Good afternoon, everyone, and welcome to First Solar’s Fourth Quarter 2020 Earnings and 2021 Guidance 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 Mitch Ennis from First Solar Investor Relations. Mr. Ennis, you may begin.

Thank you. Good afternoon, everyone, and thank you for joining us. Today, the company issued a press release announcing its fourth quarter and full year 2020 financial results as well as its guidance for 2021. 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 update. Alex will then discuss our financial results for the fourth quarter and full year 2020. Following his remarks, Mark will provide a business and strategy outlook. Alex will then discuss our financial guidance for 2021. Following the remarks, we’ll open the call 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, including, among other risks and uncertainties, the severity and duration of the effect of the COVID-19 pandemic. 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?

Thank you, Mitch. Good afternoon and thank you for joining us today. I would like to start by expressing my gratitude to the entire First Solar team for their hard work and perseverance throughout 2020. Although 2020 was a very challenging year, I’m proud of the way our team responded with our ongoing commitment to health and safety, delivering value to our customers and achieving our objectives in this unprecedented year. While, Alex will provide a more comprehensive overview of our 2020 financial results, I would like to first note our full year EPS results of $3.73. This result came within, but towards the low end of the guidance range we provided at the time of our third quarter earnings call, largely due to the volume and timing of our Sun Streams 2 project sale. Despite this timing impact, a continued intense competition across the crystalline PV supply chain and unforeseen challenges related to the pandemic, we are very pleased with our financial and operational results in 2020. Turning to Slide 3, I will discuss some of our key 2020 accomplishments. Firstly, our vertically integrated manufacturing process, diversified supply chain and differentiated CadTel technology enabled us to mitigate potential disruptions to our manufacturing operations from the pandemic. Accordingly, we produced 5.9 gigawatts of Series 6 and exited the year with a top production bin of 445 watts. Secondly, driven by continued strong manufacturing execution, in Q4 we achieved a year-on-year 10% cost per watt reduction despite an increase in volume sold from our higher cost for higher facilities and an increase in sales freight costs. Thirdly, early generation First Solar CadTel modules that were installed at an NREL test facility in 1995, reached an installed life of 25 years and demonstrated a 25 year degradation rate of 48 basis points…

Thanks Mark. Starting on Slide 7, I’ll cover the income statement highlights for the fourth quarter and full year 2020. Net sales in the fourth quarter were $609 million decreased to $318 million compared to the prior quarter. This was primarily a result of higher international project sales in Q3, partially offset by increased module volumes sold in Q4. For the full year 2020, net sales were $2.7 billion compared to $3.1 billion in 2019. But for guidance expectations, net sales were within, but towards the lower end of our guidance range. This result was primarily caused by factory shutdown on Q3 earnings call, which included the timing of the Sun Streams 2 project sale. To a lesser extent, net sales also impacted by certain modules deliveries that were delayed due to COVID-19 related events, including a positive case at a customer construction site, which resulted in a temporary shutdown and a shipping vessel containing First Solar modules that was diverted from its intended destination due to a positive case on the vessel. The percentage of total quarterly sales, our module revenue in the fourth quarter was 90% compared to 46% in the third quarter. For the full year 2020, 64% of net sales were from our module business compared to 48% in 2019. Gross margin was 26% in the fourth quarter compared to 32% in the third quarter. And for the full year 2020 gross margin was 25% compared to 18% in 2019. Systems segment revenue was $61 million in the fourth quarter compared to $505 million in the third quarter. Fourth quarter systems revenue was lower than anticipated primarily due to the delay in the sale of the Sun Streams 2 project. System segment gross margin was 18% in the fourth quarter compared to 33% in the third…

