The paragraph is an introduction to First Solar's Q4 and full-year 2024 earnings and guidance call for 2025. The call is webcast live, and participants are in a listen-only mode. Byron Jeffers, Head of Investor Relations, opens the call, introducing CEO Mark Widmar and CFO Alex Bradley. They will review the 2024 financial performance and discuss their 2025 outlook. There is a disclaimer about forward-looking statements. Mark Widmar, the CEO, highlights that in 2024, First Solar maintained a selective approach to contracting, securing net bookings of 4.4 gigawatts and achieving a year-end backlog of 68.5 gigawatts, with 14.1 gigawatts of modules sold, marking a record year.

The company reported record net sales of $4.2 billion, marking a 27% increase year-over-year. However, their full-year diluted EPS of $12.02 per share fell below the guidance range, affected by unexpected tax credits from a December sale. In 2024, they manufactured 15.5 gigawatts of solar modules and advanced their technology, commissioning a new R&D center and starting CuRe module production in Ohio. Their global manufacturing capacity rose to 21 gigawatts, aided by new facilities and optimizations, with a $1.1 billion Louisiana facility set to begin operations later in 2024. By 2026, they anticipate expanding capacity to over 25 gigawatts. As of the end of 2023, they had a contracted backlog of 78.3 gigawatts valued at $23.3 billion.

In 2024, the company recognized sales of 14.1 gigawatts and contracted an additional 4.4 gigawatts, leading to a year-end backlog of 68.5 gigawatts valued at $20.5 billion. They contracted 0.4 gigawatts of new volume since their last earnings call, including 0.3 gigawatts in India through a revenue-sharing deal. Sales to the US utility-scale market totaled 0.6 gigawatts with an average selling price of $0.305 per watt, rising to $0.314 with adjusters. Overall, the company achieved 5.1 gigawatts of gross bookings at $0.309 per watt, rising to $0.328 with adjusters. However, they faced 2.4 gigawatts of module agreement terminations, including 1 gigawatt in India. A significant portion of the backlog provides opportunities to increase prices via adjusters, contingent on meeting technology milestones at delivery.

By the end of Q4, the company had 37.1 gigawatts of contracted volume that could generate up to $0.7 billion, mostly recognized between 2026-2028. This estimate doesn't account for potential ASP adjustments or changes in sales rates and commodity prices. The potential bookings pipeline is strong at 80.3 gigawatts, though decreased by 1.1 gigawatts from the previous quarter. The mid to late-stage bookings decreased to 21 gigawatts, with 18.5 gigawatts in North America and 2.3 in India, including 3.9 gigawatts subject to conditions. Contracts in India aren't recognized until full security is received. The company will focus on customers valuing long-term relationships while navigating policy uncertainties after recent US elections. Alex Bradley will discuss Q4 and full-year 2024 results.

In Q4, net sales increased to $1.5 billion, a $0.6 billion rise from the previous quarter, while full-year net sales reached $4.2 billion, up $0.9 billion from the prior year, driven by higher sales volumes. The Q4 net sales benefited by $20 million, and full-year sales by $115 million, from customer contract terminations, but were reduced by $56 million in warranty charges due to Series 7 manufacturing issues. Gross margin in Q4 fell to 37% from 50% in the prior quarter but increased to 44% for the full year. This margin was impacted by the sale of $857 million in Section 45X tax credits to Visa, with a $39 million discount influencing Q4 and full-year margins. Warranty charges ranged from $56 million to $100 million due to Series 7 issues, with $6 million recorded in Q4. Corrective actions have been taken to address these manufacturing defects.

The paragraph discusses various challenges faced by the company, including potential formal disputes with customers and delays in shipments due to remediation processes, which affected sales and led to a deferral of 250 megawatts of module sales from Q4 2024 to 2025. These issues, along with other factors such as a $6 million warranty charge and contract termination payments, negatively impacted the fourth quarter gross margin by $16 million. Additionally, shipment delays caused $36 million in extra logistics costs in Q4. The company held 0.7 gigawatts of potentially affected Series 7 modules in inventory at year-end. An Alabama facility experienced unexpected ramp-up costs of $4 million, but still surpassed production expectations. Meanwhile, the Ohio facility faced $18 million in unexpected expenses due to the transition to CuRe technology on a manufacturing line.

