Good afternoon, everyone, and welcome to First Solar's First Quarter 2024 Earnings Call. This call is being webcast live on the Investors section of First Solar's website at investor.firstsolar.com. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the call over to Richard Romero from First Solar Investor Relations. Richard, you may begin.

Good afternoon and thank you for joining us. Today, the company issued a press release announcing its first quarter 2024 financial results. A copy of the press release and associated presentation are available on our website at investor.firstsolar.com. With me today are Mark Widmar, Chief Executive Officer; and Alex Bradley, Chief Financial Officer. Mark will provide business, strategy and policy updates. Alex will discuss our bookings, pipeline, quarterly financial results and provide updated guidance. Following their remarks, we will open the call for questions. Please note, this call will include forward-looking statements that include 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.

Good afternoon and thank you for joining us today. We are pleased with our start to 2024 with good operating performance, selective year-to-date bookings of 2.7 gigawatts with an ASP over $0.31 per watt excluding adjusters or $0.327 per watt assuming the realization of technology adjusters and solid financial performance. We're also pleased with the developing foundations to enable our long-term goal of exiting this decade in a stronger position than we entered it, from increasing production of our most advantaged Series 7 module to expanding our manufacturing footprint, to the building of an R&D innovation center and perovskite development line that is expected to enable development of the next generation of disruptive solar technology. We are focused on the future of differentiation and sustainable growth. But while we continue to play the long game, we must acknowledge the current environment in the solar manufacturing industry, which remains in a state of heightened volatility driven by intentional structural overcapacity in China. As we previously said, our ability to play this long game is a direct result of our differentiated technology and business model. From a technological perspective, the contrast is clear between our unique proprietary cadmium telluride semiconductor technology and highly commoditized crystalline silicon modules. This difference has become increasingly apparent in light of the recently announced disputes concerning alleged infringement of TOPCon cell technology and intellectual property rights, which cast out on numerous crystalline silicon producers having the freedom to legally manufacture and sell this technology. From a business model and growth perspective, we are once again reminded of the value of our balanced approach to growth, liquidity and profitability. According to reporting, large Chinese solar companies have warned of potential quality and reliability issues as manufacturers cut corners and the impact of the current oversupply environment and associated…

Thanks, Mark. Moving on Slide 5. As of December 31, 2023, our contracted backlog totaled 78.3 gigawatts with an aggregate value of $23.3 billion. Through March 31, 2024, we entered into an additional 2.7 gigawatts of contracts and recognized 2.7 gigawatts of volumes sold, resulting in a total backlog of 78.3 gigawatts with an aggregate value of $23.4 billion, which implies an ASP of approximately $0.299 per watt excluding adjusters. As we previously stated, given our diminished available supply, the long-dated time frame into which we're now selling, the need to align customer project visibility with our balanced approach to ASPs, payment security and other key contractual terms and uncertainty related to the policy environment and the upcoming U.S. election cycle, we expect to take advantage of our position of strength in our contracted backlog and be highly selective in our approach to new bookings this year. We will continue to forward contract with customers who prioritize long-term relationships and appropriately value our point of differentiation. The substantial portion of our overall backlog includes the opportunity to increase the base ASP through the application of adjusters if we are able to realize achievements within our current technology road map as of the expected timing of delivery for the product. At the end of the first quarter, we had approximately 40.2 gigawatts of contracted volume with these adjusters, which, if fully realized, could result in additional revenue of up to approximately $0.5 billion or approximately $0.01 per watt, the majority of which will be recognized between 2025 and 2027. This amount does not include potential adjustments, which are generally applicable to the total contracted backlog, both the ultimate module being delivered to the customer, which may adjust the ASP under the sales contract upward or downwards, and for increases in sales…

