Good afternoon, everyone and welcome to First Solar's Second 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 second quarter 2024 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 provide business, strategy, technology and policy updates, Alex will discuss our bookings, pipeline, quarterly financial results and provide updated guidance. Following their remarks, we will open the call to 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.

Good afternoon and thank you for joining us today. Reflecting on the first half of 2024, we are pleased with our ongoing efforts to strengthen the fundamentals of our business. With solid operating and financial performance, selective incremental bookings, robust pipeline of demand, including a near -- a recently signed 620-megawatt module supply agreement subject to the achievement of conditions precedent with a new U.S. customer that will be supplying power to a hyperscaler. And investment in technology, R&D infrastructure and manufacturing expansions, we continue to solidify our market position through strong execution. Our balanced approach to growth, profitability and liquidity, combined with multiple technological and business model points of differentiation enable us to deliver value for both our customers and our shareholders. Beginning on Slide 3, I will share some key highlights for the second quarter. From a commercial perspective, we continued our disciplined approach to bookings. Since our last earnings call, we have secured a net 0.9 gigawatts of bookings with an ASP of $0.316 per watt, excluding adjusters where applicable or $0.334 per watt, assuming the realization of adjusters where applicable and in each case, excluding India domestic sales. This includes a 0.4 gigawatt debooking related to a termination for convenience exercised by one of our European power and utilities customers who is selling a portfolio of U.S. development assets as referenced on our last earnings call and who is obligated to pay the associated contract termination payment. This brings our year-to-date net bookings to 3.6 gigawatts. Our total contracted backlog now stands at 75.9 gigawatts with orders stretching through 2030. From a technology perspective, since our Q1 earnings call, we have established a new world record CadTel research cell with a conversion efficiency of 23.1%, commissioned new critical R&D infrastructure in Ohio and remain on track…

Thanks, Mark. Moving on to Slide 6. As of December 31, 2023, our contracted backlog totaled 78.3 gigawatts, with an aggregate value of $23.3 billion. Through June 30, 2024, we contracted 2.7 gigawatts of incremental volume, reduced our bookings by 0.4 gigawatts due to the aforementioned contract termination by a European customer and recognized 6.1 gigawatts of volume sold. This brings our total backlog to 74.6 gigawatts at quarter end with an aggregate value of $22.3 billion implying an ASP of approximately $0.299 per watt, excluding adjusters where applicable. Since the end of the second quarter, we've entered into an additional 1.3 gigawatts of contracts, resulting in a total backlog of 75.9 gigawatts. Substantial portion of our backlog includes opportunities to increase the base ASP through the application of adjusters if we realize achievements within our current technology road map as of the expected timing for delivery of the product. At the end of the second quarter, we had approximately 38.4 gigawatts of contracted volume with these adjusters which if fully realized, could result in additional revenue of up to approximately $0.7 billion or approximately $0.02 per watt, majority of which will be recognized between 2025 and 2028. This increase in adjusters relative to the prior quarter is a function of the opportunity discussed on our prior earnings call to accelerate the expected replication of CuRe across the fleet. 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 in the sales contract upwards or downwards and for increases in sales rate where applicable aluminum or steel commodity price changes. As reflected on Slide 7, our total pipeline of potential bookings remained strong, with bookings opportunities totaling 80.6 gigawatts, an…

All right. Thank you, Alex. As reflected by remarks at the beginning of the call, we are pleased with our financial and operational execution for the second quarter. We have continued to deliver on our commitments and have largely advanced our planned initiatives throughout the year thus far, such as progressing our U.S. manufacturing capacity expansion on schedule, commissioning our research and development infrastructure build-out on plan and maintaining a disciplined approach to new bookings opportunities. That said, we are also mindful of several externalities which may impact the industry as a whole, including First Solar. Among these externalities we are most frequently encountering are the uncertainties related to politics and policies, irrational global supply conditions and the evaluation of strategic directions and capital allocation by certain large multinational companies. Firstly, with the November election fast approaching, the solar industry is again facing an uncertain policy environment. The impact of this uncertainty became more apparent as the second quarter progressed. We have observed increasing constraints on access to capital, both for early-stage solar technology companies seeking to finance the next stage of their growth as well as for the established companies looking to build domestic manufacturing capacity. Our financing parties wait to make investment decisions until they have a clear view of the policy picture. This uncertainty has also impacted developers evaluating risk and returns within project pro formas and which comes at a time when, as mentioned earlier, some oil and gas and power and utility developers are contemplating the pivot from renewables to prioritizing fossil projects. The potential for Republican control of the presidency in both Houses of Congress has given rise to concern over the prospect of a legislative reconciliation process or use of the Congressional Review Act adversely impacting the Inflation Reduction Act legislation or its…

