Good afternoon, everyone, and welcome to First Solar's Second Quarter 2017 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 a 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 second quarter 2017 financial results. A copy of the press release and associated 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, 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 2017. 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, adjusted operating expenses, adjusted operating income or non-GAAP EPS, we have reconciled the non-GAAP measures to the corresponding 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 presentation 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. Our operational and financial results for the second quarter were resilient and market demand for our technology continues to be robust. We've had a number of highlights since our last earnings call, including the arrival of our first Series 6 equipment at our factory in Ohio, record quarterly shipments of nearly 900 Megawatt DC and strong bookings of 1.5 Gigawatt DC. In addition, our financial results for the quarter were solid, with non-GAAP earnings per share of $0.64 and an ending net cash balance of $1.9 billion. The sale of Switch Station and higher module sales to third parties were important contributors to the quarterly results. As a result of our first-half performance, improved visibility into systems project sales and an increase in expected shipments, we have raised our full year 2017 net sales, EPS, operating cash flow and net cash guidance. Entering 2017, we knew it would be a challenging year for us with the uncertainty of the global supply-demand balance and our product transition to Series 6. Despite these challenges, we have made great progress in the first half of this year. Firstly, following the receipt of a waiver under the ROFO agreement with 8point3 for interest in the Switch Station project, we were able to leverage the continued vigorous market demand for our high-quality systems projects and selling interest in Switch Station at a significantly higher valuation versus selling to 8point3. We also received waivers of our California Flats and Cuyama projects, and similarly, given current market indications, we expect to realize considerably higher valuations for those projects. Secondly, we have been very successful realizing the energy advantage of selling through most of our remaining anticipated supply of our Series 4 product. Lastly, we've made great…

Thanks, Mark. Starting on Slide 10 I'll begin with the second quarter operational highlights for our Series 4 products. As planned, module production was lower in the second quarter at 513 Megawatts DC, a decrease of 28% from the prior quarter and 35% from the same period last year, as we ramped down Series 4 production in our Malaysia facility in preparation for Series 6. Capacity utilization, which excludes the lines taken out of service, remained high, and increased slightly to 99% in Q2 versus 98% in the prior quarter. Our full fleet conversion efficiency improved to 16.9% in the second quarter, a 20 basis point increase from the prior quarter and an impressive 70 basis point improvement versus Q2 of 2016. Module conversion efficiency in our best line averaged 17% in Q2 to 10 basis points sequential improvement and a 60 basis point improvement year-over-year. Going forward, we expect the Series 4 fleet average efficiency to level off near our current 17% efficiency as future technology improvements and investment are focused on Series 6. However, keep in mind that the current 17% efficiency level is not indicative of Series 6 efficiency, which will be higher at the time of product launch and is expected to continuously improve thereafter as we execute our technology road map. As a reminder, our record cell efficiency standard is 22.1%. In the past, we've demonstrated a consistent ability to translate record cell and record module efficiencies into production our regular cadence and we expect this process to continue with Series 6. Name plate efficiency also does not tell the entire story and the energy yield advantage of our modules must also be kept in mind. Whilst our focus remains on realizing the potential of Series 6, our Series 4 product remains very competitive from…

Thank you. And we'll go to Philip Shen.

Hey, Mark, Alex. Thanks for the questions. The first set of questions I have are around capacity. You mentioned in your prepared remarks that you were evaluating maintaining Series 4 capacity beyond the Gigawatt that you've talked about. Can you give us a sense of how much that might be? And then, as it relates to Series 6, once you get Terra zero, 1, 2 and 3 up and running, I believe you'll be at 4 Gigawatts of capacity. When do you think you could hit that 4 Gigawatt? Could we get there in 2019? What is your base case expectation for 2019?

