Thank you for standing by. Welcome to Canadian Solar's third quarter 2021 earnings conference call. My name is Rochelle, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Isabel Zhang, IR Director at Canadian Solar. Please go ahead.
Thank you, operator, and welcome everyone to Canadian Solar's third quarter 2021 conference call. Please note that we have provided slides to accompany today's conference call, which are available on Canadian Solar's investor relations website within the Events and Presentation section. Joining us today are Dr. Shawn Qu, Chairman and CEO, Yan Zhuang, President of Canadian Solar's majority-owned subsidiary, CSI Solar, Dr. Huifeng Chang, Senior VP and CFO, and Ismael Guerrero, Corporate VP and President of Canadian Solar's wholly-owned subsidiary, Global Energy. All company executives will participate in the Q&A session after management's formal remarks. On this call, Shawn will go over some key messages for the quarter. Yan and Ismael will respectively review the highlights of the CSI Solar and Global Energy businesses, followed by Huifeng, who will go through the financial results.
Shawn will conclude the prepared remarks with the business outlook, after which we will have time for questions. Before we begin, may I remind listeners that management's prepared remarks today, as well as their answers to questions, will contain forward-looking statements that are subject to risks and uncertainties. The company claims the protection of the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from management's current expectations. Any projections of the company's future performance represent management's estimates as of today. Canadian Solar assumes no obligation to update these projections in the future unless otherwise required by applicable law. A more detailed discussion of the risks and uncertainties can be found in the company's annual report on Form 20-F, filed with the Securities and Exchange Commission.
Management's prepared remarks will be presented within the requirements of SEC Regulation G regarding generally accepted accounting principles or GAAP. Some financial information presented during the call will be provided on both a GAAP and a non-GAAP basis. By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends. Management uses non-GAAP measures to better assess operating performance and to establish operational goals. Non-GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP. Now, I would like to turn the call over to Canadian Solar's Chairman and CEO, Dr. Shawn Qu. Shawn, please go ahead.
Thank you, Isabel. Good morning and good evening, everyone. During the third quarter of 2021, we delivered 3.9 GW of module shipments and sold our largest battery storage project to date, which is the 1.4 GWh Crimson project located in Riverside County, California, one of the largest battery storage projects in the world. We accomplished 34% year-over-year revenue growth, with gross margin well ahead of guidance and our strongest net profit performance since the start of COVID. Overall, we are pleased with our ability to navigate an extremely challenging market while continuing to focus on long-term investment and R&D innovation. You will hear Yan, Ismael, and Huifeng walk through a more detailed review of our performance in a few minutes. First, I would like to highlight three key messages on the global energy outlook, our strategic priorities, and CSI Solar's STAR Market IPO.
Please turn to slide three. First, after many years, we are starting to see real action across the world to appropriately price the cost of carbon and curtail investment in fossil fuels. For example, the European Union's Emissions Trading System, one of the most mature markets in the world, saw carbon prices exceed EUR 60 per ton for the first time in its history. Now it remains at nearly 6 x of its 2010 to 2018 average. In response, we are witnessing more actions that call for greater clean energy deployment. It is no coincidence that we are experiencing a number of energy crises across the world, most notably in Europe, China, and parts of the U.S. This event reflects a broader trend of declining investment in traditional energy, insufficient investment growth in clean energy, and continual growth in economic development. I see three moving parts in this equation.
However, we don't want to increase the supply of fossil fuel-based energy. We also don't want to lower our living standards. Therefore, the only solution is to accelerate the adoption of reliable, low-cost, and clean renewable energy, including solar and battery storage. Please turn to slide four. The long-term growth outlook for solar and battery storage is stronger than ever. Solar PVs cumulative installations will cross 1 TW next year and is set to reach 3.2 TW by 2030. Battery energy storage cumulative installations will cross 100 GWh next year and is set to reach 1 TWh by 2030. At the same time, clean energy PPAs are also going up, reversing a long-term trend of aggressive PPA bidding. The market is certainly adjusting and in a good way.
Meanwhile, we are encouraged by the upbeat narrative and government policies in supporting the clean energy transition. China has announced a series of decarbonization policies for the 14th five-year plan, demonstrating the country's commitment to fight climate change. We expect more policies to come. We are also hopeful that President Biden's Build Back Better plan will pass Congress and set America on the right path towards decarbonization. These are responsible government policies that will support long-term sustainable development. Turning to slide five. All of these megatrend actions serve as tailwinds for our business for years to come. Our preparations to capture these opportunities started many years ago. Today, our global pipelines of solar and battery storage assets increase the visibility of our future growth. We are also expanding and deepening our sales channels, focusing on providing total clean energy system solutions.
