First Solar's Third Quarter 2023 Earnings Call began with an introduction from the operator, followed by a welcome from Richard Romero, First Solar's Investor Relations representative. CEO Mark Widmar and CFO Alex Bradley then provided updates on the company's business and financial results, respectively. The call also included a discussion of forward-looking statements and the company's long-term goals to be a leader in the thin film market and prioritize sustainability.

The company's long-term growth plans are supported by strong market demand, efficient manufacturing processes, and a balanced business model. They have seen a steady increase in net bookings and have a total backlog of 81.8 gigawatts. The company's third Ohio factory is ramping up production and has already produced over one gigawatt of Series 7 modules. The factory recently demonstrated a top module wattage of 550 watts in a limited production run.

First Solar has achieved a record cattail production module efficiency of 19.7 percent while undergoing commercial qualification testing. Their India plant is ramping up production and has recently demonstrated a manufacturing production capability of 12,000 modules per day. The factory produced 154 megawatts in Q3 and has recently converted to produce the world's first bifacial solar panel using an advanced thin film semiconductor. This technology is expected to result in higher specific energy yield. First Solar is also making progress towards achieving their forecasted 25 gigawatts of global nameplate capacity by 2026, with their India facility completed and production underway. Commercial shipments are expected to begin once the factory receives certification from the Indian government.

In September, FirstSolar announced the construction of a new manufacturing facility in Louisiana, which is expected to add 3.5 gigawatts of annual capacity and bring their total capacity in the United States to 14 gigawatts. They are also making progress on their Alabama and Ohio facilities, as well as a new R&D center and perovskite development line. FirstSolar is committed to leading the industry in developing new PV technologies. They have also expanded their partnership with Vitro Architectural Glass to increase glass production for their solar panels.

The company has made efforts to build a resilient domestic supply chain and has a head start over competition. They have also focused on de-risking their supply chain through strategic localization and using American-made steel. They are awaiting guidance on manufacturing tax credits and are working with customers to ensure the domestic content bonus supports sustainable growth. The company is appreciative of the Biden administration's efforts to support domestic solar manufacturing. They are also aware of anti-dumping and counter-dating duty petitions against importers of aluminum extrusions.

The company is committed to fair trade and will comply with any requests for information from the United States Department of Commerce and the International Trade Commission. They are also engaged with policymakers in Europe to address challenges to solar manufacturing. The company advocates for comprehensive legislation to protect domestic manufacturing and believes that industrial policy-related benefits alone are insufficient. They also discuss their bookings, pipeline, and third-party results.

Since the previous earnings call, the company has entered into contracts for an additional 23.6 gigawatts and recognized 7.4 gigawatts in sales, resulting in a total backlog of 77.6 gigawatts with a value of $23 billion. They have also entered into an additional 4.3 gigawatts of contracts since the end of the third quarter, bringing the total backlog to a record 81.8 gigawatts. The company has also received full security for previously signed contracts in India, which have moved from the future opportunities pipeline to the bookings backlog. The company has also amended certain contracts to provide US manufactured products and domestically produced Series 7 modules, resulting in an increase of $354 million in contracted revenue. The company has the potential to increase their base ASP through the application of adjusters if they are able to achieve milestones in their technology roadmap.

The company has a contracted backlog of 40.3 gigawatts, which could result in additional revenue of $0.4 billion. This does not include potential adjustments for production and delivery of the product. The backlog extends into 2030, with 1.5 gigawatts expected to be used for US deliveries in 2024 and 2025. The company's pipeline potential bookings remain strong at 65.9 gigawatts, with decreases in mid- to late-stage opportunities due to converting some to bookings and removing others due to limited supply. The company expects a reduction in volume in upcoming quarters due to their current sold-out position and focus on balanced contract terms.