Yes, so I'll take the first one on the Series 4 capacity, and I'll let Alex talk to the Series 6 and what the first three Terra plants capacity-wise provides to us and the timeline of expected production in 2019. As it relates to Series 4, one of the things that we said in the call, and I want to make sure people understood as well is that we have not made a decision instead of doing the third Series 6 plant in Malaysia, we're actually moving that now to Vietnam. So as you all know I think, or most of you know, we have a building in Vietnam that we never began production in, but we will now move Series 6 third factory to Vietnam. And that provides capability then to look at our KLM plant 3 and 4, as it relates to the timing of how long we'll continue to run that production. So we have optionality in really the first four plants in KLM, KLM 1-2, KLM 3-4, as it relates to continuing Series 4 production into 2018 or through all of 2018. Our current plan assumes that all that production would be stopped in the middle of 2018. We also have capability in two lines in Perrysburg. We had six lines in Perrysburg. We've actually shut down production of the south building which maintained four production lines. We've had that production, obviously have ramped that down so we can ramp up Series 6. But we still have the other two lines in Perrysburg that we can evaluate. So we have, call it, 10 lines as it relates to decisions that can be made as it relates to Series 4 and how long we continue that production. We're evaluating alternatives right now. There's a lot that's going…

Yes. So as it relates to Series 6, the plan we've laid out, which is about $1 billion of capital spend, has us with the first line in Perrysburg at 550 megawatts and then a full high-volume manufacturing line at about 1.1 gigawatts. So we will go first to KLM and then, as Mark said, over to Vietnam for the second Terra factory. If you look at that spend now, that gets us to about 3.5 gigawatts of production in 2019 and has us leaving exiting 2019 just under 4 gigawatts of capacity.

Operator, we can go to the next question.

We'll go to Krish Sankar, Bank of America Merrill Lynch. Chirag Odhav - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Hey, guys. This is Chirag Odhav on for Krish. Could you just comment a little bit on any changes in customer activity resulting from the ongoing Suniva trade case? And have you noticed an increase in customers looking to secure longer term pricing as a result?

Yes, so there's two sides on the customer activity. One is fundamental demand for solar and solar power plants. Obviously, 201 hasn't changed that demand profile at all, and what we said in our prepared remarks is that there is a tremendous increase in demand for solar, driven by utilities and looking at long-term integrated resource plans and understanding the affordability and the competitiveness of solar. So that's obviously driving more demand. We're seeing a global increase in solar demand. Again, it's driven off of demand elasticity so as the prices of solar come down, we've seen a significant increase in demand associated with that. We're also starting to see, as we said in our prepared remarks, a pretty significant increase in utility scale commercial and industrial opportunities. There's a pretty robust pipeline from that standpoint. So the fundamentals as it relates to solar hasn't been impacted or is not at all driven by anything that may happen on a trade case. The trade case here in the U.S. – is it driving potentially customers to make their procurement decisions sooner than they would otherwise? I think there's probably some of that. I think people are trying to get access to supply in advance of any ruling that may be made. You know, trying to protect their projects as it relates to their embedded economics and secure a module supply. So I do think that that is happening in the marketplace and depending on how the trade case plays out, we may see more of that activity here over the next quarter or so.

We'll next go to Tyler Frank, Robert Baird. Tyler Charles Frank - Robert W. Baird & Co., Inc. (Private Wealth Management): Hey, guys. Good quarter, and thanks for taking the question. Can you just talk about how sustainable you think current economics are? You mentioned both on the project side seeing better value for the projects that 8point3 gave you a waiver for, and then, obviously, on the module side, it seems like prices have firmed up. So as we look out two to four quarters from now, what are your expectations for overall the demand and supply balance? And how should we think about the long-term sustainability of the current pricing profile?

I'll take the discussion around module and Alex can take more discussion on the systems side. Look, I think the reality is that the module prices have – and I use the U.S. as an example – are such a relatively insignificant component of the overall levelized costs of energy. As we said before, cost of capital is even a more significant impact. Right? But the balance of system costs now are getting to be more impactful to some extent. If you look at the impact of inverters and trackers, you're seeing a more significant component of the overall LCOE. If you look at the module as an example, it will vary upon regions that you're in, but the fact it will be somewhere in the range of, call it, around $0.03 of module price drives about $1 of PPA price. So if you're thinking – you're pricing at $30, and you see a module price move by $0.03, that adds about $1 to the PPA price. That's not going to change the fundamental demand associated with procurement decisions. Right? A dollar of PPA price isn't going to change somebody's decision around whether they're going to move forward and procure. So I think that – look, it's a competitive market. Obviously, as we've said before, there is excess supply and oversupply in the industry. It is a little bit tighter on the higher-efficiency, higher-quality products so that you have to bifurcate the market a little bit that way. But as I look over the next few quarters, yes, things will continue to be competitive, but I think we're in a relatively tight range of module pricing. The other thing I would say is that where we saw some of the more aggressive pricing behavior from some of our Chinese competitors in particular, I think there are some signs of fatigue. I think some have even made statements that they've reduced shipment guidance for the year because they're going to focus on profitability. So, look, this industry moves very quickly. So to try to make a definitive call for something two to three quarters out is never easy. But I would say at least for the second half of this year, we're probably in a relatively tight range relative to where module prices will move.

