The paragraph is a transcript from First Solar's First Quarter 2025 Earnings Call. The call is being webcast live and is currently in a listen-only mode, with the call being recorded. Byron Jeffers, Head of Investor Relations, introduces the participants, including CEO Mark Widmar and CFO Alex Bradley, and mentions that the call will cover the financial performance and business outlook for 2025. Some statements will be forward-looking, with associated risks and uncertainties. CEO Mark Widmar provides an update on new bookings, stating they've secured net bookings of 0.6 gigawatts at an ASP of $0.305 per watt, bringing their contracted backlog to 66.3 gigawatts.

In Q1, the company recorded 2.9 gigawatts of module sales, meeting its forecast. However, its earnings per diluted share of $1.95 fell below expectations due to a higher proportion of international versus U.S. sales. They produced 4.0 gigawatts of modules, including Series 6 and Series 7, and began commercial production of CuRe technology modules, which showed promising energy performance. The company’s expansion in the U.S. is progressing, with their Alabama factory ramping up and the Louisiana facility on track for commercial operation later this year, aiming to boost U.S. manufacturing capacity to over 14 gigawatts by 2026. They are also navigating uncertainty in policy and trade, influenced by budget reconciliation and new tariff initiatives.

The paragraph discusses the challenges First Solar faces due to new trade policies and tariffs. Despite an overall favorable long-term political and trade environment, recent tariff changes have introduced significant obstacles. The company has updated its guidance, considering a universal 10% tariff and the potential impact of higher reciprocal tariffs for India, Malaysia, and Vietnam, impacting manufacturing operations and sales to the U.S. The tariffs pose economic challenges, particularly to facilities selling into the U.S., even with a temporary pause and partial mitigation by the universal tariff.

The paragraph discusses the uncertainty regarding the potential reinstatement or indefinite pause of reciprocal tariffs affecting First Solar's module shipments. This uncertainty complicates efforts to determine precise tariff rates for shipments in the latter half of the year. First Solar's international sales contracts with the United States typically include provisions to mitigate negative impacts on gross margins due to tariff changes. These provisions allow First Solar to either terminate contracts, require customers to absorb tariffs, or share the tariff burden with customers, often after a negotiated discussion period about tariff risk allocation. If a contract is terminated under these provisions, it unwinds without termination penalties, reducing First Solar's backlog and returning deposits to customers. As of March 31, 2025, First Solar's backlog includes 13.9 gigawatts of contracts for international deliveries to the U.S., within an overall backlog of 66.1 gigawatts. These provisions are designed to protect First Solar from significant economic risks due to tariff-related legal changes.

The paragraph discusses the impact of new tariffs on First Solar's international product backlog, forecasting that 12 gigawatts could be terminated unless the company absorbs the costs. The profitability of this portion of the backlog is below average due to higher sales and storage costs despite lower production costs. However, module tariffs do not affect U.S. facility contracts. The company's ability to optimize U.S. and international production to meet domestic content ITC bonus requirements may be limited by the new tariff regime, unless customers are willing to absorb or share tariff costs. Additionally, the new tariffs could lead to increased project-related costs, especially for Solar Plus storage projects, due to reliance on Chinese supply chains for various components.

The paragraph discusses First Solar's strategic shift in production, pivoting its India facility from exporting to the U.S. to focusing on the domestic Indian market due to challenges like new tariffs affecting its Malaysia and Vietnam factories. The company is prepared for possible production cuts at these sites if tariffs intensify. Despite these short-term issues, First Solar is optimistic about long-term U.S. solar demand and highlights its unique position as the only large-scale U.S. headquartered PV manufacturer with fully integrated operations across multiple states. The company projects significant economic contributions, including supporting over 30,000 U.S. jobs and generating $2.8 billion in annual payroll, thanks to its proprietary thin-film technology, which is leveraged to compete against unfair trade practices from the Chinese silicon supply chain.

