Please standby. Good afternoon, everyone, and welcome to First Solar's Third Quarter 2018 Earnings Call. This call is being webcast live on the Investors section of First Solar's website at investors.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 conference over to Steve Haymore from First Solar Investor Relations. Mr. Haymore, you may begin.

Thank you, Holly. Good afternoon, everyone, and thank you for joining us. Today, the company issued a press release announcing its third quarter financial results. A copy of the press release and associated presentation are available on First Solar's website at investor.firstsolar.com. With me today are Mark Widmar, Chief Executive Officer; and Alex Bradley, Chief Financial Officer. Mark will begin by providing a business and technology update. Alex will then discuss our financial results for the quarter and provide updated guidance for 2018. Following their remarks, we'll then have time for questions. 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 financial results for the third quarter were solid with net sales of $676 million and earnings of $0.54 per share, driven by the sale of development projects. From an operations standpoint, we have started the first commercial shipments of Series 6 from our factory in Vietnam and progress to date on the initial ramp has been good. Commercially, we continue to be very pleased with the strong demand for our technology as demonstrated by our net bookings of 1.1 gigawatts since our prior call. It is important to note, we have booked over 1.6 gigawatts since the May 31 solar policy change in China. Before delving into the specifics of the most recent bookings, I think it's important to highlight some of the trends that we are seeing and which support the near-term and long-term growth of utility-scale solar globally. As has been the case for some time, the low cost of solar power continues to be the primary driver of demand. Beginning with U.S., solar procurement from utilities and corporate customer is strong and growing. According to a leading third party market research firm, 8.5 gigawatts of utility-scale solar was procured in the first six months of 2018 alone. Looking forward, we expect this procurement trend will continue to be robust. Based on our tracking of utility integrated resource plans as well as other public announcements, we expect utilities outside of California to procure more than 15 gigawatts of solar in the coming three years, a number that has increased by several gigawatts over the past year. Much of the growth is coming from regions such as the Midwest and the mid-Atlantic which are still in the early stage of utility-scale solar adoption. Several announcements over the…

Thanks, Mark. Before turning to our financial results for the quarter, I'd like to highlight that we'll be hosting a call in late Q4 to discuss our outlook and financial guidance for 2019. A press release with the date and detail of the event will be issued approximately two weeks in advance of the call. As Mark mentioned, we had solid third quarter financial results driven by the sale of several development projects. I'll provide some more context beginning on slide 8. Third quarter net sales of $676 million, an increase of $367 million compared to the previous quarter. The higher net sales were primarily a result of closing the sale of the Willow Springs project in the U.S., the Manildra project in Australia, and selling some smaller Japan assets. Note that each of these projects achieved initial revenue recognition in Q3 based on the respective project percentage of completion. In addition, we recognized high revenue from the California Flats Project as compared to the prior quarter. Systems revenue as a percentage of total quarterly net sales increased to 82% in Q3 versus 66% in Q2 as a result of the project sales mentioned. Third quarter gross margin grew to 19% as compared to a negative 3% in the prior quarter. The improvement was due to the mix of higher gross profit projects recognized and a $25 million reduction to our module collection recycling or EOL liability, partially offset by higher third quarter Series 6 ramp charges of $48 million. Our systems segment margin was 24% in the third quarter and the modules segment margin was a negative 5%. As it relates to the modules segment gross margin, bear in mind that sales were still comprised entirely of Series 4 volume as early Series 6 volume was allocated entirely to…

Thank you. Our first question today will come from Philip Shen with ROTH Capital Partners.

Hey, guys. Thanks for the questions. Since the end of May, module pricing continues to fall lower. We're getting to very low levels now. And I know your cost structure can compete with it. But I wanted to ask a few questions around this topic. So is the current environment putting any economic pressure at all on your 2019 or 2020 bookings for either Series 6 or Series 4? I know your contracts were legally binding, but what kind of pressure, if any, are you receiving from your customers? We hear the pressure may only be on Series 4 which is a much smaller percentage of your overall bookings. Additionally, how much of your current bookings are for Series 4 and how much Series 4 capacity is left to book? And then finally, would you contemplate winding down Series 4 capacity earlier than expected? I recall back in December, you guys extended that capacity, but would you consider ramping that down earlier than expected and then in turn accelerating the Series 6 expansion there? Thanks.