At the same time, we are making tactical manufacturing capacity expansion decisions, limiting investment in certain stage of supply chain to navigate through the short-term supply chain volatility. We are investing significantly in technologies and R&D to maintain our leadership position in clean energy. Finally, I would like to update you on the CSI Solar's IPO in China. Please turn to slide six. We are on the third round of Q&A feedback with Shanghai Stock Exchange and continue to make progress. We continue to communicate proactively and transparently with officials at the Shanghai Stock Exchange. At this point, we think it is more realistic to target completion early next year rather than this year, subject to customary market and regulatory risks. With that, let me turn over the call to Ismael for an overview of our Global Energy business. Ismael, please go ahead.
Thanks, Shawn. Please turn to slide seven. I'm proud to report that in Q3, Global Energy closed 350 MW or 1.4 GWh in battery storage project sales, delivered a total of $140 million in revenue and nearly 44% gross margin. Most of the profit this quarter was driven by our landmark Crimson standalone battery storage project in California, demonstrating the value creation potential of battery storage projects. Note that we completed this sale pre-construction, and therefore, our gross profit is a better metric of our performance than the revenue. As we continue to hold 20% ownership in this project, it will allow us to capture its long-term value creation. Yan's battery storage team is also providing the full integrated battery storage system, EPC, and long-term maintenance service.
Construction started several weeks ago, and we expect the project to reach commercial operation by the summer of 2022, with a significantly shorter lead time than most solar projects. We are very proud of our teams for having developed one of the largest standalone battery storage projects in the world, and for contributing to California's grid reliability and safety while supporting its decarbonization goals. Besides Crimson, we now have a total of 2.9 GWh of battery storage projects under construction, and almost 500 MWh in backlog. We are also expanding our storage project pipeline in Latin America and other parts of the world. For example, we won Colombia's very first utility-scale battery storage project of 45 MW and 45 MWh. Colombia has the third-largest population in Latin America after Brazil and Mexico, with very strong renewable energy growth fundamentals.
Following our first storage project win, we recently won another project in Colombia, a 52 MW solar plant in a nearby location. Elsewhere, we are also developing new battery storage projects in Chile. Recently, we have been winning in public auctions, while also exploring opportunities to create value by developing merchant battery storage projects. These projects represent our entry into new Latin American markets and our ability to diversify our pipeline globally, positioning Global Energy for long-term growth. Slide eight, please. Near-term, we are doing all we can to reduce the impact of equipment cost inflation. For instance, in some markets, we have signed PPAs indexed to inflation, significantly hedging our position. In other markets, we've been negotiating significantly higher PPAs for new projects, and off-takers have been willing to accept higher prices. We are also proactively delaying equipment orders for projects where we can.
Overall, the impact in 2021 is limited, but we think there will be some impact in 2022. Turning to slide nine. That said, we still anticipate a strong 2022. We continue to grow our global pipeline of projects, which now stands at 24 GW for solar projects, including China Energy, and 21 GWh of battery storage projects. Meanwhile, we continue to execute on our long-term strategy to expand the base of recurring cash flows. While our Brazilian infrastructure fund is slightly delayed due to the cost inflation impact, we are making significant progress on our Italian investment vehicle. The first batch of projects will be 164 MW and will be hitting the virtual road with investors in the next few months.
Our operations and maintenance teams are also winning new project contracts with our global O&M portfolio now at 5 GW of solar, of which half is already operational, and 860 MWh of storage projects across nine countries. Now let me pass it on to Yan, who will talk about Canadian Solar's CSI Solar business. Yan, please go ahead.
Thank you, Ismael. Please turn to slide 10. In Q3, we delivered 3.9 GW of shipments and $1.1 billion revenue. Gross margin improved sequentially by 200 basis points to 15.1%, driven by continued price increases and partially offset by higher costs. The margin was also helped by an antidumping and countervailing duty reversal benefit as the solar tariff for the last revision was reduced to zero in the remand decision. Please turn to slide 11. The operational environment remains very challenging, driven by three key factors. First, the global logistics bottleneck is continuing to increase our transportation costs while delaying shipping schedules. We have signed several long-term contracts with shipping companies to mitigate the impact. With average shipping costs at 5 x the historical average, the impact remains significant.