Okay. Turning to Slide 10. As we stated in the past, we believe the Inflation Reduction Act represents America's first durable solar industrial strategy. And if implemented with the whole of government commitment to onshoring, together with strong and consistent enforcement of trade laws, it also has the potential to dismantle China's dominating influence over solar manufacturing value chains. Quite simply, the IRA paves a viable pathway for the U.S. to secure supply of critical clean energy technologies, enabling America's energy independence while capturing the value of our economy and creating well-paying, enduring jobs. At the same time and also as previously stated, while we are not the only American solar manufacturer to come in existence at the end of the last century, the grim reality is that as a consequence of China's strategic objective to dominate the solar industry, we're the only one at scale to remain today. For the IRA to achieve one of its intended purposes, which is to spur U.S. manufacturing to the scale required to support the country's energy independence and climate goals, we must ensure that more companies that are aligned with the U.S. ambitions and are committed to fair competition and innovation can scale, compete and prosper. The purpose of the IRA will not be achieved under current unsustainable market conditions. The relentlessness of the Chinese subsidization and dumping strategy have caused a significant collapse in cell and module pricing and threatens the viability of many manufacturers who may never be able to get off the ground or have the ability to finance and start up the growth of their operations. Given this unfortunate reality, together with our role as a market leader and the Western Hemisphere's largest solar module manufacturer, we have joined an alliance of 7 solar manufacturing companies comprising the…

Demand continues to be robust with 2.7 gigawatts of net bookings year-to-date with an ASP of $0.313 per watt before adjusters, leading to a resilient contracted backlog of 78.3 gigawatts. Our continued focus on manufacturing technology excellence resulted in a record quarterly production of 3.6 gigawatts, and our Alabama and Louisiana factories and our R&D innovation center and perovskite development line remain on schedule. We continue to anticipate launching CuRe at our lead line factory in Ohio in Q4 of this year. In addition, we're increasing CapEx by $0.1 billion this year to accelerate CuRe conversion at our Vietnam facilities as well as at our third Perrysburg facility with a view to advancing global fleet replication by more than 1 year from our assumptions at our recent Analyst Day. Financially, we earned $2.20 per diluted share, and we earned -- ended the quarter with a gross cash balance of $2 billion or $1.4 billion net of debt, maintaining our full year 2024 volumes sold and P&L guidance, including forecasted full year earnings per share -- per diluted share of $13 to $14. And with this, we conclude our prepared remarks and open the call for questions. Operator?

[Operator Instructions] We'll go first to Mark Strouse, JPMorgan.

Appreciate all the color. Obviously, a lot going on right now. Mark, I wanted to start with your comments on India. So good to see you're added to the ALMM list. I know it's still somewhat early, but can you just talk about what you're seeing as far as pricing in that market since the ALMM went back into effect? And how are you weighing shipments to that market versus potentially shipping back to the U.S.?

Yes. All right. Thanks, Mark. Look, since the ALMM has gone back into place, we are seeing pricing move up in the market. Again, ASPs, generally in India, are much lower than what we see here in the U.S. But they have moved up 5% or 10% from where we saw them before the ALMM, so moving in the right direction in that regard. I do think that with some of the other initiatives that we have in place and especially as we move forward, towards the latter half of this year, I think we could see even firm pricing as we exit this year going into next year, which is encouraging. In the interim, we are shipping a lot of product into the U.S. So this year, we'll produce about 2.6 gigawatts of product in India. And we'll be shipping about 1 gigawatt, maybe slightly north of that, into the U.S. market. And really most of the first half shipments that we'll see, really into Q3 even, are going to be from India into the U.S. market at this point in time. So that continues to be an option for us. It's also, like I said in our prepared remarks, as we scale up to 25, 26 gigawatts from a global fleet standpoint, all that product is really available to address and serve the needs of our U.S. customers. We'll continue to figure out what's the right optimal allocation in terms of how much stays to the Indian domestic market and what comes into the U.S. But I do see pricing dynamics improving in India since the ALMM has been put back in place.

The next question is Andrew Percoco, Morgan Stanley.

