The operator welcomes participants to First Solar's earnings call and introduces the company's CEO and CFO. They will discuss the company's financial results for the fourth quarter and full-year 2023, as well as their guidance for 2024. The call will also include forward-looking statements and the CEO notes that this month marks the company's 25th anniversary.

The company has been successful in remaining a leading American solar manufacturer due to their long-term strategic decision-making and differentiated technology and business model. In 2023, they expanded manufacturing capacity, increased production and shipments, and saw strong demand for their products. They added new customers and secured a significant amount of net bookings at a high base ASP. Despite industry challenges, they have a strong contracted backlog stretching to the end of the decade.

In 2023, the company's EPS was $7.74, above the initial and Q3 guidance ranges due to the sale of tax credits and impairment of investments. Record production of 12.1 gigawatts was achieved, with 60 gigawatts produced since 2002. This was driven by manufacturing excellence at Series 6 factories and successful ramping of Series 7 factories. The company also made progress in technology and product development, achieving a world record conversion efficiency and launching a bifacial thin film solar panel. The CuRe program is expected to begin manufacturing modules in 2024. The company also made progress in its supply chain and logistics operations, including agreements with Vitro for American-made glass.

The company has signed agreements with various suppliers for steel back rails and back glass for their facilities in the US and India. They have also announced a new manufacturing facility in Louisiana that will add to their nameplate capacity. The company is also investing in technology with the construction of R&D facilities and the acquisition of a European perovskite technology company. As of year-end 2022, the company's contracted backlog totaled 61.4 gigawatts, and they entered into additional contracts in 2023. After accounting for sales, they began 2024 with a total contracted backlog of 78.3 gigawatts.

In summary, the company has entered into additional contracts and has a total backlog of 80.1 gigawatts. These recent bookings have an average ASP of $31.9 per watt and there is potential for additional revenue if technology adjusters are realized. The majority of this revenue would be realized between 2025 and 2027. The company's net sales for the fourth quarter were $1.2 billion, driven by higher volumes sold, including Series 7 modules.

In 2023, net sales for the company increased to $3.3 billion, mainly due to higher module sales and prices. They also qualified for tax credits of $0.17 per watt for each module produced in the US and sold to third parties. The company entered into an agreement with Pfizer to sell $687 million of these tax credits, receiving $336 million in cash in January and the rest expected by April 2024. This resulted in a valuation adjustment of $28 million in cost of sales. In the fourth quarter, the company recognized $229 million in tax credits, and for the full year, they recognized $659 million. Gross margin for the fourth quarter was 43%, lower than the third quarter due to the tax credit adjustment, a higher mix of modules sold from non-US factories, and write-offs of production materials. However, for the full year, gross margin was 39%, a significant increase from the previous year's 3%.

The increase in gross margin was due to various factors, including tax credits, decreased sales rates, increased module prices, and cost reductions. However, these gains were partially offset by higher underutilization costs and increased expenses for factory ramp-up and research and development. Overall, operating expenses increased due to fees associated with tax credit sales, higher employee compensation and professional fees, and increased material and testing costs.

The fourth quarter operating income for the company was $398 million, which included various expenses such as depreciation, amortization, and accretion, ramp costs, and production start-up expenses. The full-year operating income was $857 million, which also included similar expenses. The company also took a $23 million impairment related to a strategic investment in cubic PV. Interest income for the fourth quarter and full year increased compared to the prior year due to higher interest rates. The company recorded an income tax expense of $27 million in the fourth quarter and $61 million for the full year. Income for diluted share was $3.25 in the fourth quarter and $7.74 for the full year. On slide six, the company will discuss select balance sheet items and provide a summary of cash flow information.

The company's cash balance increased in the fourth quarter of 2023 due to operating cash flows and advanced payments, but decreased for the full year due to capital expenditures. Cash flows from operations decreased in 2023 compared to 2022, primarily due to higher operating expenditures and lower advanced payments. Capital expenditures were also higher in 2023 compared to 2022. The company is operating from a position of strength, but faces challenges in the market due to Chinese subsidization and dumping practices causing a collapse in cell and module pricing.

The paragraph discusses the challenges faced by European, Indian, and American solar manufacturers due to unfair trade practices and oversupply in the market. It calls upon governments and policymakers to take action to protect domestic manufacturers. The Section 201 Safeguard Bifacial Exemption is also mentioned as a threat to U.S. solar manufacturing.