Second, material costs are moving up again across the board. Polysilicon, glass, EVA, encapsulant, steel, aluminum, et c. Not just for solar, but for battery materials as well. With lithium carbonate prices at 4x where they were at the beginning of the year. We're mitigating the cost increase with continued ASP increases, with solar module prices up by nearly 25% year-over-year. Third, power curtailment has not only affected our capacity utilization rates at certain factories, but also significantly affected the utilization of energy-intensive upstream manufacturing capacity, leading to the resumption of input price increases since September. The operating environment is not great, and the power shortages in China are affecting the execution of our margin improvement plan. However, we continue to take proactive measures to improve the situation.
For example, we have walked away from low-priced volume in order to protect margins and have been raising prices more aggressively on new contracts. Our market positioning and brand is now more important than ever as we further expand and deepen our sales channel partnerships as a clean energy brand providing total system solutions. We're also optimizing our capacity expansion and utilization to ensure we are operating in line with market realities. As Shawn mentioned, we're limiting investment in certain stages of the supply chain to avoid falling into the overcapacity trap. For example, we see significant overcapacity in cell manufacturing, and thus we do not have immediate plans to expand cell capacity. Nevertheless, we do expect to continue expanding our module capacity to benefit from cell overcapacity. We continue to develop our sales channels, particularly in the distributed generation segments. Importantly, turning to the next slide, please.
We're investing in the next-generation solar technologies such as N-type heterojunction or TOPCon programs. As you know, we already invested in an HJT pilot line earlier this year, and we'll be delivering HJT modules in the coming weeks. The champion cell during mass production, not R&D testing, has generated close to 25% efficiency, while average efficiency is reaching 24.5%. We're also currently deploying a 200 MW TOPCon pilot line utilizing existing mono PERC capacity. Please turn to slide 13. In terms of battery storage, we're well on track to complete 860 MWh of storage shipments this year for the Mustang and Slate projects. In fact, Mustang's 300 MWh project is commissioning as we speak. The Slate project will be completed before the end of the year.
Our combined contracted and forecast pipeline continues to increase, although some of the earlier stage pipeline has dropped somewhat due to the current supply challenges. That being said, we're making significant progress on our in-house R&D and product development for stationary battery storage product and hope to give you more updates very soon. Now, let me turn over to Huifeng, who will go through the financial results in greater detail. Huifeng, please go ahead.
Thank you, Yan. Please turn to slide 14. In Q3, we delivered $1.23 billion in revenue. Gross margin was 18.6%, well ahead of our guidance of 14%-16%. Q3 benefited significantly from the Crimson battery storage project sale, as well as higher module pricing. As Yan mentioned, we also had a $12 million benefit from the AD/CVD reversal true-up. Without the true-up benefit, the gross margin would still stand at 17.6%, well ahead of the guidance. Selling and distribution expenses increased by 21% quarter-over-quarter, mainly due to higher transportation costs, which accounted for three-quarters of the sequential increase. To give you a sense of the magnitude, two years ago, transportation costs accounted for approximately 50% of selling and distribution expenses. Today, it accounts for 80%.
The total amount is more than 3x from two years ago. General and administrative expenses also increased by 21%, mainly due to the project loss contingency. Our underlying OpEx cost increase is very low, even after adjusting for transportation costs. In this tough operating environment, we continue to manage costs very carefully. While maintaining our investment on future technology and cost-saving operational efficiencies. Other operating income increased during this quarter due to a combination of factors, including the sale of 75 MW of solar power systems in China. Total operating expenses were up 11% and accounted for 14% of revenues. This was above our targeted long-term OpEx level. The net foreign exchange loss in the third quarter was $14 million, higher than usual.
The FX loss was mainly due to the strength of the U.S. dollar relative to a basket of our currencies, including the Brazilian real and euro. The losses were partially offset by our hedging programs. The income tax benefit was $3 million, resulting from the utilization of net operating losses. Net income attributable to Canadian Solar shareholders was $35 million, or $0.52 per diluted share. Our basic and the diluted EPS stands at $0.56 and $0.52, respectively. We increased our issued share base by 1.1 million and 2.6 million shares during Q3 and year to date with our ATM, the At-the-Money Equity Offering Program. In addition, our diluted EPS is adjusted for 6.3 million shares to account for the additional shares at our convertible bond being fully converted into equity. Slide 15, please.