So I guess, I mean, over the last few quarters, you guys have been highlighting that you expect bookings growth to slow. But I guess I'm just curious now that you've got some headlines around the potential removal of the bifacial exemption, the new AD/CVD petition and Yellen's commentary on China, I mean, shouldn't that be an accelerant for bookings? I get that you guys want to be selective because of your capacity position. But just curious on your updated thoughts on what you're seeing and expecting for bookings for the remainder of the year now that policy seems to be moving in your favor, and you've also got growing demand for clean energy in some of the AI data center markets that you guys had alluded to earlier in the call.

Yes. So what I would say right now just in conversations with our commercial team and our Chief Commercial Officer, clearly, pricing in the market and -- has changed. As soon as there was an indication, really, it's starting to increase $0.03, $0.04 since the beginning of April. And then we continue to see a little bit more momentum now that the petition has been announced and some of the other statements that have been made by the current administration, which are all very, very supportive and constructive. So we are seeing more activity, more engagement. We're encouraged. We have taken our assumption around bookings down a little bit. We did that largely with a lens of being conservative, of waiting to see exactly what we're starting to see, and the momentum is starting to pivot back in a more constructive way. And we'll see how that pans out. But a lot of engagement, a lot of customer meetings. I will be actually meeting with a number of customers next week as well with our commercial team, and we'll get a better pulse at that point in time. But I'd say that the sentiment clearly has changed over the last 3, 4 weeks.

And up next is Philip Shen, ROTH MKM.

First one is related to the termination of convenience clause. Can you talk about how much of a buffer you guys might have to meet your guide, even if all the terminations -- termination for convenience clauses in '24 and '25 are exercised? And then secondarily, as it relates to pricing for future bookings, have you already started to see the benefits of the recently filed Southeast Asia AD/CVD petitions? My sense is pricing has already maybe started to move. Just curious if maybe you saw that in some of the bookings previously announced. And then finally, as it relates to the technology, we recently wrote about a Japanese start-up that announced a record perovskite and CIGS lab efficiency of close to 27%. Can you give us an update on your tandem technology research? And specifically, when do you think you can make a definitive decision on the next-gen technology so that the commercialization path can be realized? Because our understanding is that it might take 3 full years. So you kind of need to maybe lock it in today in order to commercialize in the next 3 years.

Yes. So I'll take the termination for convenience and hand it over to Mark. So we haven't given a specific number related to this year. But if you note in the guide, we're maintaining our volumes sold guide at 15.6 to 16.3 gigawatts. So we're working under the assumption that if this volume were to be terminated, which has not happened yet, we've just been having discussions with a customer who's indicated that given the likely sale of their portfolio and the likely buyer being someone who already has volume from us and given the time frame of those deals pushing out a little bit that they are likely to -- if those all happen, then they would be likely to exercise that termination for convenience right. But that's a customer that we have a larger order book with. They've already taken delivery of over 50% of the volume under that order. They will continue to take delivery of some of the remaining, a little bit under 50%. But they will likely, if those then transpire, terminate a portion of that backlog now. As I said, we will look to either reallocate to others or resell that volume. But it is one of the reasons you're seeing the cash guide come down a little bit, is that just given we're already into Q2, if we reallocate or resell now, it's quickly not going to be until late Q3, earlier Q4 at best before we move that volume to someone else. So even though we're maintaining that guide, and we think we'll be able to do that this year, it might impact the timing of the cash. But in general, what we're seeing is, right now, the guide hasn't changed. What we're seeing this year, we think, is manageable with that range that we've given.

