Good afternoon, everyone, and welcome to First Solar's Second Quarter 2016 Earnings Call. This call is being webcast live on the Investors section of First Solar's website at firstsolar.com. At this time, all participants are in listen-only mode. As a reminder, today's call is being recorded. I would now like to turn the call over to Steve Haymore from First Solar Investor Relations. Mr. Haymore, you may begin.

Thank you. Good afternoon, everyone and thank you for joining us. Today, the company issued a press release announcing its financial results for the second quarter of 2016. A copy of the press release and the presentation are available on the Investors section of First Solar's website at firstsolar.com. With me today are Mark Widmar, Chief Executive Officer; and Alex Bradley, Interim Chief Financial Officer. Mark will provide a business and technology update. Then Alex will discuss our second quarter financial results and provide updated guidance for 2016. We will then open up the call for questions. Most of the financial numbers reported and discussed on today's call are based on U.S. Generally Accepted Accounting Principles. In the few cases where we report non-GAAP measures such as free cash flow or non-GAAP earnings per share, we have reconciled the non-GAAP measures to GAAP measures at the back of our presentation. Please note this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statements contained in today's press release and presentations for a more complete description. It is now my pleasure to introduce Mark Widmar, Chief Executive Officer. Mark?

Thanks, Steve. Good afternoon, and thank you for joining us today. Before reviewing the results for the quarter, I want to provide a brief update on some key strategic priorities and how I intend to lead the organization in my new role as CEO. In our decision-making, we will continue to apply the same disciplined approach to long-term strategy that has served us extremely well to date. At various times over the past several years, some have questioned our measured approach, the key strategic decisions including capacity expansion, asset ownership and balance sheet utilization. However, we continue to see the benefits of our disciplined strategy and are confident this approach will optimize shareholder value over the long-term. This approach also allows us to be nimble and navigate an industry that is cyclical, high growth and dynamic. The updates I provide today do not constitute any major strategic changes from what we discussed earlier this year at our Analyst Day in April but are further refinements aimed at simplifying and focusing our business. The core of our overall strategy continues to be our differentiated CadTel technology its tremendous potential for further conversion efficiency improvements. Closely aligned to our module efficiency roadmap is the evolution of our module form factor, which as we indicated in April, will begin next year with the introduction of our Series 5 module. Our Series 4 technology is an outstanding product with a superior temperature coefficient, spectral gain and shading response. Series 4 holds an energy density advantage over multi-crystalline silicon products. Series 5 retains the energy density advantage with our CadTel technology, further boost efficiency and is optimized for cost effective installations. To put this into perspective, in a typical market the reduction in Series 5 via less costs relative to Series 4 will be equivalent…

Thanks, Mark and good afternoon. I'll begin with some highlights of our operational performance during the past quarter. In Q2 we produced 785 megawatts DC or an increase of 1% from the prior quarter, resulting from higher module efficiencies and increased throughput. Compared to the second quarter of 2015, production was 39% higher as a result of higher efficiencies, improved throughput, and the addition of new capacity. Our factory capacity utilization was unchanged at 100% in Q2 versus the prior quarter, but increased by 15 percentage points versus the same period in 2015. The higher year-over-year capacity utilization was due to fewer efficiency upgrade activities in Q2 as we focused on maximizing output to meet demand in the first half of the year. The fleet average module conversion efficiency in Q2 was 16.2%, which was unchanged from the prior quarter but increased 80 basis points year-over-year. Our best line conversion efficiency was also unchanged from Q1 at 16.4%, but increased by 20 basis points compared to the second quarter of 2015. Most recently, our lead line has been running at 16.7% efficiency and we're encouraged by our progress towards our target of 17% lead line efficiency at the end of the year. Turning to slide 11, I'll discuss the P&L results for the second quarter. Net sales of $934 million for the quarter compared to $848 million in Q1. The sales increase resulted from higher third-party module sales, the sale of our Kingbird project, and higher revenue recognition across various systems projects. Partially offsetting the higher sales was lower revenue recognized on our Silver State South and Stateline projects which reached or neared completion in Q2. The higher module sales were driven by shipments to projects in Dubai and the Southeastern U.S. In relation to our Kingbird project, it should…

One thing I guess before we do that. Apparently there was a technical issue I think on the webcast, that the individuals who were logged in on the webcast I think did not get the first part of the prepared remarks. There will be obviously as always a link on our website that you can hear the replay; and that replay would be available later today for any of those on the webcast who were unfortunately unable to catch the first portion of today's prepared remarks, okay. With that, operator, we'll open it up for questions.