Now, turning to cash flow and the balance sheet. Our working capital days increased moderately as turnover days were affected by longer logistics cycles. We now expect the full year 2021 CapEx to be around $500 million, below our previous guidance, as we adjust capacity expansion and utilization plans in light of latest market conditions. Of that amount, we deployed approximately $420 million year to date, including $60 million in the third quarter. We ended the period with a healthy cash balance at $1.4 billion, giving us significant financial flexibility. Total debt increased modestly to $2.3 billion from $2.2 billion, mainly driven by an increase in non-recourse borrowings, while net debt to EBITDA, excluding restricted cash, remained stable at 3.7 x. Now let me pass it back to Shawn, who will conclude with our guidance and business outlook. Shawn?
Thanks, Huifeng. Let's turn to page 16. For the fourth quarter of 2021, we expect total module shipments to be in the range of 3.7 GW-3.9 GW, including approximately 250 MW of module shipments to our own project. Total revenue is expected to be in the range of $1.5 billion-$1.6 billion. The updated shipment and revenue guidance reflects a deliberate decision to protect module ASP and profitability in the fourth quarter. Q4 gross margin is expected to be between 14%-16%. Please note that this does not include any benefit from the potential refunds of previously incurred Section 201 tariffs on modules shipped to the U.S.
As a reminder, the U.S. Court of International Trade recently ruled to reinstate the exclusion of bifacial solar modules from Section 201 tariff. The CIT also reduced the Section 201 tariff rate from 18% to 15%. We are still evaluating the magnitude of the potential benefits, therefore, it is not included in today's guidance. For the full year of 2021, battery storage shipments for CSI Solar are expected to be in the range of 840 MWh-860 MWh. Project sales in Global Energy are expected to be in the range of 1.5 GW-2.1 GW, reflecting the timing of certain project sales, which are already in advanced negotiations, but that may occur in December or Q1 next year. We are also introducing guidance for the next year.
For the full year of 2022, we expect module shipments to be in the range of 20 GW-22 GW, reflecting approximately 45% growth from 2021. We expect battery storage shipments to be in the range of 1.4 GWh-1.5 GWh, reflecting 70% year-over-year growth. The total project sales to be in the range of 2.4 GW-2.9 GW, reflecting 50% year-over-year growth. Revenue for the full year 2022 is expected to be in the range of $6.5 billion-$7 billion, up 30% year-over-year. To sum up, we believe the challenges facing the industry are temporary, and the long-term fundamental remain positive. Canadian Solar is positioned to benefit from both market and company-specific catalysts in each of our business segments. With that, I would like to open the call to our questions. Operator?
Thank you. As a reminder, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel the request, please press the pound or hash key. Your first question comes from the line of Philip Shen from Roth Capital Partners. Please ask your question.
Hi, everyone. Thank you for taking my questions. The first one is on the 2022 guidance. Thank you for sharing that outlook so early. Specifically, I was interested in understanding how you expect margins to trend by quarter. I know you haven't given it officially, but given your outlook for how input costs could trend and your ability to increase both pricing on the module side with ASPs as well as PPAs on the project side, how do you think we could see margins trend by quarter as we go through 2022? Thanks.
Hi, Philip. This is Shawn speaking. We believe now those are all forecasts, you know, that the feedstock pricing has been quite volatile this year. Now for 2022, we believe that the overall trend for the key material, especially polysilicon, should be down rather than up. That's because the capacity of polysilicon is getting higher every quarter, and it should be up a lot over the course of the next four to five quarters.
Also considering the recently announced U.S. CIT decision, which will help the customers in U.S. and also help us because of the exclusion of the bifacial modules from the Section 201, but also the reduction of the Section 201 for other modules. Considering all these factors, I would think that the overall module margin for us should get better next year, which means, if we forecast 14%-16% margin for the fourth quarter, we are forecasting Canadian Solar's module margin being stabilized and going up slightly over the four quarters next year. Now that would be my expectation, Philip.
Great. Thank you, Shawn. You mentioned the Section 201 bifacial exemption being reinstated. You talked about how you could see a refund. I know you said you're assessing the magnitude, but given that, you know, all the bifacial product that's coming in as of earlier this week is now without the, I guess 18% tariff, you have some benefit there. There could be benefits for recent imports as well. I was wondering if you might be able to give us a sense for what the size of that could be.
