The operator welcomes participants to First Solar's First Quarter 2024 Earnings Call and introduces the speakers, CEO Mark Widmar and CFO Alex Bradley. Widmar discusses the company's positive start to 2024, including good operating performance, selective bookings, and solid financial performance. He also mentions the company's goal of exiting the decade in a stronger position. The call will include forward-looking statements and participants are encouraged to review the safe harbor statements.

The company is focused on sustainable growth and differentiation through increasing production, expanding manufacturing, and investing in R&D. They acknowledge the volatility in the solar manufacturing industry due to overcapacity in China and highlight the contrast between their proprietary technology and commoditized crystalline silicon modules. The company's balanced approach to growth, liquidity, and profitability sets them apart from other solar companies who may be facing quality and reliability issues due to cutting corners and financial stress. The company continues to invest in R&D and innovation, with plans to commission a new facility in Ohio in the second half of the year.

The Chinese solar industry is facing challenges due to overcapacity and low market-distorting pricing. However, the company remains focused on a selective approach to contracting and maintaining healthy ASPs. They are also monitoring policy and trade drivers to ensure fair competition and trade. In the first quarter, the company has booked 854 megawatts with an average ASP of $0.301 per watt, bringing their year-to-date net bookings to 2.7 gigawatts with an average ASP of $0.313 per watt.

The company has a strong backlog and is pleased with their Q1 performance in terms of manufacturing and technology. They are preparing to launch their CuRe module and are making progress on technical solutions to accelerate its replication. The company has delivered strong financial results and their growth plans are on track, with expansions in Ohio, Alabama, and Louisiana expected to be completed in the coming years. They also have a ramp-up of operations in India and expect to have over 25 gigawatts of nameplate capacity by 2026.

The company has a significant amount of capacity available to serve the U.S. market, with plans to commission new R&D projects in Ohio. These investments in R&D will help the company stay at the forefront of technology and maintain its position of strength. As of December 31, 2023, the company's contracted backlog totaled 78.3 gigawatts with an aggregate value of $23.3 billion. The company expects to be selective in its approach to new bookings this year due to various factors such as limited supply, project visibility, and policy uncertainty.

The company plans to continue forward contracting with customers who value a point of differentiation and are willing to establish long-term relationships. Their current backlog includes opportunities for increased revenue through adjusters, which could result in an additional $0.5 billion in revenue. The company's total pipeline for potential bookings is strong, with a significant increase in opportunities from the previous quarter. Demand is expected to increase, particularly due to data center load growth.

In the first quarter, First Solar's net sales decreased due to a seasonal reduction in module sales, but gross margin increased due to a higher mix of modules sold from U.S. factories. SG&A, R&D, and production start-up expenses decreased, resulting in operating income of $243 million. This included various costs such as depreciation, amortization, ramp costs, and share-based compensation. First Solar is well-positioned to supply the growing data center market with its sustainable products.

In the first quarter, there was an increase in other income expense due to an impairment of a strategic investment. Tax expense decreased due to excess tax benefits and lower income. Earnings per diluted share were $2.20. Cash, cash equivalents, and securities decreased due to capital expenditures, while debt increased to support a new plant in India. Net cash position decreased to $1.4 billion. In the first quarter, cash flows from operations were $268 million and capital expenditures were $413 million. Full year 2024 volumes sold and P&L guidance remains unchanged from the previous earnings call.

The company is increasing its capital expenditures to accelerate the CuRe conversion at its Vietnam and Perrysburg facilities, and to advance global fleet replication. This could result in additional revenue. The company's year-end 2024 net cash balance guidance has been revised due to customer schedule shift requests, a potential sale of a U.S. project development portfolio, strategic approach to new bookings, and higher CapEx. Some customers have requested to shift delivery volume timing due to project development delays, and there are indications that a customer may sell their U.S. solar development portfolio, which could result in delayed project timelines and construction schedules.

The company expects to sell a portfolio of assets to an existing customer, but due to the customer's termination for convenience rights, the company may have to reallocate or resell some of the assets. This may result in a concentration of shipments and cash collection in the fourth quarter rather than the third quarter. The company also expects a reduction in cash deposits from new bookings and increased CapEx for CuRe conversion, leading to an updated year-end 2024 net cash balance guide of $600 million to $900 million.

