending the 2 things that you ask about. On MOFCOM, we get feedback from TZS, our partner, and so Jeff's comments will be based on that. And Jeff, with the team of people, are actively managing the debt raise. Jeff?

Yes. Just to -- certainly, the first piece on China regulatory, so all indications that we learned through TZS, that will close in Q2. For financing, we expect the same. And now, that said, certainly, COVID and social distancing has made diligence and documentation less efficient since the teams haven't been able to meet face-to-face, and we're working effectively with over half a dozen banks in multiple countries. That said, the teams, including TZS and Total, the investors are fully engaged and we expect to sign the debt facilities in Q2.

Okay. That's great. And then a follow-up. So you talked about pushing some capital expenditures out into 2021. And I imagine there's probably also some others that have been delayed just into the second half of this year. So presumably, in the initial negotiations with TZS, looking at the terms and the terms of the deal, if you're pushing CapEx, does that change? Could there be some adjustments, saying they expected to purchase equipment at such and such a stage of completion, but now with delayed CapEx, maybe there will be less of that completed? Is that going to result in any kind of renegotiation or change of the terms?

Yes. I think the -- what we've been able to do is -- the short answer is going to be no, but we're able to make adjustments. And it would be fair -- without affecting renegotiation, but I'll let Jeff add color to that. It would be fair to say that almost all the CapEx in the company now is in the upstream business. So Jeff would be best to cover it.

Yes. I would say, so yes, Tom is exactly right. The pushout of the CapEx that we did, I would say it was relatively small. And the -- I would say the main piece of CapEx for us for 2020 that's strategically important to the deal is the Max 5 build-out in our Fab 3 in Malaysia. And all of that is still on track and that is being managed and to the expectations that we had when we did the deal. So no impact on the deal.

Our next question comes from the line of Colin Rusch of Oppenheimer.

I'll continue the trend here. This is Kristen on for Colin. First one, you've touched on it from a couple of different angles, but I really wanted to ask about what sort of capital needs are you feeling from -- seeing from your dealer network right now as you're going through this downturn?

So again, we'll -- this is Tom. I'll say a few words and then I'll turn to Norm. We have 500 dealers, 35 of which are Master Dealers. The Master Dealers tend to be quite financially resilient and there's quite a distribution within the remaining 465. And Norm can mention that the government programs have been quite effective with our dealer base, many of whom have been with us more than a decade. Norm?