Demand continues to be robust, 3.6 gigawatts of net bookings year-to-date, including 0.9 gigawatts of net bookings since our last earnings call, leading to a resilient contracted backlog of 75.9 gigawatts. Our continued focus on manufacturing technology excellence resulted in a record quarterly production of 3.7 gigawatts. Alabama and Louisiana factory expansions remain on schedule. The expansion of our Ohio manufacturing footprint has been completed and commercial shipments began as scheduled at the end of the second quarter. From a technology perspective, we've established a new world record CadTel research sale, commissioned our new R&D facility in Ohio. We expect our CuRe line launch in Q4 of this year, announced the ownership of certain issued and pending patents related to the manufacturing of TOPCon crystalline silicon cells. Financially, we earned $3.25 a diluted share and we ended the quarter with a gross cash balance of $1.8 billion or $1.2 billion net of debt. We're maintaining our full year 2024 guidance, including forecasted full year earnings per diluted share of $13 to $14. And with that, we conclude our prepared remarks and open the call to questions. Operator?

And your first question comes from the line of Philip Shen with ROTH Capital Partners.

The slides say you guys booked 1.3 gigs in July. And then the press release says 900 megawatts were booked since the last call. The $0.316 per watt disclosed was on the 900 megawatts but that seems to include the cancellation of the EU customer. What was the ASP on the full 1.3 gigs or gigawatts gross bookings in July, assuming that's the correct number. So that's the first question. Second question is around the bookings outlook ahead. Can you provide some additional detail on that 4.1 gigawatts of opportunities confirmed but not yet booked on Slide 7. When could these translate to bookings? We're in this policy environment that's uncertain, when do you think bookings accelerate and reflect -- start to reflect this kind of higher tariff, higher price environment?

Phil, on the ASPs, yes, so we did have a cancellation during the quarter which we referenced which is the 0.4, so that is the delta. The ASPs that we reported net of the cancellation is in line with where the gross ASPs would be as well. The actual cancellation was slightly lower but don't take it as a material delta. The numbers are in line with the net numbers that have been reported from that standpoint. Bookings from a standpoint of momentum, look, there's -- what we've -- our strategy has been, let's be patient and let's make sure the market has an opportunity to continue to digest all the information that's coming about, right? And we believe there's still even more to come and we kind of alluded to a few. One is the potential announcement of critical circumstances. We think that there is a momentum potentially for addressing the foreign entity of concern and the potential use of taxpayer dollars to go to adversarial countries. We think there are other initiatives that could be focused on examining the India imports coming into the U.S. and the potential use of Chinese cells in the manufacture of those products and brought into the U.S. market. And we also believe that there's still, as previously indicated in the domestic content guidance that was communicated in May that the current administration is evaluating the potential use of integration, I should say, of a wafer to qualify for domestic content. So we're just going to try to be as patient as possible, when you throw in the mix of recently announced TOPCon IP. We're going to be patient as possible to let all that information to be digested with the market to the extent we can see ASPs that are attractive to…

Your next question comes from the line of Jon Windham with UBS.

I guess as you've moved forward on Alabama, the focus will turn to Louisiana. And just, I guess, a couple of questions on the same topic. Any key milestones that you would point us to over the next 6 to 9 months to keep track of that project? And then at what point do you think we'll get a little bit more specific visibility on when that ramps beyond just saying the second half of 2025. Thanks again and a great result.

Yes. So look, I think the first milestone which you expect to start seeing as we exit this year into next year, it would just be a completion of the construction of the building. And you can see that a lot of the exterior construction for the building has been completed but there's still quite a bit of work that needs to be done on the interior and then it will be tool move in. So our current plan will be Q1, beginning of Q2 will be the tool move in for Louisiana for that factory. Then there's the energization process. And then [indiscernible] is going to line up to an integrated run very similar to -- we just started our integrated run this year for Alabama, you roll the plot forward to July of next year, we should be looking towards an integrated run at that point in time, it would be early Q3. So we're making real good progress, happy with what we're seeing right now. Look, hopefully, we have confidence in what we've been able to do. This is our last factory and a journey to get over north of 25 gigawatts of capacity. We started with -- not too long ago with 6 gigawatts. And so we've been able to, in a relatively short period of time to meaningfully increase our manufacturing capacity and the team has done an excellent job in delivering.