The paragraph discusses the recognition by political leaders and policymakers of the need to address unfair trade practices related to solar manufacturing, focusing on a recent determination in the Solar 3 case. The U.S. Commerce Department imposed anti-dumping and countervailing duties on solar imports from Chinese companies operating in Southeast Asia, aiming to protect American manufacturers and jobs. Despite being pleased with these measures, there is concern over Chinese companies shifting production to other regions to exploit trade laws, evidenced by increased imports from countries like Laos and Indonesia, and the potential establishment of production in areas like Saudi Arabia.

The American Alliance of Solar Manufacturing Trade Committee is monitoring trade data and remains open to pursuing trade remedies, including new anti-dumping and countervailing duty cases, to ensure fair competition and compliance with trade laws. They are ready to seek retroactive tariffs if needed and support legislation like the Leveling the Playing Field Act 2.0 to deter tariff evasion and strengthen U.S. trade laws. The group is also engaged in lobbying for industrial policies and tax incentives, like the 45X Advanced Manufacturing Tax Credit and investment in production Tax Credit, advocating these measures with the administration and Congress to support critical supply chain initiatives. They find the response to their advocacy efforts encouraging.

The paragraph emphasizes the importance of maintaining and modifying certain U.S. tax policies to benefit domestic energy production and investment. It advocates for preventing Chinese companies from benefiting from U.S. taxpayer dollars through the FEOC provision and for strengthening the domestic content provision for clean energy tax credits like ITC and PTC. These adjustments aim to provide budgetary savings, support the permanence of the Tax Cuts and Jobs Act, and reduce dependence on foreign energy sources. A growing number of Republican policymakers acknowledge the benefits of existing tax credits for boosting manufacturing investments and stabilizing utility costs. The paragraph highlights the essential need for affordable, reliable electricity amid the projected 50% increase in U.S. electricity demand by 2050 and significant growth in data center energy consumption. CEOs of major utility companies recognize the impending growth in energy demand.

The paragraph discusses the importance of solar energy in a diversified power generation strategy that includes natural gas, nuclear, hydro, and other technologies. It emphasizes the advocacy for clean energy tax credits and their associated transferability provisions to enhance solar deployment efficiently and cost-effectively. Evidence suggests that solar power significantly reduces electricity costs, as seen in states like Texas, Florida, North Carolina, and Nevada. Despite uncertainties from new tariffs, U.S. load growth is expected to remain strong, highlighting the need for increased generation capacity to support critical industries. With renewables comprising 92% of the U.S. interconnection queue, solar is noted as the fastest-growing form of new power generation.

The paragraph discusses First Solar's competitive advantage in the U.S. solar market due to its vertically integrated manufacturing process, which includes a domestically produced cell and a largely domestic value chain. This setup helps development partners qualify for domestic content bonuses, especially as these requirements increase annually. Despite policy uncertainties, such as new tariffs, First Solar's established U.S. presence allows it to offer reliable module pricing and delivery, making it a preferred choice for developers. As a U.S. company, First Solar's future domestic expansion is less likely to be affected by potential foreign entity ownership legislation, unlike many of its Chinese-owned competitors.

The paragraph discusses uncertainties affecting manufacturers and investment decisions due to delays in the reconciliation process for clean energy tax credits under the Inflation Reduction Act, possibly extending into 2025 or 2026. It highlights that the Section 45X tax credit will begin to phase out by the end of the decade, shortening its availability window. The company notes its competitive advantage due to its U.S.-based operations and investments in a domestic supply chain for materials like glass and steel. However, challenges remain due to tariffs and the lack of domestic supply for certain materials, such as pattern glass and aluminum, which could lead to higher pricing for domestically produced products. Despite these challenges, the company remains optimistic about the long-term prospects for solar energy demand in the U.S. and its ability to leverage its strategic positioning.

The paragraph discusses the position and strategies of a major U.S. solar module manufacturer in response to Chinese trade practices. The company emphasizes the importance of U.S. trade laws and industrial policy and highlights its position as the largest domestic solar module manufacturer. It is fully vertically integrated, relies on a proprietary semiconductor not dependent on Chinese materials, and supports reshoring American manufacturing. Alex Bradley then provides an update on financials and contracts as of December 31, 2024, noting a contracted backlog of 68.5 gigawatts valued at $20.5 billion. Sales and new bookings in Q1 adjusted the backlog to 66.3 gigawatts. The company has contracts with provisions to mitigate gross margin erosion in the event of tariff changes, with impacts still being evaluated with customers.