And Tyler, on the systems side, I'd say that the outlook is I think fairly sustainable. For us, there are really two things at work here. One is we are seeing a lot of interest in U.S. asset ownership at a time when there are relatively few large-scale quality assets available in 2017 and into 2018. So despite some potential headwinds around tax reform and interest rates, we're not seeing a significant change in cost of capital at the moment, and we're seeing a lot of money in the infrastructure space and in the tax equity space looking to go to work. So we're seeing a lot of interest there. I think the second thing for us, and this relates a little bit to 8point3 is the competitiveness of the yieldco and it specifically relates to the assets that we have this year in the ROFO process and the values associated with those and California Flats is a big driver of our guidance change right now. When we started marketing that asset, we were aiming to structure a deal for – to keep a residual interest for 8point3. As we progressed through that, it became clear that the structuring itself was creating a loss of value and at the same time, the yield profile of 8point3 was changing. So when you combine those two it meant that 8point3 was clearly not the best buyer for that asset. And we took that back out to market and we found a simpler and less structured deal with a much higher value that informs not only California Flats but how we think about other assets in the future. So I look at those two I think partly there's just a very robust market for U.S. asset sales today and the amount of capital and the cost of capital available is very good, and secondly, the yieldco is not really a viable buyer today for new U.S. utility scale assets, as currently capitalized.

Vishal Shah with Deutsche Bank.

Yes, hi. Thanks for taking my question. Just a question on the gross margin outlook. I know you guys have previously talked about how margins could be potentially under pressure until Series 6 is up and running in the second half. With the current module pricing environment – what's your current outlook on component market margins? And then, for Series 6 are you still looking at about a Gigawatt of 2018 shipments? And then finally, as far as your capacity allocation is concerned for projects that you intend to complete and sell in 2018, can you maybe talk a little bit about what that number would look like? This year, for example, I think you have about a 0.5 Gigawatt of capacity that's been allocated to internal projects. How would that number change in 2018? Thank you.

Vishal, I'll take the gross margin outlook and talk a little bit about the project side of 2018 and Mark can talk on Series 6 2018 shipment. On the gross margins, what we said before and remains true is that as we stop looking to improve the Series 4 module and focus on the Series 6 module, that module is going to be most challenged just before we ramp it down. So right now if you look at our gross margins you can see that this quarter is a little lower than we've seen in past quarters. Part of that is due to ASP declines from volumes that were booked in previous quarters. And then there's a small impact from under-utilization costs as well so as we've taken down our KLM 5 and KLM 6 line, which was one of our lowest cost locations, the blended cost when you include our Perrysburg factory being a larger component of the total, Series 4 increases slightly. So I'd say that on the module side, I think the margins you're seeing today are probably are relatively sustainable over the next few quarters and we've seen pricing firm up in the U.S. a little bit. On the project side, we haven't guided for 2018, so we don't have numbers to give you today but if you look through the Q that'll come out later and it'll give you a view to what's in the pipeline and the COD dates can give you a rough guide to what we're looking at in 2018.

Relative to Series 6, we still are on target for about a Gigawatt of production for next year. You know, so that lines up to everything's on schedule and progressing as anticipated. So as we think about 2018 that still what our expectations are and again the constraint isn't necessarily our own ability to ramp, it's actually getting the tool sets from our vendors and there's a relatively long lead time from that perspective. The other thing I would say around the capacity allocation is this is what we haven't guided as Alex indicated but we did indicate in the call, and I think it's the right way to look at it is that when you look at our contracted pipeline which you'll be able to see more around that in the Q when it's filed plus our late-stage opportunities that we're pursuing right now, call it 1.9 Gigawatt, we are lined up very well for 2018, 2019 and 2020 on an average basis to be approximately a Gigawatt of systems business. So I think that's the right way to look at it. We will continue to optimize the timing of the shipments and the recognition around those assets to optimize value creation from that perspective. But I do, I feel very comfortable where we are right now with maintaining that annual volume around a Gigawatt for our Systems business.