Yes. And then on the pricing side, yes, so I somewhat made the statement on one of the earlier questions as well. We clearly are seeing the benefit as the market pricing has clearly firmed up and is moving up. If you look at just what we booked this last quarter before any of the adjusters, it's $0.30. If you look at the graph that's in the presentation slide, you can see that really none of that happened in April. So all that was really bookings that happened in the first quarter, which is really before any of the indications of this case started to get into the marketplace. So none of that really is reflected yet into -- so none of that impacted the Q1 bookings that we just reported. But we are seeing movement into the market where pricing is firmed up, moving up and people obviously looking to move quicker than they would have otherwise because of the various uncertainties and trying to figure out the implications to the extent of further development pipeline and projects that they're looking to build out over the next several years and also knowing that the order book is already tight with First Solar and we're still supply-constrained in the grand scheme of things. As it relates to the tandem technology, continue to move -- progress that from a couple of different paths. One is our thin-film CIGS tandem product. The other is continuing to work on a thin-film crystalline technology and then still advancing work on perovskite. And as kind of alluded to in our comments about next-generation innovative, disruptive technology and the advantages of our R&D innovation center, that is just -- we'll be starting up here by the end of this quarter, at the beginning of next quarter.…

The next question is Brian Lee, Goldman Sachs.

I guess -- I know a lot of focus around the pricing commentary here, Mark. So I'm just going to ask another one around that, if I could. You said $0.03 to $0.04 roughly. You've been getting that sense or feedback since April, and then that doesn't even include the more up-to-date kind of AD/CVD feedback. So if we look at the bookings, $0.31 this quarter, not reflecting any of that, that's to suggest you're having discussions real time around kind of the mid-$0.30 per watt, maybe even going higher off of that. Is it fair assume that level is in play over the next couple of quarters as you think about booking future volume here, mid- to high 30s? And could we see it that quickly in the next couple of quarters? And then just secondly, Alex, you kind of quickly alluded to data center demand for electricity. That's obviously gaining a lot of attention. I mean if you look historically, I think you guys have had meaningful indirect exposure to selling to corporates, building some of that stuff out. Can you quantify or give us some sense of your best guesstimation of what percent of your demand in the U.S. is coming from those types of customers, data center-driven corporate, et cetera, and what you think that could become over time as you kind of look at that as being a new growth vector, if you will?

On the pricing one, Brian, look, let's not get -- look, I'm happy with what we're seeing right now. I don't want to commit to an ASP in the mid-30s is what we'd expect to be able to realize at this point in time. What I'm trying to indicate is that we have seen a move in the market pricing. And there is a difference between -- just make sure we're clear, a difference between international versus domestic. There's an adder for the domestic product, as we've said before, $0.03, $0.04, $0.05 for that. So that volume will be priced at a higher ASP than not. So -- but what I would say is that we're encouraged, and our strategy for this year is to be patient and continue to move forward with bookings at attractive ASPs. And as we said before, this business model is still levered to growth and contribution margin. If we can get to a stable ASP environment as we look out over the next several years and grow the production capacity that we have in front of us, drive cost out as we continue to do, leverage our fixed cost across our overhead, there's pretty strong operating margin expansion that we can realize if we do that well.

Yes. So I don't know if I have a good number for you. I would say if you look at the companies that we talked about on the call, the ones that we're going to be adding to data center demand significantly, Apple, Google, Microsoft, Meta, they value certainty even more than the utility. So if you think about utility, potentially contracting multiple projects, and they can deal with a level of failure or delay in a way that these guys can't if they have commitment to renewable targets at certain times. So they value certainty, and they certainly value the reliability of where the product is coming from and the concerns around slave labor. So we tend to be the first port of call for many of these companies or the developers who are doing the work for them. And so in many cases, developers will come to us saying that they have had discussions with these people and that they have preference to buy or work with the solar products, especially for U.S.-based demand. So I don't think I have a percentage I can give you, but I would say that generally, we're going to be the favored supplier to the projects that are going to be supplying power to these data centers or these kind of asset owners.

And Moses Sutton from BNP Paribas has the next question.

What would be the biggest consideration in determining whether you add another factory? I know the pace of bookings, that they're naturally slow considering how far out you booked. But if the industry needs, let's say, 50 to 70 gigawatts per annum by late decade of ground mount in total and considering your market share position is further improving, could at least another factory would be viable in locking interconnection bottlenecks, the poly-based competition unknowns as they ramp up in the U.S. or just waiting on developer visibility to get more confidence here for these out-years?