The company expects their earnings to be split between the first and second half of the year, with the benefit of tax credits and operating expenses evenly distributed. They believe that the Inflation Reduction Act will help secure the US's supply of clean energy technologies and create well-paying jobs. They also state that they are the only American solar manufacturer at scale due to China's dominance in the industry, and for the IRA to be successful, more companies must be able to scale and compete fairly.

The purpose of the IRA is not being achieved due to unsustainable market conditions caused by Chinese subsidization and dumping. This has led to a collapse in cell and module pricing and threatens the viability of many manufacturers. To address this issue, a group of 7 solar manufacturing companies, including the Western Hemisphere's largest solar module manufacturer, has filed petitions with the U.S. International Trade Commission and Department of Commerce to investigate unfair trade practices from factories in Southeast Asia. The U.S. administration has shown a commitment to addressing this issue and the petition is supported by the context of China's role in the global solar market.

The country in question has a history of unfair trade practices in the solar industry, including subsidies, dumping, and overcapacity. This has caused a decline in solar prices globally and hindered international competitors. The Chinese government intentionally uses overcapacity to dominate the clean energy supply chain. Four Southeast Asian countries account for a majority of U.S. solar imports and saw a significant increase in exports after the passage of the IRA. Allowing these practices to continue will harm non-Chinese manufacturers and increase the risk for installers and developers. Potential tariffs resulting from this case could impact module pricing.

The speaker argues that the high tariff rates imposed on Chinese solar products will not significantly impact the deployment goals of the US. They claim that there is sufficient product available to meet demand, and enforcing trade laws is necessary to prevent the long-term negative effects of China's unfair trade practices. They also emphasize the importance of US energy independence and having control over the supply chain and R&D for future advancements. They believe that policies like the Investment Tax Credit are not enough to achieve energy independence due to China's unfair trade practices.

The IRA must be accompanied by strong trade measures that level the playing field for investments. This includes industrial policy, a domestic content bonus, and a level playing field to address anticompetitive behavior. Without all three components, the IRA and its efforts to build a resilient American solar value chain will be unsustainable. This is a bipartisan issue that affects all U.S.-based manufacturers.

The support for the petition is based on the belief that a level playing field is necessary for American innovation and competitiveness, and for promoting quality and technology diversification. A thriving domestic manufacturing industry is beneficial for investment, job creation, and economic value, as well as insulating against global supply chain disruptions. The petition aims to enforce the rule of law and create a fair playing field for domestic manufacturers, while still allowing for competition and free trade. Importers who follow U.S. trade laws should not be concerned about the petition or any potential investigation.

The oversupply and dumping of solar modules at low prices is negatively impacting the Indian and European markets. India has implemented policies to support domestic manufacturing, but there are concerns about the dumping of solar cells. An investigation into this issue is being sought to ensure fair competition. Europe is lagging behind in addressing dumping and remains heavily reliant on Chinese-made panels.

The paragraph discusses the current state of trade barriers in Europe and the company's efforts to advocate for a level playing field. It also highlights the strong demand and production numbers for the company, as well as updates on their upcoming technology developments. The financial performance and guidance for the company is also mentioned. The call is then opened for questions from analysts.

Mark Widmar discusses the effects of the ALMM on pricing in the Indian market and how they are currently shipping most of their product from India to the US. He also mentions that they expect pricing dynamics to improve in India and that bookings growth may slow in the future.

The speaker is curious about the impact of recent news on the company's bookings, such as the potential removal of a policy exemption, a new petition, and commentary on China. They ask for the company's updated thoughts on bookings for the rest of the year, given these developments and growing demand for clean energy and data centers. The CEO responds that they have seen a change in pricing and more engagement from customers, and they have lowered their booking assumptions but are encouraged by the current momentum. They will have a better idea after meeting with customers next week. The speaker also asks about a termination clause.