The paragraph discusses the backlog and potential revenue from adjusters tied to achieving milestones in a technology roadmap. As of the end of the first quarter, there are 32.5 gigawatts of contracted volume with these adjusters, which could generate up to $0.6 billion in additional revenue if fully realized, primarily between 2026 and 2028. Since the last earnings call, contracted volume with adjusters dropped to 4.6 gigawatts due to confirmed adjustments, expired notification periods, and delays in Vietnam's CuRe conversion, partly because of new tariffs. The paragraph also notes that potential adjustments to the total backlog could occur due to changes in the ASP or fluctuations in costs. Despite these changes, the pipeline of booking opportunities remains robust at 81 gigawatts, with significant growth in mid to late-stage opportunities, especially driven by increased demand in India due to a government initiative related to agricultural solar power.

The scheme launched in 2022 aims to add 30 gigawatts of solar capacity in India by March 2026, with several states allocating capacities to developers. First Solar's Series 7 modules qualify for this initiative due to the requirement for India-made cells. The pipeline includes 3.8 gigawatts of opportunities pending conditions. Contracts in India are not recognized until full security is received. In Q1, First Solar sold 2.9 gigawatts of modules, with 1.75 gigawatts produced in the U.S., resulting in net sales of $0.8 billion, down $0.7 billion from the previous quarter due to seasonal reductions. Despite the gross margin rising to 41% from 37% due to tax credits, it fell below forecasts. U.S. module sales and production were lower than expected, reducing the recognized tax credit. Some sales from a limited production run are delayed to the second quarter.

In the final weeks of the quarter, shipping challenges and seasonal trends affected revenue recognition, with 70% of the quarter's volume recognized as revenue in March. The company dealt with ongoing impacts from previously resolved Series 7 manufacturing issues, holding 0.7 gigawatts of potentially affected modules in inventory. Agreements are being reached to resolve issues with initial production run modules, and an independent review of corrective actions has been completed and shared with stakeholders. SG&A, R&D, and production startup expenses rose by $12 million due to increased potential credit losses and startup costs for a new facility, totaling $123 million in Q1. Operating income was $221 million, factoring in depreciation, ramp costs, and other expenses, with non-operating income showing a $4 million expense, which was a $6 million improvement over the previous quarter.

The paragraph discusses the financial changes experienced by the company in the first quarter. Higher interest income from overdue accounts receivable drove earnings per diluted share to $1.95. A tax expense dropped to $8 million, thanks to a favorable jurisdictional mix and lower pre-tax income, along with high reserves for state taxes in the previous period. The company saw its cash and cash equivalent balance decrease by $0.9 billion due to an increase in accounts receivable and inventory, primarily due to a shipment strategy for 2025 leading to temporary working capital challenges. The inventory and warehousing costs increased, but this trend is expected to reverse as shipments increase later in the year. Additionally, the overdue accounts receivable balance rose by approximately $350 million by the end of the quarter.

The paragraph discusses financial and operational challenges the company is facing, including a $70 million shortfall from terminations related to a 2024 default and pending litigation to recover termination payments. It mentions a deferred $100 million payment backed by a surety bond, which affects near-term liquidity. Additionally, there's an increase in overdue accounts receivable linked to past manufacturing issues. Capital expenditures of $206 million went primarily towards a new facility in Louisiana, affecting the company's cash position, which decreased by $0.8 billion. The paragraph notes uncertainties impacting financial guidance, particularly due to new tariffs and policy changes in Europe, India, and the U.S.

The paragraph discusses First Solar's supply-demand imbalance and policy uncertainties affecting its operations. The company faces being oversold through 2026, but undersold in 2025 due to contract terminations and project delays. Policy uncertainties, including those related to budget reconciliation and tariffs, are causing increased costs and risks. New tariffs are negatively impacting First Solar by raising production costs in the U.S., increasing import costs from international facilities, and potentially reducing production abroad, which could worsen financial impacts. This is compounded by increased project costs and delays faced by their customers. First Solar has revised its financial guidance to account for these impacts, considering various tariff rates and exclusions affecting different countries and products.