Look, I think the framework that we use is pretty consistent with what we've done in the past. One is whatever we do, we want it to be demand driven. And if we get confidence, especially as we progress now through the second half of this year, around a strong, enduring demand profile that we would need through the balance of this decade -- and one of the catalysts that we referenced already is what's going on with data centers, and there's a lot of activity going on there right now. So first, I'll start with demand. The other one, just to make sure, is a stable policy environment. And so for what I am doing and what -- I think I said before in a couple of other calls that I've had is I've told my team is we need to be ready to go. We need to figure out our supply chain. So we need to have our glass strategy. We've got to think about tellurium, right? We got to think about site selection process and access to power and ready to go to -- as quickly as possible as we see those inflection points that we start to see strength in demand, and then we see through the other side of the November election that we believe we have a highly predictable and stable policy environment that we can then make informed decisions from. That starts to come into the mix. Then I think we're in a much more positive position to think about further capacity expansion. So that's what we're doing, and we're going to be as nimble as possible. And if all those -- we start filling out our scorecard a little bit there with the key dependencies that we need to further capacity expansion, we'll be ready to go as quickly as possible. And what we've proven is that once we make decisions, we get projects built, constructed, tools installed and up and running and ramped probably best than anyone else in this industry. And we want to continue to be able to do that. I know there's been -- at times, I've heard someone was -- caught me by surprise that there was some concern about execution risk because we exited last year at 12 gigawatts, and we're going to 25, 26 gigawatts. That, in my mind, is the least of things that keep me up at night. We do this well, and we've demonstrated that. And like I said, our current activities that we currently have ongoing right now are progressing extremely well and on schedule. And we know if we need to continue to grow off the base we have right now, we have -- truly have the capability of doing that. And we just want to see the demand and the right policy environment to make that decision.

Up next is Vikram Bagri, Citi.

I realized 5-in-1 question is the way to go, so I'm going to try that. Mark, you previously commented that excess panel inventory in the U.S. was nearly 30 to 40 gigawatts at year-end '23. A lot of debate about how that -- how much of that excess inventory is now. I was wondering if you can share some color on where you think that stands. And the reason for debate is the steep price increases as soon as the petition was filed indicates some level of concern that the excess inventory might not be that high. And then, Alex, you had mentioned delays in -- delays and potential cancellation from hydrogen customer in the past. Is there any way you can take advantage of the spot pricing in the market? And then finally, a couple of press releases about bookings in the last 2 days. Were these contracts done in first quarter given the chart on Slide 5 shows no bookings since March? And if these contracts were entered into after 1st of May, can you share the price on those bookings as well?

All right. Please come back with me on some of this because I want to make sure I got some of the questions. I'll start with the last one. The bookings that we reported really were all done from -- what was our -- was it in Feb 20? Feb 20, whatever. Our earnings call was at Feb 27 or 28, whatever the date was, and really through March 31. So that 854 megawatts, there's very little of that, that happened in the month of April. That's probably what I was trying to say before, is that the indication of a potential case for -- against Southeast Asia really wasn't into the market at the time that we were negotiating and closing on that booking volume. So all that booking volume, the 854 megawatts, which is incremental, was -- happened pretty much in the month of March. The quarter-to-date number is 2.7 gigawatts that we referenced as well. And again, all that happened before there was any real indication of some of the policy changes or even some of the statements that the administration has made here recently. The inventory -- I think the other question that you asked was about the inventory levels and how much inventory may be in the U.S. And I know there's speculation and views of 30 gigawatts, maybe even more, that sits in the U.S. that's been brought in partly because of the moratorium that was provided on the circumvention. We've heard that type of number in the past. I have no real way to validate that. But I do believe that there has been, looking at the import records, an excessive amount of product that has been brought into the U.S. at a rate that's much higher than current demand, which all is going to have to be managed and worked through. And there's issues that are going to have to be dealt with how, once this moratorium is over, in theory, all that inventory has to be deployed and installed by the end of this year and to monitor and to ensure that truly is happening. Uncertain to me how that would happen, to be honest with you. So some of that inventory may be subject to tariffs, if that were not to happen. But to be seen on that regard. Then you asked me about -- the other, you can repeat. There was a question around hydrogen, and then I think there was a question around spot prices, unless Alex, you got either one of those.