Thank you. Our first question comes from Vishal Shah with Deutsche Bank.

Hi. Thanks for taking my question. Mark, can you maybe talk about the profitability of the bookings that you're seeing right now, especially in markets like India? And can you just talk about how we should think about capacity, especially as you get into 2017? Thank you.

Yeah. I guess just general color around the profitability on bookings. We're still very pleased with the margin realization that we're capturing. We are being very disciplined though and engaging in making sure that we're capturing full value of our technology. So if you use India as an example, it's a market that our technology is competitively advantaged. A hot humid climate, we have a superior spectral response and that can command an energy advantage over crystalline silicon. Plus it's mainly fixed tilt structures in India, which is again more advantage for our Series 4 product than, say, a tracker solution. Plus we have a number of self-developed projects in India, and the returns on what we're capturing against the sell-down – our anticipated sell-down of those projects are in line with what we would normally expect and even in some cases on the upper end of our expectation. We've been very pleased with the ultimate performance of those assets. Having said that, is the market becoming more competitive? It clearly is. We're seeing a lot of very aggressive pricing behavior in the market whether it's at the PPA level or whether it's at the module level. And that's why we have to be disciplined and selective, and engaging with customers and developing relationships to ensure we can capture the full value of the offers and the value creation that we provide to our partners and our customers. So we are being disciplined in that regard and we are seeing a very aggressive marketing environment. There's no doubt about that. And that's what's also informed our view around capacity expansion and why we are being disciplined as we think about when we'll add capacity. As we indicated in our prepared remarks that we'll continue to assess that as we move forward. As it relates to near-term, our focus is converting all of our capacity into Series 5. So we want all of our Series 4 product into Series 5 as quickly as possible, and our current timeline would indicate that that would happen in the end of 2017. We'll continue then also to validate the business case around Series 6. And as we get more informed and have a better understanding and realization of the current views around Series 6, we will start to think about how do we add capacity and the associated timing around that. So I would say for now, again, near-term focus, moving Series 4 to Series 5; as we get better information and validate Series 6, that'll determine the timing around when do we start to add incremental capacity.

And the next question comes from Ben Kallo with Robert Baird. Benjamin Joseph Kallo - Robert W. Baird & Co., Inc. (Broker): Hi. Thanks for taking my question. I've got two. First of all, when you guys talk about your margin, I guess at Analyst Day, your target margin, and maybe this loops onto Vishal's question and there're lot of concerns out there in the marketplace. As we look to next year, is that a valid range for us to think about as of this year and what you guys have talked about as your target margin? I guess as you look at projects like Moapa which you can move around a little bit, what type – and I think you guys already said that you're at the high end of your guidance if everything goes okay. So it seems like there's some flexibility into next year as well. So how do you guys think about that, about 2017, and being able to move projects into that if you don't need to finish them this year, as well as the margin question?

I'll do the margin question. I'll let Alex take the question around how we're thinking through timing of activities between 2017 and 2016. As it relates to the margin realization, similar to what we, I think, highlighted in the Analyst Day, especially when you start looking at our contracted pipeline in particular, the margin profile will start on the lower end of the range in 2017 and then continue to improve as we move through the balance of this decade primarily because as we transition into Series 5, it's a much more competitive product. And what we look at right now for our Series 5 capacity in 2017, it's probably going to be right around 1 gigawatt, which means we have about 2 gigawatts of Series 4 product that we're going to have to sell through. We also indicated in the comments today that the value of that delta in form factor as it relates to lower labor cost, fewer connectors, better wire management, elimination of clips is worth over 100 basis points of equivalent efficiency. So what you should think about is our margin profile in 2017 is going to be on the lower end. It's mainly because two-thirds of our production volume is still going to be Series 4. As we transition that into Series 5 and then really get to a position of an equivalent form factor and really capturing full value of our energy advantages, you'll see margin expansion as we go into 2018 and 2019 and 2020.

Yeah. Talking about the projects, so it really relates to our Cal Flats, Moapa, and then our residual interest in the Stateline asset. We'd expect to complete the sale of the Cal Flats asset in either late Q3 or early Q4, and then Moapa in Q4 of this year. We've guided to selling our remaining 34% interest in Stateline this year and that's still in our base case. I'd say along with both Moapa and Cal Flats, there's still significant uncertainty around the structure and the ultimate value of those sales. So in terms of our guidance, we're remaining conservative as we continue to develop those structures. The Stateline sale is really dependent on the other two deals as well as market conditions relating to the yield curve. So we'll make that decision in Q3 or Q4. We do have the flexibility with Stateline to push some of that into 2017 if needed.