All right. Philip, there's quite a few of them. So hopefully I'll get them all. Let's start with the economics on the 1.1 gigawatts which 700 or so megawatts was module and the 350 megawatts or so that we highlighted was our systems business. So, when you look at the module business – and again, of that 700 megawatts, about 300 megawatts of it was outside of the U.S. Slightly more than half of that volume was actually Series 4 of that 700 megawatts. So, there was a big chunk of Series 4 in there. And then most of the international number that we cited was international and that was a Series 6. I am – again, we tried to highlight in the script, in the prepared remarks that we have a very good luxury of focusing on where we can capture the highest value, where we can capture – where have point of differentiation, where we can capture the energy yield that we have in certain markets, where we can capture the eco-efficient or eco-friendly attributes of our module and focus on those markets. And so, when I – when you look at that and you look at the economics and what we saw for both Series 4 new bookings and Series 6 new bookings, and you've got to remember the Series 6, in particular bookings are starting to go up further into because we're sold out through 2020. So, we're starting to see more latter half of 2020 kind of buying books that we saw this quarter. We saw a nominal reduction to the ASPs in this quarter. Our sales teams have done a fabulous job of positioning the product, capturing the best value from the customer. And I'm talking nominal being 10% deltas on ASPs, right. From…

Your next question comes from...

Would you please go to the next...

...Sophie Karp with Guggenheim Securities.

Hi. Thank you for taking my question. I was wondering as far as systems demand in the U.S., are there any particular areas, states in particular, that you see that are stronger than others? I know some of your competitors have also been a highlight in Texas and some other Southeast States. So, I'm kind of curious where you see demand coming from in the next few years. Thank you.

Yeah. I mean I think – for us in particular, Southeast is a really strong market. As we highlight, one of the larger PPAs that we announced as part of our booking this quarter was with a utility in the Southeastern U.S. We – last quarter we also announced we had an acquisition of a portfolio of projects in the Southeast which also came with a PPA and we're real happy with having more development sites in the South Carolina region, in particular. We're doing a lot with TECO; you saw that. So, the Southeast region is a very strong region for us across Texas, and then obviously, into the Southwest continues to be a good market. But the one thing I would say, and we kind of highlighted this in the – especially as you look across the horizon, to your question, over the next couple years, solar is only going to be increasingly more and more competitive through 2023. And if you look at some analyst reports, especially when you go beyond 2019 into 2020, over the next several years, you're going to see the vast majority of utility-scale renewables being solar. And so, I had, actually – I'll use an analogy that one of my customers used who does both solar and wind. Their view over that horizon is if you look at the map of the U.S. today and red being solar and blue being wind, there'll be a convergence of red all over the blue. So the red will continue to grow mainly – around most of the U.S., except for maybe the Midwestern states where there's very strong – Central states where there's a very strong wind resource. So as you look at it over the next several years, you're going to start seeing competitiveness of solar across many different geographies. I was talking with a customer recently, even in the Northeast where wind is a good resource, the economics are penciling out better for solar right now. So I think we're strong in a couple of traditional markets today, but that's only going to expand and grow; and, we highlight what we're seeing with AEP and what's going on in Michigan and Indiana. So across Michigan, Ohio, and Indiana, those are all states that are in early innings and we're seeing tremendous amount of opportunity for solar deployments over the next several years.

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

Yeah. Thanks for taking my question, Mark. It is a little bit difficult at the moment to get a handle on what the normalized gross margins are and what your earnings power through the cycle is here. It looks like the cycle itself is somewhat kind of attenuated by this visibility you have. So I'm hoping that you're getting to the point now where you're able to forecast the earnings power within the band for a couple of years, at least. Is that starting to come into focus? And when can we understand what your gross margin kind of structure is?