And your next question comes from the line of Andrew Percoco with Morgan Stanley.

I do just want to kind of come back to the election point that you made earlier, Mark. I'm just trying to clarify, do you think this is going to slow momentum because developers are on pause? Or do you think this could actually accelerate momentum just given your domestic footprint just on the view that a potential Republican President would likely have a much more protectionist policy view. I'm just trying to get a better sense of whether this is a pre- or post-election bookings and pricing acceleration?

Yes. Look, I think it's -- the answer is both unfortunately. I think initially there will be -- there'll be some pause with trying to understand exactly the policy environment and what potential implications there will be if there is a new administration and Republican control. But I think as you see through that dust, it's going to be very clear that in my discussions in D.C., clearly, geopolitical tensions with China aren't getting any easier when you go to the Republican side of the conversation. There are going to be tariffs that are going to be imposed which are going to a better advantage First Solar and our domestic footprint for sure. And there's a real reluctancy of using U.S. taxpayer dollars to advantage Chinese owned and controlled company. So all that, I think, plays to our strength. But at the same time, I think everyone's going to want to understand kind of the environment, so there could be an initial pause. And then I think once that happens, you could see further acceleration. And in some cases, you may even see a pull forward of projects from '26 into '25 if there's a view that there's a legislative process potentially that could change certain provisions within the IRA, there may be an acceleration of everybody trying to monetize as much as they can in '25 before budget reconciliation process could potentially impact the legislation and call that maybe late Q3 of '25 kind of view of the world. So I think we're going to see a little bit of both, maybe some pause just to assess. But then I think what likely plays out with the Republican controlled D.C. would be a very favorable outcome for First Solar's domestic manufacturing.

Andrew, Mark is talking about it from a customer perspective. The same is also true from us. We talked before about how there's potentially some customer timing question around when they would want to make bookings. The same is true for us as to when we want to take a booking and you see that in the very judicious approach we've been taking and what looks historically like relatively low bookings in this quarter, that's a deliberate outcome for us. And so as we think through the risk profile of taking bookings today, the risk profile around the election, most scenarios would tell us that it makes sense for us to wait, especially given that one of the things that First Solar prizes itself on is we honor our contracts. And so if we set a price today and things change around the election that could otherwise lead to different outcome, we will honor the contract that we signed in the same way we expect our customers to honor the contracts they have signed. So there's a lot of things here that will lead us to wait as well as the customer.

And your next question comes from the line of Mark Strouse with JPMorgan.

I wanted to follow up on Phil's question earlier. Just comparing and contrasting the ASPs of the bookings in July versus what you put up on the last earnings call, up a bit kind of despite all of the news that's come out intra quarter. You mentioned kind of customers are kind of digesting all of the news flow. Is there any other color to that you would call out as far as timing of those deliveries, 2027 versus 2030 that also might be a factor in that? And then just a quick follow-up. Do you have a customer in mind to backfill for the 400-megawatt cancellation? Should we just simply add that to our 2025 numbers? Is there any chance that that could potentially come back into 2024?

Yes. Look, on the last question, I guess, first, I'll hit on that is, look, there is a chance. We're actively engaged right now with negotiations on a portion of that volume. But at the same time, we're just trying to be balanced in our views. We only have 5 months left in the year. The timing of the requirement for those modules and what project, it has to be something that is not too far long in the design phase because if it's already been designed to a different product and then to switch the engineering drawings and everything else and potentially even the supply chain balance the system that they would -- they are currently procuring could have to be modified as well. So I think it's best just to assume that it does not happen this year. But clearly, we're going to want to sell through that volume as quickly as we can. As it relates to the bookings, yes, there is -- to me, there's really 4 large bookings. There was -- in the current quarter, forget about the debooking. In the current quarter, there was 4 large ones. And I'm also including the one booking that subject to CP -- contracts subject to CP, right which is a 600-megawatt project. So you include that in there. That deal is completely -- is finalized all terms and conditions and ASPs and all that stuff is finalized. And it's subject to a developer getting actual finalizing control of a site on their end. And we hopefully will see that close out this upcoming quarter. So I look at it, there's 4 large bookings for the quarter or 3 bookings plus a contract which aggregates up to about 1.8 gigawatts when you look at it from that perspective.…

And your next question comes from the line of Brian Lee with Goldman Sachs.