Brian Lee, Goldman Sachs. Brian Lee - Goldman Sachs & Co.: Hey, guys. Thanks for taking our questions. I had a couple of them. Maybe first off, Mark, can you comment on the pricing environment for modules in the U.S., but also globally? I know there's a bit of a difference there. And have you raised prices in the U.S. specifically and by how much if you can comment? And then just maybe lastly on that point, how are you pricing bookings especially for deliveries in 2018 given some of the trade case uncertainty? The follow-up I'd have is just around the systems visibility for the raised guidance. Can you quantify how much of a margin improvement you are seeing from the structuring change you mentioned, Alex? And then whether you think margins on systems are better than modules in the second half of the year given some of the price bifurcation we're seeing in the market? Thanks.

All right. I'll take the first two and have the last one. As it relates to the pricing environment, let's talk to U.S., clearly things have firmed up, right? I said that in my prepared remarks as well. So the pricing has firmed up in the U.S. Again, there's a tremendous amount of demand right now across really all segments of the market, which is firming up that pricing. Internationally, it depends on the market. Some, I would argue, are stabilizing and firming up a little bit. Others I would argue are still very aggressive, so it's hard to give you a generic statement relative to the international side of the house, but on average, I would say the global, if you take the U.S. combined with the international markets is relatively – the pricing has firmed up over the first half of this year relative to where we exited the end of last year. In terms of how we're thinking about the trade case and how we're selling forward, we continue to try to best position our pricing in the marketplace relative to the competition and sell through the differentiation and value creation that we have inherent in our model, which is the energy yield advantage. As it relates to the trade case, it's still an uncertainty at this point in time as it relates to, A, if it's going to happen, B, to what extent there would be an impact. So we haven't really informed our pricing decision, per se, as it relates to if something were to happen. I think as we get closer and we see better line of sight, we'll evaluate that. One thing I will say though is our general approach, especially as we position Series 6 into the marketplace, is we will capture fair value for the technology that we provide to our customers. But I'm not looking at this as some opportunistic ASP grab that we could get into the marketplace. I mean, we're going to engage customers from a relationship standpoint and a long-term partnership perspective and capture the right appropriate value for the product, not necessarily trying to be overly optimistic because of a potential trade dispute that may happen or may not happen.

Brian, to your second question, if you look at the EPS guidance, we're raised that $1.75. There's a tax benefit in there of about $42 million. The rest is associated mostly with the systems business. On Cal Flats, there are two things at work. One, and we brought this up, I think, on a previous call, is there was a specific development related risk item that was not in our guidance before, which has now been resolved relative to property tax. So that provides significant uptick to value and then the remainder of that then comes from the structuring and taking the deal out of the yieldco and selling to a third party. But from a value perspective, I would look at the EPS raise minus the tax as mostly attributable to the systems business.

I think, too, one thing that Alex did say I think, Brian, you're asking what does the second half margin profile look like between systems and modules, one of the things that Alex indicated in his comments as it relates to – as we ramp down production of Series 4, again, there's an under-absorbed, underutilized cost structure there that will create a little bit of a headwind on our Series 4 costs, all right, so that by default then what we would potentially expect is to have lower gross margin, which we saw in Q2 versus Q1 because of the impact. And if you use a penny as an example, if there's a penny under-absorbed costs that now has to be weighted down towards Series 4, you're talking something that's going to be 3% to 4% gross margin. So a small delta could have a significant impact to gross margin percent, and we saw a little bit of that here in the second quarter.

Colin Rusch, Oppenheimer and Company. Colin Rusch - Oppenheimer & Co., Inc.: Thanks so much, guys. Can you talk a little bit about the impact of lower energy storage prices on demand overall for projects at this point? And how you're developing, going forward, in lieu of what we're seeing in terms of that cost decline on energy storage?