Yeah. Paul, certainly, internally we obviously forecast it out. I don't see us providing guidance out multiple years. We'll provide guidance to 2019, specifically, later this year. But if you go back to the Analyst Day that we had in December of last year, we gave an outlook at that point trying to break down the various components of the value chain that we have through the module development piece through EPC and through O&M. And we gave indicative gross margin numbers around that. And we said at the time that that was being used for guidance for the year, but you could think about that as an indicative view of how we looked at the business in the long term. You're right that the current visibility we have over the next few years, based on the contracted pipeline, is very helpful for us, and I think the message we gave in the Analyst Day still holds, which is those are good indicative ranges to use when you think about gross margin across the various segments. We've talked about the amount of the development business that we look to have around that gigawatt a year mix of self-developed project assets plus EPC business. So, you can use that. And then, internally, clearly as Mark said, we are focusing on putting ourselves in the strongest position we can for 2021, such that when we're through this period of current contracted backlog, hopefully fully over to Series 6, to our most advanced product at (40:42) that point, we still maintain a competitive position even in a market where we'll naturally see ASPs come down. And we're seeing that competitive environment be strong at the moment. So, for the long term view, I would still guide you back to what we talked about last year and, obviously, there's considerable strength over the next couple of years based on the contracted pipeline we have today.

Yeah. And the only thing I would just add to that is that I do – we do try to hopefully get people to continue to think about not only at the gross margin level, but what is the op margin expansion that we can see as we see higher contribution margin coming through from growth, right, as we continue to expand the platform. One of the challenges we have right now is we're only producing a little bit less than 3 gigawatts when you combine the Series 4 and the Series 6. And the Series 4 is two-thirds of that number, and that's obviously not our most advantaged product. So just as that mix shifts from all the Series 6, and then we start growing from 3 gigawatts and to 4 gigawatts to 5 gigawatts and 6 gigawatts and to 7 gigawatts with a relatively flat OpEx profile, there's an opportunity for a meaningful op margin expansion which I think everyone needs to take into consideration.

The next question will come from Brian Lee with Goldman Sachs. Brian Lee - Goldman Sachs & Co. LLC: Hey, guys. Thanks for taking the questions. I had two of them. I guess first off, last quarter if I recall correctly, you called out lower margins due to some higher ramp cost on the back end of Series 6. So wondering what's incremental here in 3Q since it sounds like you're calling that out again as one reason for the outlook change here? And then I had a follow-up.

I think on the other ramp, I think, actually the last quarter we were at $60 million for the full year and that was a number for the prior quarter. I think we started the year right around $60 million or so of ramp. So we hadn't changed the ramp last quarter, so and the guidance didn't reflect any change to the ramp. What happened this quarter, partly because we ended up starting our Vietnam factory, first Vietnam factory, and we'll start our second Vietnam factory sooner than we had anticipated, is that the profile has shifted from start-up into ramp. So start-ups come down $30 million. The full-year number now for ramp is $100 million. So it went from $60 million to $100 million. So there's about a $40 million increase in ramp. $30 million of that is just the kind of geography shift between start-up and the ramp. There is about a $10 million of incremental ramp cost. Some of that is partly – we're still working in both Malaysia and Ohio. Our framing cell is still – it's basically manual back-end process. And the throughput through there is still not where we want it to be. And as well, we also had to hire some incremental labor in order to deal with the revisions that we made to the frames. So, there's some of that costs that – that's in there. But the way I would look at it, Brian, outlook to outlook, ramp, what we guided to last call, the $60 million that was consistent with Q2 – excuse me, Q1 and now it's going from $60 million to $100 million, but $30 million of it was geography shift and $10 million of it relates to some incremental ramp that we are seeing mainly associated with Malaysia and Ohio. Brian Lee - Goldman Sachs & Co. LLC: Okay. Okay. No, that's helpful color. Appreciate that. And then just my second question was around free cash flow. I know there's a bunch of moving pieces here but the – the end result this quarter was pretty negative. And then if I look back a little bit further at the overall cash flow profile since your Analyst Day in December, there's been like a $350 million to $400 million swing in free cash flow to the negative as cash flow from ops is down and CapEx is up. So, wondering how you're thinking about the profile into 2019 and if you're confident that free cash flow can get back to positive next year or if that's maybe still too aggressive of you right now to assume just given the recent trajectory. Thank you.