The paragraph provides a financial overview of a company facing unforeseen costs and changes in operating expenses. In India, the company incurred a $5 million cost due to new import regulations on cover glass. In Q4, SG&A, R&D, and production startup expenses were $11 million, a $12 million decrease from the previous quarter, with Q4 production startup costs $9 million above the guidance midpoint due to expansions in Alabama and Louisiana. Operating expenses for 2024 were $465 million, a $14 million increase from the previous year, including a $39 million rise in R&D expenses and a $20 million rise in startup expenses. This was offset by a $9 million decrease in SG&A expenses and the absence of a $36 million litigation loss from the prior year. The Q4 operating income was $457 million, including several key expenses, and the full-year operating income was $1.4 billion, featuring costs related to depreciation, underutilization, startup, and share-based compensation.

The paragraph discusses the company's financial performance and position in Q4 and the full year 2024. It reports a $10 million expense in interest income and other financial activities for Q4, but a $12 million income for the year. Tax expenses were $53 million in Q4 and $114 million for the year, affected by state tax reserves and jurisdictional earnings shifts. Earnings per diluted share increased significantly both quarterly and annually. The company’s cash and securities balance reached $1.8 billion year-end, with a net cash position of $1.2 billion. The Q4 cash increase was driven by proceeds from Section 45X tax credits and operating cash flows, while the annual decrease was mainly due to capital expenditures.

In 2024, cash flows from operations increased to $1.2 billion from $0.6 billion in 2023, primarily due to $1.3 billion in proceeds from Section 45X tax credits, despite higher supplier payments and lower module sales. Capital expenditures were $314 million in the fourth quarter and $1.5 billion for the year, compared to $1.4 billion in 2023. Mark Widmar discusses the company's technology strategy, emphasizing the importance of solar energy and thin-film technologies. The strategy focuses on improving their core CadTel semiconductor technology and includes a limited commercial production run of modules using CuRe technology, which may lead to a permanent conversion of the Ohio lead line upon successful validation.

The paragraph outlines a three-pillar strategy for advancing solar technology. The first pillar involves converting the Ohio lead line to CuRe in early 2026 to integrate manufacturing insights and extend field validation. The second pillar focuses on developing commercial-scale perovskite thin-film semiconductors, with progress driven by research at the California Technology Center and support from the Evolar acquisition; their new perovskite development line in Ohio is set to be operational by Q2. The third pillar emphasizes creating a next-generation tandem solar device using two thin-film semiconductors for higher efficiency, prioritizing this structure over hybrid approaches involving crystalline silicon. This strategy aims to keep the company competitive against leading silicon and crystal technologies.

The paragraph discusses the ongoing intellectual property challenges within the solar industry, particularly emphasizing patent disputes between leading companies. It highlights recent legal actions, such as Trina Solar suing Canadian Solar and JinkoSolar taking legal action against LONGi. First Solar also emphasizes its strong TOPCon patent portfolio acquired from TetraSun, which is protected until 2030 in various regions. First Solar filed a lawsuit in Delaware against JinkoSolar for infringing on their TOPCon patent, reinforcing their commitment to protect their intellectual property rights, while also remaining open to commercial resolutions with other interested companies.

The paragraph discusses First Solar's recent agreement to license its US TOPCon patents to Talon PV and the potential legal risks associated with procuring TOPCon solar products due to existing lawsuits and competitor strategy shifts. It highlights the advantages of First Solar's CadTel technology over crystalline silicon panels. Additionally, it touches on the broader market and policy environment, noting that President Trump's administration aims to boost economic growth, energy dominance, and innovation, with projections indicating a need for 128 gigawatts of new electricity capacity by 2029 to address high demand, despite challenges in expanding power generation and grid infrastructure.

The paragraph discusses the challenges and delays associated with expanding natural gas and nuclear energy capacities, highlighting the urgent need for alternatives to avoid energy price inflation and maintain energy independence. It argues that solar energy, due to its low cost and quick deployment, should be a significant part of the solution. However, the paragraph warns against increasing reliance on China for solar supply chains, advocating for policies that would protect American manufacturing and energy security. This includes the implementation of laws to exclude Chinese Communist Party-affiliated companies from benefiting from U.S. taxpayer-funded incentives.

The paragraph discusses recent developments in trade and manufacturing related to US-China relations and Southeast Asian countries. It highlights the impact of FIAC legislation, which limits China's access to US taxpayer-funded incentives and supports domestic manufacturing. Additionally, it details the progress of a Southeast Asia anti-dumping and countervailing duty case, noting the Department of Commerce's preliminary determination of higher-than-expected cash deposit rates for Cambodia, Malaysia, Thailand, and Vietnam, along with significant increases in countervailing duty rates for certain solar manufacturers in Cambodia. The Trade Committee is monitoring trade practices and considering all options, with future determinations expected for Malaysia and Vietnam regarding Chinese subsidization.