In the third quarter, our net sales decreased by $10 million due to lower non-module revenue and a slight reduction in volume sold. However, our gross margin increased to 47% due to higher module ASPs, lower sales rate costs, and higher volumes of modules produced and sold in the US. This resulted in additional credits from the inflation reduction end. We expect to continue our strategic approach to future contracts and have a strong backlog of contracted opportunities, including 1.7 gigawatts in India. Our signed contracts in India will not be recognized as bookings until we have received full security against the Arctic.

The company encourages reviewing safe harvest statements and potential risks related to receiving full benefits. Sales rate costs were reduced due to improved ocean and land rates and favorable domestic volume mix. Ramp costs and expenses have also impacted gross margin. S&A and R&D expenses increased, while production start-up expenses decreased. No significant non-module activities were included in the third quarter operating results, but the year-to-date operating loss for legacy systems business activities is approximately $22 million.

In the third quarter, the company's operating income was $273 million, with various expenses including depreciation, ramp costs, and share-based compensation. The company also recorded tax expenses of $22 million. The company's cash and marketable securities decreased to $1.8 billion, primarily due to capital expenditures for new facilities in Ohio, Alabama, and India. Total debt increased to $499 million, and net cash decreased to $1.3 billion. The company's cash flows from operations were $165 million. However, the majority of the company's cash is held offshore, while most of their future capital expenditures will be in the United States.

The company is continuing to evaluate options to balance the expected temporary cash imbalance, including repatriation of funds and use of existing credit facilities. The volume sold and net sales guidance remains unchanged, but there have been adjustments to the gross margin, production start-up expenses, and operating income and earnings per share guidance. Demand remains strong, with a record contracted backlog and record production, thanks to the company's focus on manufacturing technology excellence.

The company's India manufacturing facility has started production and expansions in other states are on schedule. They reported $2.50 per diluted share and ended the quarter with a gross balance of $1.8 billion. They maintain their 2023 revenue guidance and have raised their EPS guidance. The company has strong bookings and pricing, with an average of $0.30 per watt excluding India. They may be more selective and strategic with bookings in the future due to declining prices in the U.S. market.

The company is looking further into the future and considering the impact of adders on their base price. They expect to capture upsides in the long-term and have already started production in Ohio. When adjusting for adders, the pricing is stable and the company remains disciplined in their supply constraints. They have a roadmap to reach 25 gigawatts and are starting to see success in filling up 27 gigawatts and beyond.

The speaker discusses how they are engaging with customers in terms of pricing, security, and domestic content. They mention that there may be some hesitation from customers due to uncertainty about future events, but overall, the market is returning to normal supply and demand conditions. The speaker believes that the shift in buyer sentiment is not significant and that challenges with permitting and interconnection may be a factor in the compression of mid- to late-stage projects.

The speaker believes that their customers are still confident in their ability to fulfill their contracted pipeline and secure off-take agreements. However, the issue lies in the timing of when the project will be ready for financing and when the company will need to provide security for the contracts. The speaker mentions the need for a balance between certainty of delivery and the customers' current liquidity constraints. They also mention the importance of creditworthy parent guarantees and the challenge of finding them. Overall, the speaker does not believe that the sentiment towards the realization of the development pipeline is an issue, but rather the timing and balancing of financial commitments.

At the Analyst Day, it was mentioned that the company purposely over-allocates in the near term due to projects moving out to the right and recent bookings being framework agreements. These agreements can be challenging to plan for, but customers are still willing to commit because of the value they see. However, as the company looks further into the future, there is less visibility on the framework side, potentially resulting in slower bookings. In terms of competition, a Chinese company recently announced a 5 gigawatt expansion in the U.S with lower CapEx costs. The company's CEO was asked about the cost structure of overseas competitors, to which he responded.

The speaker discusses a recent announcement made by a competitor regarding their sales in the U.S. While they are also vertically integrated, they do not manufacture their own wafers or ingots in the U.S. and their poly-silicon source is uncertain. The speaker believes that their competitor's production capacity and headcount are significantly higher, leading to a higher cost profile. Additionally, the speaker emphasizes their own localized supply chain as an advantage.