Yeah. Brian, I'm not going to comment on 2019 but I'll – we'll give you numbers later in the year. I think when it comes to the off-cash fees, there's a lot of noise based on how we've been selling assets. So, I wouldn't focus particularly on that. But what you're seeing a lot on the free cash and on the cash position overall is a significant decrease at the moment, just based on timing. So, as we've been shipping Series 6 product later to certain sites, that means one of the EPC agreements we'll get milestones later. And when they're in the billing cycle, we're receiving cash later. So, we've got a dip in the quarter here which may actually go through the end of the year as well just based on the timing of construction. So, we're actually seeing receipts from the some of the larger projects we have potentially spilling out over the end of the year in 2019. And you're going to see a reflection of that in terms of the unbilled amounts on the balance sheet as well. We've also added in Perrysburg too. So, if you go back to beginning of the year on the CapEx side with an initial guidance we have in December that CapEx is going to have significantly booked with adding in the new Perrysburg plant as well. And then lastly, we've also structured a couple of deals recently where we have pretty back-end loaded cash flow profiles. If you look at the cost of carry from a project perspective, relative to the opportunity cost and the cash in the balance sheet at the moment, we've been using some of that cash optimizing some of the project returns and timing of cash flow receipts from projects. So you're seeing a lot on the project side that's causing noise for the year. And then later in the year, we'll give you an update on 2019.

And our next question will come from Ben Kallo with Baird. Benjamin Joseph Kallo - Robert W. Baird & Co., Inc.: Hi. Good afternoon. (46:31), so, just on Series 6, so I'm clear, because you have – I heard you say, Mark, the pull forward, our Vietnam starting up faster, so you have some extra cost there. And then you have the framing cost. And so, I just want to sure that we leave this call understanding where you are in the technology level, and at the same time, the cost level, so we can model that out. So, are you there...

Yes. Benjamin Joseph Kallo - Robert W. Baird & Co., Inc.: ... with the technology? And this is a onetime thing, and then the cost is where you would expect it to be? And then, we've pulled forward some Vietnam because you guys did better than you expected?

Yeah. So, let's talk about – part of the question was around the ramp delta, right, from what we had last quarter to this quarter. So, the vast majority of the ramp delta, $40 million, $30 million of that was just a geography move from startup into ramp, because we were successful at pulling forward Vietnam into production faster. And we're actually going to pull forward Vietnam, too, sooner – faster as well. We highlighted to that as well. So, that's just a geography shift in terms of where the cost goes. $10 million was the incremental ramp cost, for the reasons that I said, mainly for – associated with Malaysia and Ohio, mainly on the back end for the framing cell and some of the manual processes that we had to put in place there. So – and then that is all being normalized away. So, as I indicated as well, in Perrysburg, we were at – we have one accumulator left to do, which will help sort of buffer the back end a little bit more, which will help drive higher throughput. But more importantly, we're 70% through on the tooling upgrade – tool set upgrades that we need to do. So, we have identified and prioritized a number of upgrades that we need to do for the tool set. We're 70% through on that. So, I'm happy with where we are there. As we indicated, Perrysburg, even with not having been fully buffered, but clearly the benefit of having buffered a significant portion of the line, we went from kind of a 60% capacity number to around a 90% capacity number. So, I'm really happy with that. Malaysia made similar progress. And as we progress through the balance of the year, we'll have accumulators installed at both…

The next we'll hear from Julien Dumoulin-Smith with Bank of America Merrill Lynch.