For Q3, I think the gross margin had a positive impact from the AD/CVD from a prior period being refunded or at least being reduced, I think, to 0%. Can you quantify what the impact was for Q3? What you expect for Q4 as I guess you might continue to get that refund? Thanks.
Yeah, the AD/CVD benefit in Q3 is $12 million. Now, moving forward, as you said, without 18% duty, it will help, the exception of 18% duty for the bifacial will help our U.S. customer, also help us. Moving forward, I think we'll receive more of this benefit next year rather than in Q4, because, as you know, the shipping and logistics time is pretty long these days. The stuff we are shipping today will probably only be able to clear customs in Q1.
Great. Thank you. One last one for me. How do you guys expect OpEx to trend in Q4, maybe by line item? In Q3, I think you also had this $23 million operating income benefit. What was the driver of that? Thanks.
Phil, this is Huifeng. Let me answer this question. Yeah, the OpEx was up about 11% quarter-over-quarter. Mainly due to the higher transportation cost, as I explained on the call earlier. Going into Q4, I think all these cost factors will be pretty much in a similar to Q3. That is the overall picture. I think a lot of them will be compensated with the higher ASP.
Okay. Thank you, Huifeng. Thank you, Shawn. I'll pass it on.
Thank you.
Your next question comes from Colin Rusch from Oppenheimer. Please ask your question.
Thanks so much, guys. Yeah, can we get an update on how your PPA pricing is holding for the products that you've already fully developed and signed deals with, relative to, you know, clearing price in the market for sales of projects? Just trying to get a sense of, you know, how those spreads are changing and, you know, your ability to digest some of the higher costs that are coming through the supply chain.
Hi, Ismael will handle this question.
Thank you, Shawn. Hi, Colin. Thanks for the question. Look, we don't have this year many project PPAs signed that are not indexed to inflation. Like most of the PPAs we signed this year are in Brazil, and they're all indexed to inflation. There is no change in the market there. In the rest of the countries, all the PPAs that we have signed had all the orders placed before. We don't see a big impact for us on any change in the market conditions this year. What we are seeing in the market, it truly depends from market to market. What we are seeing, for instance, in Europe, is a significant increase on the market PPAs.
What we have been doing is all the contracts we have under negotiations have been basically renegotiating them. We even signed some PPAs that were basically very close to be finalized and pricing is being renegotiated. Has this replied to your question or?
Yeah, you know, I have some more nuance to it. You know, I guess the second question embedded in there is, you know, clearing price for projects. Are you seeing things clearing at, you know, 5% unlevered returns? Is it getting, you know, down below 5% or is it closer to 6%? What's the sense of pricing on where buyers are right now?
It really depends from market to market and on the PPA contracts that you have signed, as you know. Look, in general, I would say 6% is a reasonable assumption, and it's what people is basically looking for in OECD countries.
Okay, great. Just changing gears on the power dynamics in China. Shawn, you know, as you look at the activity around that, you know, are you seeing signs of real activity that can help boost power production? Are you seeing the government get involved? Can you just give us an update on what's happening on the ground to mitigate that and what you're watching for to just get a bit more hopeful on capacity coming back online?
Well, this is Yan. First of all, I think, given the macro level, the high level of controlling on the carbon emission from the carbon-based energy consumption will continue. However, in the past few months, the very harsh restriction on power control was kind of a temporary. We're already observing relaxation on that. That's why we see some improvement on the supply chain already. I'm not saying that will completely disappear. It will continue, but it will be in a more rational manner into next year.
Okay. Thanks a lot, guys.
As a reminder, if you wish to ask a question, please press star one on your telephone keypad. Your next question comes from Brian Lee from Goldman Sachs. Please ask your question.
Hey, guys. Thanks for taking the questions. Maybe just first one is a follow-up to Philip's question. That $23 million operating sort of income benefit you saw on the OpEx line, Huifeng, what is that, and does that repeat?
Sorry, Brian, can you highlight exactly where the number is?
Hi, Brian.
Do you mean the tax benefit?
No. Hi, Brian. This is Shawn. That operating benefit is from selling of some of the solar power plant asset in China. It will not repeat. It's a one-time item.
Yeah. That's a 75 MW solar power plant we sold in Western China.
Okay. Why does that show up as a contra expense, I guess, as opposed to just why is it not, you know, booked as traditional revenue and margin?
Yeah. Because that asset book is recorded as a project to hold. You know, as long as if it's project to hold, then if we decide to offload the project, it is recorded as an operating benefit or other income rather than into the revenue line.