The paragraph discusses the financial guidance impact of reciprocal tariffs on solar products in India, Malaysia, and Vietnam, with respective rates of 26%, 24%, and 46%. Though current contracts with customers and suppliers account for these tariffs, the company will reassess how costs are shared. Potential indirect costs from restructuring or asset impairments due to tariffs are not included in the financial guidance. The U.S. manufacturing forecast of 9.5 to 9.8 gigawatts remains unchanged, but 0.7 gigawatts from Malaysia and Vietnam have been removed due to tariff uncertainties. Reduced demand is anticipated, leading to lower capacity utilization at these international factories, with the possibility of partial or full shutdowns through year-end. The company is evaluating production optimization in light of reduced international demand.

The paragraph discusses the strategic adjustments made by a company in response to changes in tariffs and production forecasts. It outlines the temporary idling of production to navigate tariff updates affecting Malaysia and Vietnam and the impact of the budget reconciliation process and IRA. Initially predicting that 2 gigawatts of production from India would be sold in the U.S. by 2025, the company has revised its forecast, reallocating about half of this output back to the Indian market to dodge expected tariffs. Consequently, the dependence on the domestic Indian market has increased, raising its forecast from 0.7 to 1.5 gigawatts. The company now projects total module sales of 15.5 to 19.3 gigawatts. It foresees a financial impact due to changes in volume and average selling prices ranging from $100 million to $375 million. The company also anticipates tariff expenses on imports, estimating $90 million to $70 million for module imports and a $25 million to $55 million tariff impact on raw material imports, particularly aluminum and glass, following new tariffs and as domestic glass supply increases.

The paragraph provides a financial forecast for the company, highlighting an increase in period costs by approximately $65 million to $270 million due to underutilization of factories in Malaysia and Vietnam, leading to under-absorption of fixed costs. It also anticipates additional freight and logistics charges due to accelerating imports and potential tariff fees. The company projects net sales for 2025 between $4.5 billion and $5.5 billion, considering changes in international volumes and tariffs. The gross margin is expected to range from $1.96 billion to $2.47 billion, or roughly 44%, buoyed by tax credits but impacted by ramp costs. Operating expenses, including SG&A, R&D, and production startup expenses, are projected to total between $470 million and $510 million.

The paragraph provides an overview of the company's financial expectations and guidance for 2025, highlighting an operating income forecast of $1.45 billion to $2 billion with a margin of approximately 35%. This includes costs and credits such as $155 million to $290 million in startup expenses and $1.65 billion to $1.7 billion in Section 45X credits. The earnings per diluted share for the year are projected to range between $12.50 and $17.50, with the upper end reduced by $2.50 due to tariff impacts and underutilization costs. Expected module sales for Q2 are 3 to 3.9 gigawatts, with EPS between $2 and $3. Capital expenditures are anticipated to be $1 billion to $1.5 billion. The year-end net cash balance is expected to be $0.4 billion to $0.9 billion, excluding potential monetization of Section 45X credits. Q1 earnings fell below the guidance range due to a shift in the mix of U.S. versus international product sales, though the forecast for U.S. volume sold remains steady.

The paragraph is a segment from an earnings call where the company discusses challenges from new tariff policies that have affected their forecasts. They have updated their earnings guidance for 2025 to a range of $12.50 to $17.50 per diluted share. Despite the uncertainties, the company remains optimistic about the long-term prospects of the U.S. solar energy market and their position within it, owing to their fully integrated manufacturing and proprietary technology. During the Q&A, Philip Shen from ROTH Capital Partners asks about the impact of the tariffs on customer bookings, noting that new bookings were made at a rate of $0.305 per watt. He also inquires about recent underperformance issues in their modules, specifically seeking details on Series 6 and Series 7, and the production line fixes mentioned in a third-party report. Lastly, he asks when the company expects customers to resume normal delivery schedules.