Hey. Good afternoon. Thanks for the question. First question here, just going back to the systems side of the business, obviously you've had continued success. Can I ask you – in terms of margins, obviously, we've seen pricing come down on the module side. How are you thinking about the margin profile persistence as you continue to scale this up and you see a little bit of a different geography? Is it still kind of in the same ballpark that you all have seen historically? Part one. And well, maybe the second question, I'll throw it out now. On the actual Series 6 panel, you kind of hit at it a little bit a second ago, but you kind of alluded to on the call the competitiveness of the panels themselves actually improving a little bit. Any sense of the magnitude, overall, versus what you'd been contemplating perhaps earlier this year, just as you think about it?

I'll let Alex take the system one. As it relates to the competitiveness of Series 6, we're very happy with how it's positioned in the market and the value that it's capturing. As I said, just on our bookings this last quarter, Series 6 versus Series 4, we've got a 10% premium of our Series 6 product over our Series 4 product, which when you couple a 10% premium with, I would say, a much lower cost profile entitlement, then that's a very attractive product. And the indications that we're getting from our customers – and I was recently at SPI, and one of our structure providers came over to me and was just very excited about Series 6 and the implications it has on helping them drive cost out as well on their structure, as well as the installation velocity and what we're hearing from our EPC partners. They're very happy with the ease of the installation, the ease of the wiring and the connections associated with it. So, we're seeing the same thing in our own projects that we're self-developing and executing on right now. So, what I'm seeing on Series 6 right now has been very much in line, maybe slightly more favorable than what we had anticipated, but the product's been very well received in the marketplace.

Yeah. Julien, on the gross margin side, I refer you back again to the Analyst Day last year. I think at that point, we talked about our contracted pipeline having greater than 50% gross margin on the pure development piece. Now, the way we did that makes it clear as we broke out what we thought the entitlement for the module was, assuming a third party module sale, the total EPC, and then the residual development piece is a very small number. But on that development piece, we are seeing contacted margins greater than 50% on the existing pipeline, and new contracted development asset from the development piece, we are seeing over 20% gross margin. So, clearly, it's come down over time, but we're still seeing, I'd say, healthy gross margins on the development piece there. The other thing to say is that it depends a little bit who the buyer is and what the structure of the deal is. So if it's a contested auction in California for a busbar long-term PPA where there's a huge amount of competition. We may no longer be the best buyer because they're not going to sacrifice a successful gross margin profile for volume. But what we're seeing is there are a lot of opportunities out there for us to deploy the skills that we have and the team, and the opportunity set that we've built up over time in both sites and human capital. Through more complex PPAs, for instance, with C&I buyers, who have a different profile rather than contracting a significant amount of product and assuming that maybe some PPAs will fall away and just re-contracting them. Renewable energy buyers, corporate buyers have a much more reputation in focused procurement process where they're looking to make sure that everything they procure will actually go through, so the stronger counterparty risk piece that they place and that positions us very well for that. And then finally, also on the UOG side where again we can bring talent to bear and skills to bear that we have as a company that aren't necessarily the same across the board, and we can see successful margins there. And we don't look through where the procurement is happening, but in general, I'd say that especially with the backlog we have today of systems procured, we're not going to go out and chase margins down for the sake of volume when we're seeing enough opportunity, acceptable margins today to maintain today that gigawatt a year that we talked about.