The paragraph outlines the company's growth and investment strategy, emphasizing a balanced approach to growth, profitability, and liquidity. It details their strategic decisions, including exiting the systems business, expanding R&D and manufacturing in the US, and forward contracting. By the end of 2024, the company has secured a contracted backlog of 68.5 gigawatts at $0.30 per watt. The backlog consists of contracts related to specific projects and larger multi-year frameworks, featuring fixed-price structures with potential adjustments for various risks. Most of the backlog includes protections against steel, aluminum, and freight cost fluctuations, which is crucial during uncertain macroeconomic and industry conditions.

The paragraph discusses the factors influencing long-term growth in solar energy demand, particularly in advanced economies, due to its cost-effectiveness and quick deployment. However, there is currently significant uncertainty, primarily due to unresolved policy issues in the US following the elections, causing delays in domestic manufacturing expansions and cautious customer behavior regarding new procurements and project timelines. An example is Indian solar company Premier Energies pausing its US plant plans due to this uncertainty. Despite this, the company remains oversold through 2026, deliberately to ensure revenue stability amidst industry volatility and potential delays in project development and factory ramp-ups. This overselling strategy provides resilience against delivery uncertainties.

As the company approaches delivery dates and annual planning for the upcoming year, it aims to align demand with supply. While over-allocating can provide long-term flexibility, it needs resolution in the short term. In 2024, the company faced requests to delay delivery schedules due to project delays, and experienced terminations amounting to 2.4 gigawatts, including significant defaults in Indian contracts. For those who haven't paid termination fees, the company plans legal action. Looking ahead to 2025, while U.S. production is strong, the Series 6 production in Malaysia and Vietnam is under-allocated due to customers shifting delivery schedules and previous contract defaults. These shifts and contractual ambiguities affect delivery certainty, as evidenced by 1 gigawatt of contracts with flexible delivery moved beyond 2025.

The paragraph discusses the company's challenges in reallocating product deliveries due to intra-year flexibility requests and contract terminations. It highlights constraints in shifting Southeast Asia-produced products to other markets because of policy environments in Europe, India, and the US. In Europe, China's market strategies and lack of EU trade remedies have made the market less attractive, leading to the closure of the company's EU sales operations and incurring $3 million in severance charges. In India, government's measures against Chinese market dominance effectively eliminate Malaysia and Vietnam as viable sources. In the US, uncertainty about future tariffs and policy changes after the elections affects the market, with final resolution expected by the second half of 2025.

The paragraph discusses the current and future outlook for First Solar's domestic and international module production. Customers generally prefer domestic modules due to economic benefits from the IRA domestic content bonus. The recently issued points-based guidance enhances customers' ability to qualify and finance this bonus, benefiting First Solar with greater supply-chain flexibility and allocation optimization in the US while maintaining sales agreement terms. Despite long-term optimization opportunities, near-term challenges exist due to project delays, policy-driven demand imbalances, and contract terminations affecting 2025 deliveries. As a result, First Solar anticipates a challenging supply-demand balance entering 2025. However, production capacity is on track for growth, with Ohio's expansion completed in Q1 2024, aiming for a 25 GW global nameplate capacity by 2026.

The paragraph outlines production and financial forecasts for a company with factories in Alabama, Louisiana, Malaysia, Vietnam, and India. In the U.S., the Alabama factory will exit its ramp phase by Q1 2025, while the Louisiana facility will start ramping production by mid-2025. Combined U.S. production is expected to be between 9.2 and 9.7 gigawatts. Due to a supply-demand imbalance and policy impacts, the company will reduce Series 6 international production by 1 gigawatt from its Southeast Asian factories, forecasting 5.8 to 6.1 gigawatts. In India, production is expected to hit 3 to 3.2 gigawatts, with 70% for the U.S. market, leading to a total annual production forecast of 18 to 19 gigawatts for 2025. Growth-related costs will impact operating income by $110 to $130 million, mostly due to the new Louisiana factory and underutilization costs across various sites. A workforce shift will temporarily support U.S. facilities, and module sales are projected at 18 to 20 gigawatts, including Indian exports to the U.S.

The article discusses expected financial metrics for the company's solar operations in 2025. The anticipated average selling price (ASP) for the full year is around $0.29 per watt, considering domestic and international sales, with a significant portion being international products. The cost per watt is projected to increase to about $0.20 in 2025, due to several factors: underutilization and yield loss from CuRe technology in Ohio, suboptimal production capacity in Alabama, higher costs for export production in India, and reduced production in Vietnam and Malaysia leading to higher fixed costs. These factors are expected to drive the increase in production costs.