The paragraph discusses First Solar's warehousing expenses and the uncertainties in resolving them, potentially not until 2026. It highlights increased customer interest due to recent events like the Solar 3 outcome and universal tariffs, which have prompted concerns about tariff exposure. As a preferred partner for domestic capacity, First Solar is experiencing increased activity, but there are still uncertainties regarding market prices and potential impacts from changes in legislation, such as budget reconciliation or modifications to the IRA, affecting supply and market dynamics. Due to strong domestic bookings, the company is maintaining a patient approach regarding these uncertainties.

The company is facing complexities in meeting customer demands for near-term opportunities due to international production challenges and tariff discussions. There's uncertainty around the future pricing dynamics of domestic modules. Regarding the Series 7 product, a third-party report has validated the identification of root causes and corrective actions were implemented last year. The company is finalizing settlement agreements with customers affected by initial production issues, and progress in these settlements is seen as positive, allowing the company to move past these challenges.

The speaker reiterates their commitment to standing behind their product, as previously stated, by fulfilling warranty obligations agreed upon with customers. The company will test modules according to mutually agreed IAC standards and replace them if they fall below warranty thresholds. Despite repeated questions, the company assures its ongoing support. However, uncertainty, particularly stemming from Chinese battery cell tariffs, has worsened since the last earnings call, affecting project economics and customer delivery timing. This increased uncertainty hampers the visibility and timing of shipments to customers.

In this discussion, Andrew Percoco from Morgan Stanley asks about the unexpected volume downside in the company's guidance, particularly in relation to battery storage supply chain issues and factors affecting U.S. and international operations. He also queries about the company's strategy for managing working capital headwinds in light of tax credit transfers and third-party capital. Mark Widmar responds by attributing the guidance adjustments to the impact of universal tariffs and explains the need for the company to operate its factories continuously while adhering to communicated tariff measures, including a 10% tariff effective until July 9.

The paragraph discusses the impact of high reciprocal tariffs, particularly a 46% tariff on products shipped from Vietnam to the U.S., which makes such shipments uneconomical. Contracts with customers include tariff provisions to mitigate risks. If tariffs change significantly, parties may renegotiate who bears the cost or terminate the contract if no agreement is reached. The guidance reflects different scenarios: the high end assumes a 10% tariff through year-end, while the low end assumes universal tariffs remain until July 9 before rising. This uncertainty has already affected business plans, leading to a reduction of 700 megawatts in projected volume.

The paragraph discusses the strategic decision by First Solar not to manufacture and ship products from Malaysia and Vietnam to the U.S. in the latter half of the year, due to economic challenges and tariff concerns. First Solar has not fully engaged with customers about the tariffs, which might affect manufacturing plans, especially if proposed country-specific tariffs are implemented. The company is uncertain about the outcome of these discussions and has decided to halt operations in these countries while evaluating potential tariff changes and U.S. policy impacts, such as those from the Inflation Reduction Act (IRA), to determine their influence on future production and import strategies.

The paragraph discusses the impact of tariffs on production and sales volumes for a company operating in the energy sector. The speaker notes a significant expected reduction in manufacturing in Southeast Asia, particularly Malaysia and Vietnam, due to tariffs making it uneconomical to produce and export to the U.S. Despite this, U.S. and India manufacturing volumes remain unchanged, but a shift is expected, with more production intended for India's domestic market rather than export to the U.S. This adjustment results in a reduction of 700 megawatts in contracted production, with a potential additional decrease of 1.8 gigawatts. These changes have led the company to lower its cash guidance by $300 million and widen its Capital Expenditure range.

The paragraph discusses financial strategies regarding capital expenditure (CapEx) and cash management. The company is adjusting its CapEx based on lower-end guidance scenarios and managing high inventory and IRA balances, which are expected to decrease in the year's second half if sales continue as planned, barring unexpected events like tariff impacts. The figures discussed are net numbers; on a gross basis, they are $500 million higher. The company hasn't sold its 2025 credits but is exploring market conditions to potentially sell them, aiming for a valuation that ensures economic neutrality. In a challenging IRA risk environment, selling these credits would position them better financially. They generated $300 million in credit in Q1, expect another $300 million in Q2, and project $1 billion in the second half of the year. Additionally, they have a $1 billion untapped revolver to manage international cash flow efficiently.