All right. Thank you, Alex. As our company’s founding Over 20 years ago, the PV industry has been through periods of rapid growth, declining costs and technology evolution. We’re one of the few solar companies that both entered and exited this last decade. We have continued to adapt our business model to remain competitive and differentiated in a constantly evolving market. For example, our original assets into O&M and EPC and project development was to address an unmet need of the market and capture a profit pool. Our acceleration of Series 6 production was a competitive response to address the current market condition. Despite these transformation among others, our core identity as a module manufacturing company with a differentiated CadTel technology has remained constant. As we look into the future with a more focused business model, our pace of innovation will be critical to our competitive strengths, enabling us to leverage our points of differentiation and capture compelling value for our technology. CuRe, cell crackling warranty, and responsible solar strategy are recent examples of innovations enhancing our competitive position in the market. The market momentum for PV continues to build. Our Series 6 energy, quality and environmental advantages are all key demonstrators, which we believe we’ll enable us to meaningfully participate in this wave of demand for clean and affordable energy. Based on the growth of selected people markets and our competitive advantages, we believe we can grow our manufacturing capacity while still selling our products into regions where our technology has points of differentiation. Within this context, Slide 9 provides an updated view of our global potential bookings opportunity, which now totals 19.7 gigawatts across early to late-stage opportunities through 2023. In terms of segment mix, this pipeline of opportunities is exclusively third-party module sales. In terms of geographical…

Thanks, Mark. Before discussing our 2021 financial guidance, I’d like to highlight our core [indiscernible], which is endeavor to create shareholder value through a disciplined decision-making framework that balances growth, liquidity and profitability. As it relates to growth, we anticipate increasing our nameplate manufacturing capacity to 9.4 gigawatts by the end of 2020, driven by the addition of our second factory in Malaysia and ongoing improvements in average watts to module throughput manufacturing yield. As Mark previously highlighted, we’re evaluating potential future capacity expansion and may do so beyond our existing geographic footprint. Strong booking performance in 2020 and year-to-date 2021 and current forward contract position of 13.7 gigawatts gives us commercial confidence as we evaluate the potential for incremental expansion. Our liquidity position has been a strategic differentiator in an industry that has historically prioritized growth without regard to long-term capital structure. For example, one of the few solar companies that both enter the next to the last decade and our strong balance sheet has enabled us to weather periods of volatility and also pursue growth opportunities. Additionally, we were able to self-fund our Series 6 transition whilst maintaining our strong liquidity position, ending 2020 with $1.5 billion of net cash. And just to say, we’ll be able to continue to self-fund future capacity expansion and strategic investments from our technology whilst maintaining a strong differentiated balance sheet, which we believe is meaningful competitive differentiator. From our profitability perspective, contracted backlog provides increased visibility into future sales, reduces financial exposure to spot pricing for PV module, helps align our capacity with future demand. Accordingly, we can be selective with our bookings opportunities and contract module sales at pricing levels that fairly value our energy advantage products and provide an acceptable profit per watt. For example, in 2022, although there…

[Operator Instructions] Our first question comes from Philip Shen with ROTH. Your line is open.

Hey guys, thanks for taking my questions. You’ve shown some healthy bookings a year-to-date, given the forced labor issue ramping up. Can you talk about how recent conversations with customers having shaping up and perhaps how they’ve shifted as well? And then looking out to 2022, when do you expect that could become fully booked? It looks like you’re two-thirds there and then what about the outlook for 2023? And then in terms of your recent bookings, you talked about, I think a 10% reduction in pricing from 2020 levels, which might suggest that your 2022 bookings that you gained or booked recently are in the $0.30 per watt. So I was wondering if you could comment on that or if they might be closer to the mid-$0.20s per watt, which is I think certainly and possible in what some market participants have been sharing with us in terms of market pricing for crystalline silicon. So I know there’s lot there. Thank you very much for the questions.