And our next question comes from Brian Lee with Goldman Sachs. Brian Lee - Goldman Sachs & Co.: Hey guys, thanks for taking the questions. I had two. So first off, last quarter, Mark, you mentioned roughly 950 megawatts of potential systems bookings as you move through the back half of the year. I think you had mentioned those were international. Can you update us on if that pipeline is still intact, or how much has already been booked and vice versa how much maybe has come off? And then the second question just on some specific projects. On Stateline, if you can update us on how much revenue is left to be recognized and what percent of the project has been completed. And then separately, I know you alluded to this, but on Moapa it sounds like the expectation is that you do sell the project in its entirety this year in Q4, but are you exploring different options of monetization similar to what you've done with Stateline now that you've taken it off the 8point3 ROFO list? Thank you.

So relative to the contracted or systems business pipeline for 2017, one of the things we said in our prepared remarks – with our incremental booking that we now have, India which is a little less than 100 megawatts DC. We have about 400 megawatts of systems business already positioned for 2017. We have a pipeline that would move us towards closing that out and getting to a gigawatt expectation for 2017, for that other 600 megawatts or so. We're still working through those. There are a couple in there that I would say that – not around the economics. Those economics are very compelling. There're some issues around structuring of the PPAs and overall bankability of those PPAs. As you know, as we indicated already some of these are in international markets where we're just trying to work through in making sure they're clearly financeable and bankable. So there're some challenges in that regard, but what I would say is there's a sufficient pipeline of projects that would enable us to get to our goal of having 1 gigawatt of systems business in 2017. The other aspect that we continue to be very mindful of and very disciplined on is making sure that we get a proper return on capital, given the risk profile of doing international development business, right. In some markets pricing has gotten very aggressive, so we have to be careful in that regard. So we'll be balanced, making sure that the return on capital is commensurate with the underlying risk associated with those opportunities, but I would say in aggregate, we're still very happy with the robustness of our pipeline to get to our goal next year of 1 gigawatt of systems business. On the Stateline discussion, I'll take that one and I'll let Alex take the question on Moapa. When you get the Q, which will be available tomorrow to see, I think, I'll say effectively 96% or somewhere in the upper-90%s Stateline has been completed through the second quarter. So the vast majority of the revenue that was related to the sale for Southern has now been recognized through Q2. We have about 4% of that left and the project will achieve COD in the third quarter.

With relation to Moapa, yes. So it's no longer on the ROFO list for 8point3. That gives us a lot more flexibility in the structuring. I'd say that we're still in early stages, so we're not going to go into the detail of the structure now but we would expect to monetize the entire asset in Q4 of this year.

And the next question will come from Paul Coster with JPMorgan.

Thanks. Mark, in the prepared remarks you talked of how the expected revenue per expected module of shipment is coming down a little bit, owing to the shift towards longer dated PPAs. Is that a trend? And is it a trend that in any way relates to your customer's awareness of your product transition? Thank you.

I mean, like clearly it's a trend. PPA prices are coming down; you can see that each and every day when somebody else announces a new PPA price, wherever that may be around the world. PPA prices have become pretty competitive in a number of markets. Some of those – I would argue in some cases, it's questionable whether or not they're going to be viable or able to be achieved, but there's a pretty long runway to delivering against some of those assets that go out into the 2019, 2020 timeframe or potentially even later than that. So clearly PPA prices have come down. I don't know if it's directly related to – I wouldn't sort of position this being directly related to our advantages and our advancements and our roadmap and our form factor and efficiency. The other day we're competing against crystalline silicon, so it's really relative to the alternative technology that's in the marketplace. And so to the extent that we create separation relative to crystalline silicon, that value should accrete back to First Solar. I would also say that there's a very strong bias in the marketplace for more and more customers and developers and partners coming to First Solar first. We've got a number of parties who historically over the years have moved away from First Solar that are coming back to First Solar. And we've also got a number of other partners that are starting to come to discussions with First Solar that we historically have never had conversations with. And I do think that is related to our roadmap and our technology, and understanding where First Solar is going to go long-term with our capabilities, not only on the module side but as we indicated before, with MVDC and the advantages that that creates for the balance of system cost and just general learnings around BOS and optimization and wire management and a lot of things that we're doing to drive down a lot of cost. We're getting more and more interest from other parties to want to do more business with First Solar. So clearly trended a lower PPA, but not to extent that when I look at where the PPA pricing is going that I'm concerned relative to what we can personally do with our overall cost-reduction roadmap. Just as a relevant data point, just on the module alone, year-on-year our reduction on our module cost has been in the mid to upper-teens. So in the last 12 months, we've taken mid to upper-teen type of cost out of our module which is extremely impactful and competitive and it ultimately creates an opportunity to have robust margins against the contracted pipeline that we've created.