I think just related to spot, I mean we talked before that there isn't a huge immediate spot market in the utility-scale solar in the same way that there is in resi. So when we talk spot, we're still talking for projects that are 2, 3 quarters ahead, maybe just not 8, 10, 12 quarters ahead. So when I think about the opportunity for us, as we have potential [ holdings ] come up in the year, if we have some short-term [ holes ] open up with things like termination of convenience, there's an opportunity, yes, for us to capture what I think you would call spot on a utility-scale basis, which is forward a few quarters. I don't think there's a lot of ability to sell meaningful volume on an immediate basis given the time lines for permitting and development of a utility-scale project. But certainly, if we have opportunities around any termination of convenience or if we have other customers that ask us to move product out, we'll certainly go out and see if there's an ability. If anyone else looks for products and wants to have product, we're willing to work with customers in that way. There could be some opportunity there. We also said we continue to be cumulatively oversold through 2026. So we continue to do an almost daily balancing of our supply-demand and work with our customers to see where things need to move both in and out.

And then maybe if you could repeat your question on hydrogen or clarification on any of the things we responded to maybe that didn't hit the spot.

You already answered, Mark. I was asking if you have a hydrogen customer who might not take the delivery. If you could feed out those volumes in the spot market and benefit from higher prices. But Alex already answered.

And next, we'll hear from Kashy Harrison, Piper Sandler.

So I'm going to follow Vikram and just ask a bunch at once as well. First one is on AD/CVD. Does your alliance expect to ask for critical circumstances if the Department of Commerce accepts your case? And then as we think about just critical equipment shortages in the market, I'm just curious if you know what proportion of your customers have secured all their critical equipment, hot transformers, high-capacity circuit breakers for their project development needs over the next several years just given how long those lead times are. And then just finally, I was just checking if the credits this quarter were $124 million as it's indicated in your Q. If so, it seems like your COGS per watt ex credit has come down quite a bit. And I was just wondering if you could talk to some of the drivers of the lower cost here.

Let me just take the credit one, and I'll pass it back to Mark. The credit was higher than that. So we had $194 million in the quarter. I think the guide was $190 million, so a little bit over. If you go back into the Q, there's a few moving pieces in the government grants receivables. So the number for Q1 was $194 million.

In terms of the AD/CVD, which critical circumstances are effectively retroactivity of some of these tariffs, to me that's facts and circumstances that will evolve. It depends on what happens. It's extremely unfortunate, in my mind, that China has chosen to do what it's done so far, right? I think we -- this -- we were in a position, a balanced environment that we believe it was adequate for a domestic industry to grow and scale and create domestic capabilities. China, clearly, not only here in the U.S. but in India, is aggressively trying to prohibit that from happening and -- given the amount of overcapacity and pricing. And just to be clear, you guys are listening to all their comments and everything else. I think Daqo made a comment recently that 70%, 80% of the polysilicon guys are selling below cash cost, right? Jinko, but for a onetime item and including their subsidy income, their last quarter, they lost $3 a share. So everyone is -- it's a blood bath. And if China wants to continue to do that, let them do that on their own accord, right? We should not have to be exposing our domestic industry here in the U.S. and our domestic industry in India as an example to China's behaviors, right? We need to be able to find a way that allow companies to compete on their own merits and not be always threatened by China's oversupply and abusive, aggressive behaviors. So if imports stay relatively stable as we go forward, if pricing on those imports stay relatively stable, then I think there's less of a likelihood that critical circumstances would be requested. But to be determined. And again, this is not just the First Solar. This is the coalition that has to make that…

And everyone, that does conclude our question-and-answer session. It does also conclude today's conference. We would like to thank you all for your participation today. You may now disconnect.