All right. So I help to get on them all three of them. With on booking, we’re real happy with the momentum. And just, if you even look at the mid to late-stage opportunities for that – we expected that opportunities, which we could close within the next year with north of 12 gigawatts sitting there. The momentum we’re starting off with right now, we expect 2022 to be a very strong booking year. As it relates to the discussion and comment around implications of forced labor. I think we try to hit on some of those themes of and it’s probably just interesting one particular issue, but it goes back to this concept that we refer to as responsible solar. And there clearly are a number of counterparties and customers that we engage within conversations that are one concern about over-reliance, concern about maybe the current state of political relationships between the U.S. and China or India and China or other markets as well. And as a result of that, they’re looking for alternatives and one thing that’s great about, first of all, not only do we have great technology and great capabilities, but having, a different standard, which we hold ourselves accountable for. And we have different value attributes that we can provide to our customers. And certainty is one and dealing with a counterparty or a supplier was a different, they themselves, from an integrity and ethical standard to the highest levels. I think it’s important and it’s starting to come into the bookings and what we’ve started to see now in the pipeline that we have. So Phil is one of many, I think there’s still a lot of people, they’re trying to understand the whole forced labor and how it plays out and what the…

Our next question comes from Brian Lee with Goldman Sachs. Your line is open.

Thanks for taking the questions. I had to hear, I guess, first, Mark, can you – of the 1.1 gigawatts assistance, I think you talked about this, but how much is targeted to be sold this year, next year, and then presumably 2023 will be the last year where you see some systems business revenue, and how much in that year? And then the gross margins, I know, they depend a lot on mix, but it seems like if we back up the components where you’re doing pretty well, it’s about a high-single-digit, low-teens number implied for this year. Is that going to be kind of the go-forward margin level? I would’ve thought it’d be a little bit higher given Sun Streams made it into 2021 versus 2020, but any thoughts around mix implications for margins and how to think about margins for that business as you still have some revenue to monetize over the next couple of years. Thanks guys.

Yes. I’ll take the first one, Brian, and I’ll let Alex takes the – those questions on gross margin. As relates to the systems business, the 1.1 is largely the U.S. assets that we still have. Sun Streams has contracted. The rest of the Sun Streams is complex, we’ve signed, but we haven’t finalized what portion we signed up – another portion hasn’t signed yet. But the plan would have all that done, hopefully by the end of the quarter. And now it takes the largest portion of the U.S. volumes that aggregates up to on an AC basis. I don’t know, 600 megawatts or something like that. And there’s another few hundred megawatts that’s left in the U.S., which our plan would be to move forward as quickly as possible. And ideally, we have all of that sold out by the end of this year. So those are just development sites of which we would then try to contract module uptake agreements too. But the goal for the U.S. stuff would be to monetize all that volume this year and in sooner, the better. The development team is going with the transaction. So we don’t have the capabilities really to continue with the development activities. We’ll have to enter into a service agreement effectively forward with Leeward to continue to support those projects until they’re sold down. The balance of it though there is still 200, 300 megawatts of contract in Japan projects and there’s still more, that’s not contracted at this point in time. We have feed in tariffs, but we haven’t actually fully accomplished the permitting process and interconnection and other things that would ultimately also may require for a recollecting of a booking. That volume will be recognized – most of it will show up in 2023, there’ll be some in 2021 and 2022. But if you look at the CODs on those projects, most of them had 2023 CODs as we currently see them. But as you know, the bookings – excuse me, the average ASPs on those projects are highly attractive. And so we’ll monetize that over the next three years. And we’ll see if we go beyond that. Again, we still have some more projects with tariffs that we haven’t booked yet that potentially could create more volumes into 2023, maybe even 2024 period. But I’ll let Alex talk about the gross margin.

Yes. So Brian, if you look at the guidance we gave, total revenue $2.85 billion to $3 million, of that module $2.45 billion to $2.55 billion that implies systems of $400 million to $450 million of revenue. And on the gross margin side, on the $710 million to $785 million company-wide and module $580 million to $625 million, so again implies systems $130 million to $160 million. So if you look those gross margins, it’s 25% to 26% at the company level, systems looks pretty high, but it’s really very limited volume as the systems is in the low 30’s, skewed a little bit by Sun Streams, and then potentially a little bit of Japan coming in backend of the year. But the module that comes in at about 24% to 25%. So that’s where you’re seeing module gross margins for the year. And then as you’re talking about kind of how to look at that going out, we tried to give a little bit of color here. On the gross margin level, we talked about the ASP decline and what we’ve got books, right? And if you look at 2022, there’s clearly still a lot to book in there, but we do have a significant amount of contracted already. And we said, if you look at the ASP decline, 2021 and 2022 goes down about 10% and then cost decline go down 11%. Now those are off different bases, obviously on an ASP and a cost per load. As you can see that we’re getting costs coming down at a slightly better than the ASP decline going from 2021 into 2022 and at the same time, you’re getting some additional volume coming through that scale. On a percentage basis, you get a better benefit there from deletion of the fixed costs that are on absolute dollar basis, you got just the benefit of increased volume coming through there. And then as we talked about before, it matters all started go down to the operating margin levels. So we talked about some of the cost reductions coming out from the sale of the O&M and product development. Some of that comes out in 2021, but there’s also a lack of a little bit that comes out in 2022. So that’s going to see cost of sales and OpEx continuing to reduce as we go into 2022. And that again helps us down to an operating margin level.