Got it. Okay. Understood. Makes sense. Then maybe two more quick ones from me. I don't know if you mentioned this. I appreciate the early 2022 guidance and all the different capacity forecasts here. What are you thinking about the CapEx budget for 2022?
Oh, that's too far away. We haven't finished that yet.
Do you think it'll be in excess of $500 million for this year given, you know, your capacity is growing more on a year-on-year basis?
Well, at this moment, we believe it's more or less the same as 2021. However, as I said, we're still quite a few months into 2022, so we'll finalize it in the months to come.
Okay. Understood. Makes sense. Last one from me, and I'll pass it on. If I look at your slide deck, the guidance slide 16, again, appreciate all the detail here. You got, you know, modules up 45% in 2022. Battery storage 70%. Project sales up 50%. Revenue's up 30% in the guidance. Just trying to understand, what sort of ASP assumptions are you making? Why you know, an environment right now where, you know, panel pricing is up 25%, like you said, Shawn, are you assuming ASP degradation into 2022 or, you know, are the batteries or project sales coming in at lower prices? Just wondering why that volume growth, which is pretty robust across all three product types for you, isn't kind of translating into a similar level of revenue growth. Thank you.
This is Yan. Actually, we're still feeling certain uncertainties for next year, first of all. We still believe there are multiple number of driving forces for next year. As you see, the inflation may not end yet, and we'll still see. We're still observing the real output for silicon next year is gonna be taking time from first half into next second half. The real capacity is gonna be released, will be out in second half. We're still seeing a rather tight balance between supply and demand. I'm talking about silicon module shipment for next year.
Although we are also observing the adjustment from downstream, I'm talking about the PPA offtake prices, and the expectation of returns are also becoming more tolerating. All things together, we're seeing next year is a very rational balancing. That's why we're providing a very rational forecast. In terms of ASP, I would say it's rather stable. It may go down, but it's not gonna be a dramatic drop. In particular, in the first half, we're seeing a quite tight balance.
Okay. Thank you. Appreciate it.
Brian. Yeah. Brian, this is Huifeng. Let me also add on the EG side, even though the gigawatt we projected for next year, 2022, higher, significantly higher than 2021. Because the nature of the business, a higher gigawatt doesn't necessarily mean higher revenue. There is this factor in the total equation. That's why you see a much higher volume, but not necessarily much higher revenue.
Okay. Yeah, I'll take that offline. Thanks, guys.
Once again, if you wish to ask a question, please press star one on your telephone keypad. Again, it is star one if you wish to ask a question. We will take our final question from J.B. Lowe of Citi. Please ask your question.
Hey, morning, everyone. My question is on essentially on polysilicon and whether you guys have. Well, first, I wanted to ask about, you know, what impact you guys are seeing, if any, from the WRO instituted by the Customs Bureau here in the States over the summer, and how that's been affecting your polysilicon buying patterns, if at all. Whether or not you guys are looking for, I guess, alternative polysilicon to buy outside of China and how that would kind of work with your cost base. Thanks.
Hi, J.B. This is Shawn speaking. We are buying polysilicon both inside China and outside China. We have stable long-term suppliers both inside and outside China. Indeed, we are buying significant outside of China. Moving forward, I think we continue to buy polysilicon both inside China and outside China. Of course, in all of our purchasing activities, we have a strict policy to prevent any, you know, forced labor or any, you know, actions violating the commonly accepted labor practice.
Okay, great. Other question was just on, did you guys see any COVID-related slowdowns in your Southeast Asia manufacturing facilities? If so, have those abated in any sense?
We do see some COVID-related slowdown in the manufacturing in Southeast Asia. We also see some slowdown seems to be due to other reasons, for example, WRO, and it looks like it's affecting especially the productions at some other solar companies.
Yeah, I think, the impact from other factors are bigger than the impact of COVID.
Okay. Okay, interesting. All right. That was it for me. Thanks, guys.
There are no further questions from the line at this time. I would now like to hand the call back to Canadian Solar's Chairman and CEO, Dr. Shawn Qu, for closing comments.
Thank you, and thanks, everyone, for joining us today and for everyone's continuous support. If you have any questions or would like to set up a call, you know that you can contact our investor relations team at any time. I hope you have a wonderful Thanksgiving holidays next week with your family, and have a nice day.
Thank you. This concludes today's conference call. Thank you for participating. You may now all disconnect.