Sorry to beat a dead horse but on the bookings front, just had a pricing question, were all the bookings from U.S. fabs in the quarter? Or was there some from Asia in there as well? I'm just trying to, I guess, get a sense of like-for-like pricing given your comments from the last call that U.S. pricing had moved maybe $0.03 to $0.04 per watt higher in recent times owing to tariff uncertainty. Is that kind of still what you're seeing mid-30s level in the U.S. specifically? And then second question I had was just big picture thoughts on new CapEx and timing of any kind of next manufacturing capacity expansion, whether new technology tandem or Series 7, what are kind of major bottlenecks decision criteria you're thinking about to potentially move forward on a decision there?

Yes. So the bookings, there was some India domestic volume that was booked within the quarter and we highlighted that and called that out of the average ASP. It wasn't a significant portion of the total volume but it was a piece of it. But there are shipments from India, in particular, that are being sold into the U.S. market that are included in that average ASP. I wouldn't say all that dissimilar from our normal mix of domestic versus international but there is some in India volume that will be sold into the U.S. market that's captured in the bookings for the quarter. The -- one thing I want to make sure is that when we go back and talk about pricing environment, what I would say is what we saw going into last earnings call, we had an earnings call in Feb, pricing got really soft in the month of March, then we rolled through beginning of April and there was -- at that time, it was an indication of the AD and CVD action against Southeast Asia, the new trade initiative that happened in early April. And then we started to see prices firm up. And then we ended up closing out on a reasonable amount of volume in that earnings call that we announced in May. But my comment that I even said last time was that some of that -- my point was the $0.03 to $0.04 was from also the weakness that we saw initially within the quarter that then firmed up. So I want to be clear, with adjusters we're at $0.33, $0.33 and change. I don't think we should be looking at that, that number is going to go up into above the mid-30s kind of range, right? So even -- to…

And your next question comes from the line of Vikram Bagri with Citi.

I apologize if I missed this. Mark, I wanted to understand your exposure to the uncertainties you highlighted, the capital allocation, maybe political and so forth and regulatory. Are you sort of like trying to indicate that the backlog is completely secure and these uncertainties only impact the forward-looking outlook? Or there is -- you're having discussions where there might be more calculations due to convenience. And then staying on that same topic, Mark, the Chevron Doctrine ruling has very widespread applications and a lot of the IRAs interpretation by government agencies, do you see any risks from challenges to those interpretations directly or indirectly to First Solar?

Yes. Look, I think what we tried to highlight in the call is that there is externalities right now that create some amount of uncertainty. And one is, obviously, the political environment, we spend a lot of time around that. The other is clearly the significant overcapacity that we continue to see unabated from China and we're just trying to continue to highlight that and also emphasize why there's -- it's so important for us to be very aggressive on a trade policy standpoint, whether here in the U.S. or in India or even actions and initiatives we're trying to do in the EU, right? So we think those are all important things that everyone needs to be mindful of. The one -- as it relates to whether this calls into question our backlog, those 2 are not calling into question the risk of our backlog from a contractual standpoint, right? Now if for some reason, there's a new policy environment, the Republicans were to getting into control and they eliminated the tech-neutral ITC or minimized it, reduced it, that could have an impact on our viability of our customers' projects and their associated returns. I mean, clearly, that's going to have a ramification to First Solar because now project fundamentals have modified. There's no view of that per se happening but it's an indication of when we go through the political uncertainty or the election process that we're going to be going through and if there's a Republican control, there's a number of things that could be addressed as part of the IRA that may or may not have any potential implications on us. We're just trying to highlight that as such. So no impact on the backlog from that standpoint but for some dramatic pivot or change into…

Vikram, just on the backlog. So we've said before, we have fixed price agreements. And what we're saying here is those still stand. In the event of a systemic shock to the system, I think some of the risk ultimately could fall on us if there's significant defaults and customers are in trouble. But generally, I would say we look to the strength of the contracts in the event that there's a determination of the convenience option, customers choose to utilize that. And we've said before, that's on a very small part of our backlog, then we would collect the termination payment. In the event that customers default, we've shown and I think it's fair to say that we believe our contracts are 2-way agreements, customers have obligations as well with us and we will go after termination payments that are owed to us.

And that does conclude today's conference call. You may now disconnect.