One thing I’ll add to that queue, Brian, Alex mentioned in his comments. There’s a pretty significant headwind in 2021 for under utilization in order to deal with the upgrades that we need to do for primarily for CuRe. So there’s a significant cost, I think it’s about $40 million in total of under utilization that we’ll have to absorb within 2021. So that’s weighing down on the gross margin. I think if you adjust for that, I think the gross margin goes up a couple of percentage points up into that range.

Our final question will come from Ben Kallo with Baird. Your line is open.

Thank you for making time for me. I kind of want to boil it all down. So, I heard you say, several different things about gross margin improving. You said the ASP’s are firming up, you’re much locked into 2022. So if I go to 2022 EPS should be up right. And then my second question is, I guess, Alex, when you build a new factory, how do you determine whether or not you have the ROIC on that? I guess, there’s probably a margin associated with that. And so you have to have some kind of firm belief in your long-term contracts to invest that money. Those are my two questions.

Yes. I don’t think, first of all, that Alex said. Ben we’re not giving guidance for 2022 at this point that we gave some pretty strong indicators of what will drive 2022, which will be the volume – the production volumes as we referenced the new product of CuRe. The one thing I want to keep making sure that it’s representative there is, in all of 2022 volume will be CuRe. If you look at the one slide, which shows the energy uplift, there’s a meaningful energy uplift because of the improvement of long-term degradation. And that we sell energy, we sell back. And so that is important to understand. And we also referenced that there was a lot of interest and rightfully so when bifacial modules came out and they talked about a 4% to 8% energy uplift relative to monofacial modules, similar efficiency. If you look at where we are with our pure product, and on a lifecycle averages, on top of the initial Tesco and efficiency pop there’s another 10 percentage points of lifecycle energy through improvement of long-term degradation. And so you can take our products and even, again crystalline silicon bifacial that maybe even as a nameplate of 150, 175 bps better efficiency. And you’re going to find that over the life cycle energy profile, we’re going to outperform that in the range of call it, anywhere from 4% to 6%. And that’s compiling value fruition. So it’s the technology, it’s the supply improvement, there are production plan improvement that we’re talking about and continued reduction of our own internal costs, I think 2020, we’re not going to give specific guidance, but we gave enough information, I think to help people look because ROIC and then what 2022 should look like.

And Ben, I think about ROIC, if I look at it across both in individual factor on a company wide basis. If you think about individual factory at a gross margin level depending on what our volume sold is more of it as sold outside the U.S. today. And as we expand, you may see that gross margin level going down, being more challenging from individual factory relatively to the current book volume. But at the same time, adding a factory adds very limited to no OpEx, and also actually have a slight benefit diluting from the fixed costs instead of the cost of sales line. So therefore, on an operating margin benefit of anything that factory could look better. So because it has impacts not just for an individual factory, but also for diluting fixed costs plus the benefit you get call of extra volume with pretty much the same OpEx, given that, as you said before, we think 80% to 90% of operating cost line is fixed. We have to look at it both individually and across the company. But we certainly want to make sure that adding was being significantly cost of capital for adding factories and we’ve seen that today.

We have reached the end of our time for the question-and-answer session. This concludes today’s conference call. You may now disconnect.