Yes. So, especially in certain markets, the impact of storage, and really it's interesting because not only in mature markets that maybe have a more fundamental issue that they're trying to deal with right now, and everyone, generally, we refer to it as the duck curve phenomenon. It's not only there where there's an increased interest on storage and integration of PV with storage. We're even starting to see – as we see some of the demand now migrate into the southeast, as an example, and some of the utilities are early on in their journey for solar, and it's now strategic and integrated into the long-term resource plan, so they want to understand storage as part of that long-term solution. So we're seeing it on both sides for more mature markets, but even in more emerging markets, as well. The other thing that is a continued concern and is around grid reliability and stability, and when you see increased renewal penetration, and we've demonstrated through our work with Cal ISO and Edrolin (50:55) reports that we've issued and validated by others, is that utilities feel solar, obviously, can improve – it can provide services that actually improve reliability and stability of the grid. And that's another item that a lot of the utilities are asking a lot more about, and trying to have a better understanding of what are the proper power plant controls that can enable that. And we feel very good about our offer in that regard. It's clearly going to be another inflection point for demand generation. It enables a much higher solar penetration in a number of key markets, and what's happened with the battery side of the equation, the costs have come down significantly, and you're seeing very compelling PV plus storage. And we're actively engaging and participating in a number of RFPs. In some cases, even more almost bilateral negotiations with a couple of customers to make sure that we can demonstrate our innovation and thought leadership in this area. But I do think it's going to have a significant impact on demand as we look forward in the next five years to ten years.

Sophie Carp, Guggenheim Securities.

Hi. Good evening, and thank you for taking my question. Can you comment a little bit on your strategy with 8point3 Energy Partners at this point? Are you still pursing the sale of (52:12) and the situation with pricing and the project values that you see, are they impacted in any way?

Yes. I mean, I can't go into a lot of details as it relates to 8point3, but we are still exploring strategic alternatives, which would include the sale of our interest. Specifically, it could include something more than that depending on the interest from a market perspective. I think as Alex indicated, and I said in my prepared remarks as well, is that we've captured tremendous upside by selling our high-quality assets outside of 8point3. And if you look at the delta of where the share price would have to be to effectively give us equivalent economics on an asset like Switch Station, it would actually have to trade above where the IPO was. And there's no indication of anything in that range. And I don't think we'll ever see the yield that we saw at that point in time coming back anytime soon. So I think where we stand we know that we can capture better – we can get better value capture for our assets with other buyers. It creates more of a competitive dynamic for the sell-down process. So I don't think strategically anything has changed from our perspective relative to 8point3. Our strategic valuations are still ongoing. I have no other updates beyond that.

Our final question from Pavel Molchanov, Raymond James. Pavel S. Molchanov - Raymond James & Associates, Inc.: Thanks for taking the question. Let me go back to the tariff issue. There have been some estimates from the SEIA and others that if this Suniva request were granted, it would cost something like 100,000 jobs in the U.S. solar value chain. Because you guys are both hardware vendors and project developers, I guess my – the way I would frame it is what do you think is the optimal outcome? Are you rooting for Suniva's request to be granted or not?

So, it's interesting. We're part of SEIA. We love SEIA. But I can take you back to the first trade cases, the anti-dumping cases that were put in place 2012-2014 timeframe, same argument was there. This would be a complete destruction of jobs. All these jobs that were being created were going to be a tremendous risk. We're going to lose hundreds of thousands of solar jobs. If you take that time and move it forward, nothing more than – the only thing that happened is the industry is continuing to thrive. Nothing fundamentally changed and disrupted the demand profile for solar. There were no jobs loss. There were jobs created over that period of time. So I know the rhetoric there and people like to lead with that, but I think you've got to step back and look at the reality. And I think if you look at the most recent history, you would argue that the reality is something much different than maybe what people are saying. What I would say is go back to statements we said in our last call. There is a tremendous oversupply in the industry, right? We believe in free and fair trade to the extent there's not fair trade then there's an element of enforcement potentially that needs to be put in place. We're not a part of the trade case. We're not anticipating to be a part of the trade case. You know, the process of the way it rolls out right now, there's still an evaluation of an injury of the termination. That'll be made sometime by the mid to late September. Once if there is a determination of injury at that point in time, they'll move forward into a remedy phase which lasts, again, another six weeks to eight…

Thank you, Mr. Haymore. And that does conclude today's conference call. We thank you all for your participation and have a great day.