Yeah. And the only thing I'll add is that – look, I think there is still quite a bit of demand for high quality assets. And so, when you look at the capital stack and across whether it's the tax equity side, I think it's becoming – where we thought that it maybe would be less competitive given some the tax reform that happened last year. We're not seeing that at all. We're seeing even more getting involved in the tax equity side here in the U.S. The cash equity, there's a lot of money being raised around the world that people are looking to deploy in either great quality assets from that standpoint. And we're even seeing on the debt side, aggressive pricing from that standpoint as well. So, all that accretes higher value to the projects and the value that we can capture. And we've got a very strong pipeline right now, not only here in the U.S., but Japan assets in Australia. I'm very happy with what we have, and we're going to continue to build upon that. I think the Safe Harboring opportunity that's in front of us. And again, an opportunity to deploy our balance sheet to carry multiple gigawatts of opportunities out in 2023 is going to be a very good position for us to be in.

Our final question will come from Michael Weinstein with Credit Suisse. Michael Weinstein - Credit Suisse Securities (USA) LLC: Hi, guys. Thanks for the question. With capacity expansion and CapEx already locked in and product development pipeline now pretty much above the 1-gigawatt-per-year target, can we expect – this is use of cash question. Can we expect M&A or maybe capital return next year? And then regarding M&A specifically, do you see any opportunities for project pipelines or are there any technologies or new verticals of interest out there that you might be looking at?

Yeah. Look, we continue to see most things that are happening in this space. We're always very happy to look at development portfolios. And I think Mark mentioned earlier we acquired a small development portfolio on the southeast this year. We're always happy to look at both early stage and contracted assets. So we'll continue to do that. In terms of technology, given that we have a unique and different technology relative to most players in the market, it's hard to see what could be out there that would be untouched to us. But there are things that we'll look at. And for instance we did make an acquisition last year that's helped develop our anti-reflective coating technology and it's been advantageous there. So we'll continue to look at things around the core technology. The other thing that comes up often is storage. As of today, we haven't seen anything that we think is differentiated enough to make it worth a lot investing in the source technology. We clearly will make sure we invest in understanding how to integrate storage and how to contract storage in a plant. But today I don't necessarily see us investing in the core storage technology. On the second piece there on capital return, we'll continue to look through the future opportunities and uses of cash. And we've talked before about having a waterfall and how we look at that funding our core operations, the capacity expansions, any M&A in developing business, and then having a reserve given the cyclicality of the industry that we're in. So, we'll look a bit more through that. The other piece I'd say is towards the end of this year. We're going to be talking a little bit more about the opportunity to Safe Harbor because we look out to the end of 2019 there could be considerable opportunity for us to Safe Harbor either through our module business or through using some of the balance sheet and that could give us a strategic advantage not available to other players without the financial resources we have. So, we want to always make sure that we're looking to use that cash as advantageously as possible. But if we go through that full waterfall, we can't see an opportunity to expand the business. And we have laid out a CapEx profile against the current capacity profile. If the future of solar is as we believe, there's no reason that that is a stopping point for us from a capacity perspective. So, that's something we're going to continue to monitor and look at when would be the right time to consider additional capacity, which obviously we prefer to do versus returning capital. But if we get to a point where we can't feel we could use that cash accretively at acceptable returns through the profile, then we'll, at that point, look at options to return capital.

Yeah. The only thing I'll add to in terms of the kind of use in entirety is that one of the things now that as we move forward with Series 6 and where we are, and obviously, there's a number of programs still on our efficiency roadmap, we're going to obviously look at our California team which is our advanced research team just to continue to think about the next evolution. Where is the next evolution with our current technology? Where can we take its fullest potential to go above and beyond? Now, as we do that, there may be opportunities that – opportunities may come up that some form of an acquisition or capability or – that we don't have today. If you guys remember one of the things that helped us with our core technology to where we got it today was the acquisition of the IP from GE a number of years ago. Alex referenced the acquisition of a new anti-reflective coating that's obviously beneficial to our product, not only from the standpoint of giving a better benefit to – a better efficiency benefit to the product, but also enabling us to capture almost 100% of the market with that product. And so, I would imagine as we think forward, especially with the creativity and capability of our advanced research team in California, there'll probably be some other opportunities as we think about, again, how do we evolve this technology to its fullest capability.

And that does conclude our question-and-answer session for today and today's conference. We thank you for your participation.