The paragraph discusses the need for the Department of Commerce to close the market-distorting bifacial exemption for solar imports, as well as advocating for the use of all tools available to prevent forced labor in the solar supply chain. The paragraph also mentions the need for India to not grant waivers for the Approved List of Module Manufacturers and to expand its requirements to include cell manufacturing. Additionally, the paragraph addresses the recent establishment of the Net Zero Industry Act in the EU, but notes that more work needs to be done to achieve the region's goal of becoming climate neutral by 2050.

The paragraph discusses the importance of establishing a level playing field and addressing trade policies and loopholes to support local solar manufacturing. It also mentions a recent economic impact study that shows the benefits of First Solar's operations in the US, including job creation and economic output. Despite challenges in the market, the company's pipeline of potential bookings remains strong.

The total bookings opportunity for the company has increased to 66.5 gigawatts, with a decrease in mid to late stage opportunities. The mid to late stage pipeline includes 3.8 gigawatts of opportunities that have contracted subject to CP Presidents, with a majority in India. The company is making progress on its capacity expansions in Ohio and Alabama, with expected completion in the first and second halves of the year. The new Louisiana facility is also on track and expected to be operational in late 2025, bringing the total nameplate capacity to over 25 gigawatts by the end of 2026. The company's strategic expansion of manufacturing capacity in the U.S. will allow customers to benefit from domestic content bonuses under the Inflation Reduction Act.

First Solar expects significant growth in the coming years due to the demand for their American-made solar technologies and eligibility for tax credits. They plan to expand their manufacturing facilities and accelerate R&D efforts to develop the next generation of photovoltaics. The company also plans to commission a new R&D center in Ohio which will allow for the production of full-size prototypes without impacting manufacturing operations. The goal is to exit the decade stronger than they entered it, with a record backlog, increased R&D capabilities, and continued momentum in their core markets. The call will now be turned over to Alex Bradley to discuss the company's outlook and guidance for 2024.

The company's growth and investment thesis focuses on differentiation and a guided line approach to balance growth, profitability, and liquidity. This has led to the expansion of their module manufacturing business and increasing nameplate capacity. They have also made advancements in their R&D roadmap, including the development of bifacial modules. The company prioritizes certainty in their contracts, with a reported backlog that includes security provisions and two types of contracts: those related to specific assets or projects and larger, multi-year frameworks. These contracts typically have a fixed price structure with adjusters for technology improvements, bin class, freight risk, and commodity risks.

As of December 31, 2023, the majority of the megawatts in the company's backlog have freight and commodity cost protection. A small number of contracts have a termination for convenience provision, which requires advance notice and a termination payment. The company expects to see operating margin expansion in 2024 due to increased nameplate capacity. The backlog is oversold through 2026, providing resilience to potential delays and allowing for incremental supply as new factories start up.

The company is comfortable with over allocation for deliveries further out, but as they get closer to delivery dates, they prioritize meeting demand with available supply. They have received requests from customers to shift delivery dates due to project delays, but they will work with customers to optimize schedules while balancing production and shipment needs. The company's strong customer relationships provide flexibility in delivery timelines. They do not anticipate any damages from overallocations in 2024 and their contractual provisions protect them in the event of long-term customer issues or disputes. One corporate customer has notified them of significant delays and financial distress, leading to the cancellation of 381 megawatts of modules scheduled for delivery in 2024.

First Solar is working with a customer to optimize the outcome for both parties, but they will continue to enforce their contractual rights in the event of a breach. They believe their approach to forward contracting has been successful in the past and their current backlog provides them with optionality in uncertain market conditions. They expect to be highly selective in their contracting in 2024 due to policy and election uncertainties. In India, they had 1.7 gigawatts of signed contracts in their pipeline, but only 1.1 gigawatts have been recognized as bookings due to a customer default.

The company is enforcing its contractual rights and seeking to recover contractual termination payments. The temporary suspension of the ALMM policy is negatively impacting domestic market ASPs and gross margin, but the expected reinstatement of the policy and the ability to serve the domestic content market segment provides a market opportunity. The company has completed its transition back to a module-only company and is no longer providing segment-specific guidance. Factory expansions and upgrades are on schedule to increase global nameplate capacity, but growth-related costs will impact operating income in 2024.