And moving on to Phil Shen with ROTH Capital Partners.

Hey, thanks for taking my questions. I think you've touched on this in part already, but I wanted to ask a more pointed question. Module ASPs globally are falling sharply on overcapacity issues. The acceleration to the downside really started at the beginning of July. How is this impacting your module-only and module-plus business? And how do you expect to respond to this downside price move? You talked about moving up the capacity roll-out of Series 5; could we start to see some meaningful volumes of the Series 5 module? And if so, can you quantify what that might be in 2017?

Like I mentioned previously, Phil, our volume right now for Series 5 in 2017 will be about 1 gigawatt. So about a third of our production will be Series 5. So there still will be a meaningful amount of Series 4 product that we obviously will have to sell through into next year. Some of that is already contracted, but there is more volume that we have to make sure that we sell through in that regard. You're right, module pricing has become more competitive. We are still able to command a premium for our technology. That's why we try to focus on markets where we're more significantly advanced. We even referenced in our prepared remarks, Zambia, right? So there was a opportunity in Zambia for over 50 megawatts. It's a hot, humid climate, which is an advantage for our technology. So what we are doing globally is looking at pockets of strength. We're trying to manage with constraining ourself on available capacity, at least at this point in time, especially as it relates to Series 4. We're looking for pockets of strength where we can sell through and capture highest-margin opportunity entitlement that we have relative to what's going on in the marketplace, but we're very well aware of how aggressive some of the pricing has become.

Phil, I'd also say that not every customer does see the value, but there are clearly some that differentiate and some see the value in our balance sheet, our performance. It depends a lot on the buyer. So if you're selling to developers who are looking to flip assets, they may not value the full entitlement of the module, and they may not be the sellers that we choose to sell to. While we are capacity constrained, as Mark said, that allows us to pick and choose those buyers all the more and look for those long-term owners that will fully value the benefits of the module.

And this question comes from Julien Dumoulin-Smith with UBS.

Hi. Good afternoon. I wanted to ask just a couple quick questions. Maybe to first start-off following up with the last, can you comment a bit on the duration of the cycle that we're looking at? What inning do you think we are, to use the analogy, in terms of the inventory cycle and the build out of the supply? And then perhaps secondly, going back to the 2017 discussion on margins, can you elaborate a little bit as you ramp up from that 400 megawatts of development systems to that 1 gig, when you think about margins and being at the lower end of that range, is that specific to the development – inclusive of that 1 gigawatt playing out?

So, I don't know. We always get that question. What inning are we in? I don't know. I mean look, this industry is so dynamic and can change so quickly, to be able to articulate and have a well-thought out view of what the inning is, is difficult because it can change. The game seems like it can change very quickly and events can happen very quickly that becomes disruptive or undermine or events can happen that become very positive. And clearly there is, on the positive side, there's a clear understanding globally of kind of the demand elasticity around solar and the competitiveness of solar in many different markets. And that's driving a demand profile that obviously is very encouraging. There's also – the offsetting side of that is there's quite a bit of capacity that is being added or planned to be added, maybe is a better way to say that, but that can change very quickly as well. I mean, as people think about the market opportunities and what they're willing to sell through and what ultimately is sustainable, the planned announcements that have been communicated may or may not happen. I mean there's still a lot of uncertainty as to whether or not that production supply comes to market or not. So I don't want to get into an analogy of an inning because I think it's very, very difficult from that standpoint.

On the margin piece I'd say 2017 is still pretty uncertain. So we'll have more clarity at the end of the year when we hold the guidance call. What I would say though is that we always knew that 2017 would be a challenging year, especially as we saw margins decline from our more lucrative legacy contracts as they rolled off. The ITC extension in 2016 came too late to influence 2017. That's why we think it's incredibly important that we see both a transition towards higher module business in 2017 but also as a product from Series 4 to Series 5. The other thing I'd refer you back to is the Analyst Day when we talked about what our long-term contracted pipeline looks like. Back then we spoke about having over 2.5 gigawatts of contracted assets after 2017, with north of $1 billion of contracted margin entitlement. I think if you look at that, combine that with – even without capacity expansion another 7 or so gigawatts of modules for sale, I would expect some of that volume to be incremental systems as well as modules. When you combine that with executing on the cost reduction roadmap and our OpEx coming down, I think we look to see beyond 2017 having acceptable and robust margins across the new products. 2017 itself is somewhat opaque today and we'll give better guidance around that towards the end of the year.