The paragraph discusses possible strategies for managing jurisdictional cash and optimizing assets in light of potential tariffs on imports from Malaysia and Vietnam, ranging from 10% to 30%. It mentions the possibility of relocating some manufacturing equipment to the U.S. in response to these tariffs. The discussion includes considerations about deposits related to gigawatts outlined previously and addresses key legislative elements like the foreign entity of concern provision and the 45X provision within the Inflation Reduction Act (IRA). These could significantly affect Chinese companies' operations in the U.S. and influence the domestic supply chain. Additionally, potential changes to the domestic content ITC and PTC are noted, particularly how value distribution might shift towards technology components.

The paragraph discusses strategies for optimizing assets and reducing costs in light of tariffs. One approach involves front-end processing in Malaysia and Vietnam and back-end finishing in the U.S., particularly on the West Coast, to leverage tariff reductions and cut shipping costs. This strategy could also involve semi-finished products to maximize shipping efficiency. However, uncertainty remains about the final strategy until post-budget reconciliation clarifies the situation. Separately, Alexander Bradley notes that by year-end, about 12 gigawatts in the backlog may face tariff revisions, potentially affecting roughly $3 billion in revenue.

The paragraph discusses concerns about potential financial risks due to a $1.9 billion backlog, which could translate to $300 million at risk if cancellations occur. The speaker notes that many customers are keen to continue with their projects despite tariff challenges, implying that cancellations are unlikely. They mention limited domestic product supply but note the possibility of fulfilling contracts with domestic products later if necessary. A question from Brian Lee at Goldman Sachs follows, asking about the company's strategy in maintaining high-end guidance despite a 10% universal tariff on 1.8 gigawatts from Southeast Asia. He inquires whether this involves accepting lower margins or passing on costs to customers, and how this will impact future volumes from Malaysia and Vietnam if the tariffs persist. He also asks about the expected module finishing capacity from Vietnam and Malaysia for the year.

The paragraph discusses a company's strategy regarding potential 10% tariffs on products. Alexander Bradley mentions that their current financial numbers assume these tariffs, but they plan to discuss this with customers. They have some inventory in the U.S. to mitigate tariff impact. For products affected by tariffs, they may finish them in the U.S. to optimize costs. Mark Widmar adds that they're considering expanding production in the U.S. based on customer demand and policy clarity. There's uncertainty about plans for 2026 due to the evolving policy environment.

The paragraph discusses the company's capacity constraints and the timeline for setting up a new finishing line, which hinges on finding a suitable building. Once a decision is made, it could take 9 to 12 months to get the line operational, contingent on various factors like reconciliation processes. The timing might fall in late Q3 or Q4. In the subsequent exchange, Julien Dumoulin-Smith from Jefferies asks about the re-pricing risks related to the company's backlog of contracts, specifically concerning 12 gigawatts out of 66 gigawatts. He inquires about potential re-pricing due to tariff contract reopeners, changes in law, and sourcing changes between U.S. and foreign supplies, seeking clarification on these aspects.

The paragraph discusses the commitment to delivering a remaining 54 gigawatts of primarily domestic product for the U.S., with minimal involvement in India, indicating there is no re-pricing risk. For an additional 12 gigawatts, delivery depends on customer discussions and external factors such as reciprocal tariffs and the availability of domestic supply. The decision to invest in further capacity, like a finishing line, hinges on clarifying policy details under the Inflation Reduction Act (IRA) and the adjustment of country-specific tariffs, potentially affecting Vietnam's rates.

The speaker discusses the uncertainty surrounding negotiations with customers regarding product delivery requirements and pricing, which may lead to operational changes. They express a willingness to make tough decisions, such as closing a facility if operating costs become too high due to tariffs, in order to avoid weakening their negotiating position. They also mention awaiting more information on the Inflation Reduction Act (IRA) and its potential benefits. The situation has evolved since the last earnings call, and they aim to maintain transparency. The conference call concludes with gratitude for participation.

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