The paragraph discusses the anticipated negative impact on fleet cost per watt due to a shift in production from lower-cost international facilities to higher-cost US production, coupled with a reduction in production capacity in Malaysia and Vietnam. It also addresses the cost implications of new US tariffs on imported aluminum, with the company's US Series 6 product using Malaysian aluminum frame rails. Additionally, the paragraph mentions potential reciprocal tariffs on goods from countries that impose tariffs on American products. Contracts for international module deliveries typically include protections against new tariffs. Lastly, it touches on China's export controls on critical minerals like tellurium, a key raw material for the company's modules, and outlines efforts to diversify the supply chain to reduce dependency on China.

The paragraph addresses the operational impacts of China's decision on copper mining and processing in the U.S., emphasizing the need for strategic development in these areas. It forecasts fleet average sales rates and costs per watt sold, noting a reduction from 2024 but higher than previous assumptions. Contractual protection from freight rate increases is mentioned, although some additional charges are expected due to increased sales volume from India to the U.S. Warehousing and storage needs have risen due to increased production and allocation challenges expected to result in back-ended shipment profiles in 2025, with warehousing rates increasing due to domestic manufacturing and import surges. A Series 7 manufacturing issue has led to estimated warranty losses between $56 million and $100 million, with 0.7 gigawatts of affected inventory held. The cost per watt sold for 2025 is forecasted at $0.24. The strong balance sheet of the company serves as a strategic advantage, allowing for flexibility in pursuing growth opportunities and funding Series 6 and Series 7 expansions.

The paragraph outlines the company's financial outlook and plans for 2025. It reports a strong liquidity position ending 2024, allowing the company to finance its capital programs without external funding. The net sales for 2025 are projected between $5.3 billion and $5.8 billion, with a gross margin of 47%, largely due to Section 45X tax credits. SG&A expenses are expected between $180 million and $190 million, while R&D expenses are increasing to $230 million to $250 million, driven by new operations at an R&D innovation center and perovskite development. Overall operating expenses, including production startup costs, are projected to be between $470 million and $510 million.

The article's paragraph discusses financial expectations for a company in 2025, projecting an operating income between $1.95 billion and $2.3 billion with a 38% operating margin, inclusive of ramp costs and Section 45X credits. Non-operating items are expected to net zero, with a full-year tax expense of $100 million to $120 million, resulting in estimated earnings per diluted share between $17 and $20. First-quarter sales are projected at 2.7 to 3 gigawatts of modules, resulting in diluted earnings per share of $2.20 to $2.70. Capital expenditures are expected to be $1.3 billion to $1.5 billion, largely for capacity expansion, mainly at a Louisiana plant. The net cash balance by the end of 2025 is anticipated to be $0.7 to $1.2 billion. The paragraph also notes that 2024 earnings per share fell short due to costs relating to growth and liquidity strategies, including expenses for the Alabama facility expansion, throughput and yield losses from a manufacturing transition, and liquidity enhancements from the sale of tax credits.

The paragraph discusses the company's performance and outlook for 2024 and 2025. In 2024, margins were affected by increased logistics costs due to delayed shipments, particularly related to manufacturing issues with Series 7 modules. Despite this, 2024 net sales met the company's guidance, with a significant contracted backlog of 68.5 gigawatts at an average selling price of nearly $0.30 per watt. The company's diluted earnings per share (EPS) for 2024 saw a 55% increase over the previous year. Looking to 2025, the company is strong in US production but faces international uncertainty due to policy environments, particularly affecting Southeast Asian production costs. Assuming domestic content provisions remain, there are long-term optimization opportunities. They project 2025 earnings per share to grow 50% over 2024, with guidance ranging from $17 to $20 per share. As the call for questions begins, Brian Lee of Goldman Sachs expresses appreciation for the information and questions the wider-than-usual guidance range, particularly concerning the impact of selling 1 gigawatt of leftover India volume.

In the paragraph, Mark Widmar addresses a question about the potential for safe-harbor provisions in an uncertain environment. He notes that many customers have already established safe-harbor arrangements, primarily using equipment like transformers, to secure their projects against regulatory changes. However, due to ongoing uncertainty, there is hesitance to make immediate changes. Projects are still progressing, but face challenges from evolving regulatory updates. Widmar emphasizes the industry's need for clarity and certainty to move forward effectively.