The speaker discusses the company's potential buffer to meet their guide and how the termination for convenience clauses in '24 and '25 may affect it. They also mention the impact of the recently filed Southeast Asia AD/CVD petitions on pricing for future bookings. The speaker then asks for an update on the company's tandem technology research and when a decision on the next-gen technology will be made.

The company is facing potential project cancellations due to the current market conditions, but they are working to reallocate or resell the volume. This may impact the timing of cash flow, but the company's guidance remains unchanged. The market pricing has firmed up and increased, but this was not reflected in the Q1 bookings. The company is seeing increased demand and supply constraints for their products.

The company is making progress on their thin-film CIGS tandem product, thin-film crystalline technology, and perovskite technology. They have made a significant investment in these technologies and will be starting them up soon. The company is focused on not only producing record cells and modules, but also ensuring their reliability in the field. They are aware of the challenges faced by other companies, such as TOPCon, in terms of field performance and reliability. The company does not have a specific timeline for when these technologies will be fully operational, but they are making good progress.

The speaker discusses the company's current focus on R&D innovation and the perovskite pipeline, which will provide better insights on commercialization and time to market. The next question is about pricing, and the speaker mentions that they have been receiving feedback since April and the current bookings do not reflect the recent AD CVD feedback. They are having real-time discussions about pricing and it is possible that they could see mid- to high-30s per watt in the next couple of quarters. The second question is about data center demand for electricity, and the speaker mentions that they have indirect exposure to this market and cannot give a specific percentage of demand from data centers. They see this as a potential new growth sector.

The speaker discusses the difference between international and domestic pricing for the company's products, noting that domestic products have a higher ASP. They also mention their strategy to be patient and continue booking at attractive prices, as their business model is leveraged to growth and contribution margin. The speaker then mentions that companies like Apple, Google, Microsoft, and Meta value certainty and reliability, making them the first choice for many developers and companies working towards renewable targets.

The speaker cannot provide a specific percentage, but believes that their company will be the preferred supplier for projects supplying power to data centers. When considering adding another factory, they prioritize demand-driven decisions and a stable policy environment. They are currently preparing for potential increases in demand, particularly from data centers, and are closely monitoring market conditions to be ready to act quickly.

The company is waiting for the November election to make informed decisions about further capacity expansion. They are confident in their ability to execute projects and are not worried about execution risk. They currently have ongoing activities that are progressing well and they have the capability to continue growing if there is demand and the right policy environment. In response to a question, Mark shares that there was previously an estimated 30-40 gigawatts of excess inventory in the U.S. and there is currently debate about how much of that remains.

The paragraph discusses concerns about steep price increases and excess inventory in the market after a petition was filed. The speaker addresses the possibility of taking advantage of spot pricing and mentions delays and potential cancellations from hydrogen customers in the past. They also clarify that recent bookings were made before any indication of policy changes. The speaker also addresses speculation about high levels of inventory in the US.

The speaker believes that there has been a large amount of solar product imported into the U.S. and that it will need to be managed and installed by the end of the year. They are uncertain about how this will happen and mention the possibility of tariffs. The speaker also talks about the potential for selling products in the short-term through termination convenience or other customer requests.

The speaker responds to a question about potential opportunities for product sales and mentions ongoing efforts to balance supply and demand. They also address a question about hydrogen customers and potential benefits from higher prices. Another speaker follows up with multiple questions about the company's case for AD/CVD, customer equipment shortages, and credits. The speaker clarifies that the credits were higher than reported and discusses the government grants receivables.

The CEO of First Solar, Mark Widmar, discussed the impact of AD/CVD tariffs and China's aggressive actions in the solar industry. He expressed frustration with China's oversupply and pricing tactics and stated that the coalition will determine if critical circumstances should be requested. The decision will depend on the stability of imports and their pricing.

The company is facing supply chain constraints and disruptions, particularly in the procurement of critical components and transformers. However, they are working closely with their large, sophisticated customers to mitigate the impact and create resiliency. They are also over-allocated on an annual basis and work with customers to adjust project timelines accordingly. Despite their efforts, there is still potential for changes and disruptions throughout the year. The conference call has now ended.

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