In 2024, the company expects to produce and sell a significant amount of modules, with a portion being produced in the U.S. and sold domestically in India. They anticipate a fleet average sales price of 28.2 cents per watt and a cost of 18.7 to 18.9 cents per watt. This represents a 2-3% improvement in cost compared to the previous year. The company also expects a 7% reduction in cost per watt sold, with the majority of module costs being de-risked due to fixed costs and long-term agreements. Additionally, over 95% of their backlog has sales rate protection, providing significant gross margin visibility.

The company's strong balance sheet allows them to weather volatility and pursue growth opportunities without requiring external financing. They expect to finance their current capital programs with forecasted operating cash flows, tax credits, and module order prepayments. The company's 2024 guidance includes net sales between $4.4 billion and $4.6 billion, a gross margin of approximately 46%, and reduced SG&A expenses. R&D expenses will increase due to new operations and investments in advanced research. Total operating expenses, including production start-up costs, are expected to be between $455 million and $485 million.

The company expects to see an increase in operating income in 2024 due to leveraging their business model and fixed SG&A costs. Non-operating items are also expected to contribute to earnings, with a forecasted earnings-to-share profile of 15% in Q1, 25% in Q2, and 60% in the second half of the year. Capital expenditures for the year are expected to range from $1.7 billion to $1.9 billion, with a majority of the spending going towards capacity expansion and R&D programs.

The paragraph discusses the anticipated net cash balance for the end of 2024, which is expected to be between $0.9 billion and $1.2 billion. It also summarizes the key points from the earnings call, including solid demand, a strong backlog and opportunity pipeline, expansion of manufacturing capacity, and plans for a new R&D facility. It mentions the company's earnings per diluted share for 2023 and forecast for 2024, as well as their cash balance and potential opportunities for investment. The paragraph concludes by stating that the company is in a strong position to lead the world's sustainable energy future.

In this paragraph, Moses Sutton congratulates the company on its continued price momentum and execution. He asks about the possibility of seeing near-zero bookings in a quarter and how that would affect investor perception. Mark Widmar responds by saying that the company plans to be patient and continue to see bookings in India, with a conversion of contracted subject to CP. He also mentions their strategy of engaging with the market and expresses satisfaction with the recent bookings, which have good ASPs and counterparties. However, he notes that there may be a period of softness between now and the next earnings call.

First Solar has ongoing commercial negotiations for over three gigawatts of shipments into the U.S. and has already booked 10% of that. They are focused on maintaining their average selling prices and providing certainty to their customers. There is uncertainty in the market due to policy changes and a potential change in administration, as well as concerns about intellectual property rights in the transition to TopCon technology. First Solar will continue to engage with customers in a disciplined and measured manner.

The company expects to have a 1:1 book to bill ratio and add 16 gigawatts by the end of the year, which would fill out their pocket of opportunity for 2027. They anticipate a solid backlog and strong position going into 2027 and beyond. The recent bookings ASP of $0.32 has been influenced by policy changes and a shift in customer conversations. The company expects pricing momentum to remain steady through 2024, but there is potential for it to go higher or lower. There is currently 381 megawatts of product that a customer cannot take delivery of, and there may be up to 1.5 gigawatts floating around in the secondary market. The company does not have control over this, but it is something they have to manage and their customers have to deal with.

The 380 megawatts project was for a corporate customer who is facing financial challenges. The project is being marketed and if it is successfully sold, the modules will be included with the sale. The company will support the sale with the spirit of enforcing rights under the contract. There are also challenges with interconnection positions for customers in the secondary market.

First Solar's contracts and customers are aware of the need to take delivery of hundreds of megawatts worth of modules in 2024. The company is willing to work with customers to find a solution if they are unable to take delivery, and this is not expected to significantly impact the company's ability to book volumes in 2024. The company's value proposition, including its technology, certainty, and responsible solar practices, is highly valued by its partners and their contracted off-take customers.

The speaker discusses the economic impact of their work and how it supports American jobs and manufacturing. They also mention their strong relationships with customers and their ability to maintain pricing discipline. They are confident in their position and can afford to step back and manage any uncertainty in the market. Their strategy is not to chase deals or drop pricing, but to work with customers who value their brand and offerings.

Mark Widmar, CEO of First Solar, states that achieving a one-to-one book-to-bill ratio this year and selling through their open position in 2027 would be a great result and position the company well for the future. The conference call has now ended.

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