The company's Series 7 product will mainly be made in the U.S., except for the glass which will have to be sourced from Southeast Asia or China due to cost. There are potential duties for extruded aluminum, but the Series 7 product does not use aluminum. The company believes they have a cost advantage and are ready to compete with any other U.S. manufacturer. They also believe that a diversified supply chain with various technologies is necessary for long-term energy independence and security in the U.S.

The speaker discusses the need for more manufacturing and innovation in order for the company to become a technology leader. In response to a question about the domestic content requirements under the IRA, the speaker explains that the only identifiable component that will significantly contribute to domestic content is the cell, and that the timing of the availability of these cells aligns with the increasing requirements for domestic content.

The speaker discusses the challenges of meeting domestic content requirements for solar modules and mentions that Series 7 modules, which are 100% domestically sourced, have an advantage in this regard. They also mention updates on capital allocation, including efforts to reduce tech CapEx through supplier processes and the potential cost of repatriating cash. They confirm that buybacks with cash and common equity are not currently on the table.

The company is optimistic about finding a supplier to provide coatings for their glass and potentially reducing their technology-related CapEx. However, their current CapEx plan for the next few years remains significant and there may be state and local tax implications for bringing money back due to the 2017 tax reform.

The speaker discusses the company's decision to permanently reinvest capital offshore and the potential tax implications if they were to change that decision. They also mention the need for temporary transition capital to bridge the gap between investments and cash receipts. The speaker also addresses the possibility of equity and buybacks in the future, but states that it is not a current concern due to upcoming capital expenditures. The questioner asks about the company's finished goods inventory and run rate in India.

The company currently has over 3 gigawatts in inventory, with 150 megawatts produced in India. This is due to certification delays, but it aligns with anticipated shipments in the fourth quarter. The India factory has demonstrated the ability to produce 80% of nameplate capacity, currently running at 70%. This is a significant improvement, considering the factory was started from scratch in July. The success in India is a positive indication for future factories in Alabama and Louisiana. The goal is to start these factories up sooner and faster than the previous one.

The speaker discusses the success of their company's operations in Ohio and India. They also mention a recent deal with a partner for 500 megawatts and the importance of providing certainty to their customers. The integration of storage and hydrogen is also mentioned as a key factor in successful projects.

First Solar is uniquely positioned to de-risk their projects and provide the highest domestic content qualifying module in the industry with Series 7. This allows them to have a higher level of confidence in delivering against their commitments to their Board and shareholders. However, there are still uncertainties, such as potential duties on true aluminum coming in from China and Southeast Asia, which could affect the risk profile of their partners. Additionally, the company's primary business model as a developer and IPP may create a perception that they are helping their competitors gain market share.

The company's customers view them as a low-risk option with a great product and technology at a good price. While there are penalties for breaking contracts, customers are unlikely to do so due to the potential risks and uncertain benefits. Starting up factories faster accelerates the return on invested capital and may make future factory investments more attractive. At Analyst Day, it was stated that 14% of the company's backlog was subject to termination.

The speaker discusses the impact of a difficult financial environment on the solar market and how it is affecting the company's backlog. They mention a large portion of their backlog being unable to terminate contracts for convenience, but for those that do have that option, there is a fee of up to 20% and the possibility of reselling the modules. The final question asks about the company's competitive advantage in this environment and the speaker mentions three large contracts, one with a return customer, that were booked in the last quarter.

In September, First Solar announced two new customers, an IPP and an asset management entity, and is happy with the beginning of their partnership. These customers were attracted to First Solar's unique value proposition and were eager to secure supply for future years. This environment and First Solar's capabilities have led to an increase in their contracted backlog, which is now over 80 gigawatts. This backlog reflects the success of their business model and the understanding of their value proposition by their partners.

This summary was generated with AI and may contain some inaccuracies.