And the next question comes from Patrick Jobin with Credit Suisse. Patrick S. Jobin - Credit Suisse Securities (USA) LLC (Broker): Hi. Thanks for taking my question. I have three of them here. First, on 2017 are you still comfortable with the 1 gigawatt system business? I guess this morning Dominion came out and doubled their outlook for solar in 2017, and Georgia Power clearly with their 1.6 gigawatt business. I guess I'm trying to understand your comfort level on the 1 gigawatt, if that's increased or decreased relative to your Q1 view. That's the first question. Second question, can you just flush out maybe that low end of margin guidance? There was a few ranges at the Analyst Day; I'm curious. Third point, the component gross margins of 24% – I guess more of an accounting question – but is that driven by spot market pricing or the pricing locked-in during contracting? Thanks.

Yeah, so, on the 1 gigawatt for 2017, we're 400 megawatts in right now. If you asked me the other 600 megawatts, there's – really high confidence on 300 megawatts of the 600 megawatts. The other 300 megawatts I would say there's still a number of moving pieces. And some of the announcements that have come out here recently and now people are thinking about, especially in the U.S., opportunity to procure in 2017 that gets me more encouraging. As I look at some of these international opportunities and especially the challenge in some cases to some of the PPAs, as I indicated, to get them to be financeable – that sort of sways me the other way. But I would say on balance, we feel that we will get to with – whether it's 850 megawatts or 900 megawatts, it's going to be within a ZIP Code that's going to be close to that 1 gigawatt of volume at least for next year. So, I'd say there's reasonable level of comfort from that standpoint. On the margin guidance, I think the best way to handle, as Alex already said, is that we're not going to get into the specifics of that right now. There're so many moving pieces that we would rather wait until we do our guidance call in December. What I would also continue to point you to is that whatever that view is, and when we communicate that in December, I don't think we should look at this as a discrete data point as indicative of the long-term earnings potential of First Solar. The 2017 margin profile, especially as we indicated with Series 4 still being the predominant product in our platform, it's going to drive a little bit of margin pressure. There's no doubt about…

And moving on to Krish Sankar with Bank of America Merrill Lynch.

Hi. Thanks for taking my question. I had a couple of them. One is, Mark, I understand you're not giving next year guidance, but I'm just trying to think, is the thought process right that when you move to Series 5 capacity more next year and you decide to add more capacity, your cash balance should come down exiting 2017? And then the second question I had was, of your total shipments in Q2 or of the booking opportunity that you have, how much of that booking opportunity is modules-only? And of the total shipments in Q2, how much is direct versus indirect module? Thank you.

So on the Series 5 comment and impact to cash balance, one thing I think you also ought to think about around Series 5 is it's really relatively CapEx-light, relative to – if we had to start a new greenfield, all we're taking is our existing platform and we're converting it into a different product that is optimized around lot of management and some other things along those lines. And so it's not really a significant CapEx. We're going to finish this year somewhere around $2 billion of cash as we exit the year. Series 5 in and of itself is not going to drive a significant delta to that number, as we deploy that capacity or conversion of the product – Series 4 into Series 5 product in 2017. I'm not sure I got your last question. Can you repeat your last question?

Yeah. I was trying to find out of your total shipment of modules, how much is direct versus indirect in Q2? And of the 24-plus gigawatt booking opportunity, how much is modules?

So when you say shipments in Q2, are you talking bookings in Q2 or true shipments?

True shipments.

Okay. What we disclosed in that regard is that a little bit more than 80% of the shipments or the revenue I guess is a better way to say it in Q2 was systems and the balance was modules. So I don't know if that gets to your question in that regard. In terms of the 24 gigawatts and the breakout between systems and modules, we don't really provide that level of detail, but I think you clearly can anticipate that that profile and that mix of systems versus module is increasing. So there will be a higher percentage of module sales reflected in that pipeline than would have had historically.

I think that's our last question. The other thing I'd just like to remind everyone on is, again, apologize for the issues on the webcast. There will be a replay available on the First Solar Investor Relations portion of our website and that should be available later today. We thank everyone for their time.

Well thank you. And that does conclude today's conference call. We do thank you for your participation today.