The paragraph discusses the complexities and uncertainties involved in optimizing customer options in the context of achieving domestic content requirements and potential tariff implications. It highlights the reluctance of parties to take on additional risks due to uncertainties related to tariffs and the allocation of risks between domestic and international modules. The current contractual framework shares risks, but the uncertainty makes it difficult to optimize or change strategies. Despite these challenges, there is significant activity around safe harbor provisions, which supports ongoing project development. However, many are opting to maintain their current positions until there is more certainty.

In this paragraph, Alex Bradley and Mark Widmar discuss the shipment guidance of 18 to 20 gigawatts, highlighting risks and uncertainties, especially concerning the back-end of the year and potential shipment delays due to ongoing negotiations related to a warranty issue. They indicate a 1.4 gigawatt unsold dependency on international markets and some risk in the US market, while expressing optimism about the Indian market due to its mechanics and assured payment security. They anticipate improved clarity and optimization in the international and domestic product mix as the year progresses.

In the paragraph, Philip Shen from ROTH Capital Partners questions the operator about a few concerns. First, he inquires about warranty expenses related to production issues and seeks confirmation on whether the problems with the Series 7 modules have been resolved, as well as whether the warranty expense risk is capped at $100 million. He also asks about the potential for expenses exceeding this amount. Secondly, he asks if tariffs are included in the company's guidance. Finally, he addresses the potential issue of customers experiencing lower production levels, which could jeopardize projects and future purchases of First Solar modules. Mark Widmar responds by indicating that some changes impacting warranty concerns had already been corrected, as discussed in a previous call.

The paragraph discusses the resolution of issues impacting the underperformance of the Series 7 product. It mentions that certain problems, such as dual washer time, were specific to some manufacturing locations, notably not affecting the Alabama factory. Corrections have been made, and the Series 7 product is now being shipped and expected to meet performance specifications. An independent third-party assessment is being conducted to validate corrective actions, offering reassurance to customers and stakeholders. The estimated financial reserve for these issues is $56 million, with a potential upper range of $100 million. Additionally, the company is not factoring in any tariffs on its products imported from Malaysia, Vietnam, or India.

The paragraph discusses the challenges faced by a company due to tariffs and rising costs. The company anticipates that imported aluminum components will incur a 25% tariff and that additional charges may arise for Chinese-owned or manufactured freight carriers. These factors create uncertainty surrounding their financial impact. In 2022, the company experienced significant financial strain due to increased freight and commodity costs, particularly aluminum, resulting in a $500 million adverse impact. Despite these challenges, the company honors its contracts and absorbs these costs, maintaining strong partnerships with customers. They are prepared to handle similar cost increases and other financial impacts this year while fulfilling their obligations.

The paragraph discusses a company's warranty obligations, emphasizing that they fully support their technology within the agreed contract terms, but they don't cover consequential damages outside those parameters. The company is committed to evaluating and addressing any technological shortfalls within the warranty's framework, which defines their operational and managerial boundaries. They value long-term partnerships and believe their credibility ensures stable relationships with customers. The paragraph transitions to a question from JPMorgan's Mark Strouse about differences in cost per watt produced and sold. Strouse notes the company is ahead of its 2025 cost target and asks about expectations for 2026, to which Mark Widmar begins to respond.

The paragraph discusses various cost factors affecting the production and sales of a company's products, specifically focusing on the cost per watt produced. Production challenges have emerged, including increased tariffs affecting Southeast Asian factories, leading to higher costs due to reduced production throughput. These factors have expanded period costs significantly beyond initial expectations. Costs related to sales rates, ramp-up processes, and other overhead expenses are outlined, emphasizing that warehousing costs have escalated considerably since the last Analyst Day. Overall, the company's production costs are close to expected levels, but period costs, primarily due to warehousing, have increased significantly.

The paragraph discusses the financial challenges faced by a company, highlighting a $250 million warehousing cost due to storing a significant volume of products resulting from shipment delays and customer adjustments linked to a warranty issue. These issues have created a lag effect from 2024 into 2025, with underperforming sales leading to unsold inventory. The company maintains a consistent production rate, but inconsistent shipping leads to inventory build-up. Additionally, unexpected tariffs on aluminum are projected to impact costs by $30 million, and rising glass costs continue to present challenges as the company scales production and reactivates decommissioned facilities.

The company is experiencing increased costs as it scales up its U.S. operations, partly due to its significant share of the U.S. glass market and the use of more brownfield than greenfield assets, which are more expensive. Additionally, rising natural gas prices could put further pressure on glass costs, although they remain within the expected range.

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