First Solar, Inc.

Good afternoon, everyone, and welcome to First Solar's first quarter 2023 earnings call. This call is being webcast live on the investor section of First Solar's website at investor.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 hand the call over to Mr. Richard Romero from First Solar Investor Relations. Mr. Romero, you may begin.

Thank you. Good afternoon, everyone, and thank you for joining us. Today, the company issued a press release announcing its first quarter 2023 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 Bratton, Chief Financial Officer. Mark will begin by providing a business and strategy update. Alex will then discuss our financial results for the quarter. Following their remarks, we will open the call for questions. Please note this call will include forward-looking statements that involve risks and uncertainties, including risks and uncertainties related to the Inflation Reduction Act of 2022. It 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 more complete description. It is now my pleasure to introduce Mark Widmark, Chief Executive Officer. Mark.

Thank you, Richard. Good afternoon, and thank you for joining us today. As we noted on our last earnings call, we entered 2023 in a significantly stronger commercial, operational, and financial position than the previous year, setting the stage for growth, and improve profitability in 2023 and beyond. The first quarter of the year reflects this direction as we commissioned our latest factory in the United States and started production of our next generation Series 7 modules. Secured a manufacturing incentive award in India, progressed our technology roadmap with a new cell efficiency record, and continued our strong bookings and ASP momentum. It is important to emphasize that our points of differentiation from our unique CAD-TEL technology and vertically integrated manufacturing process to our commitment to responsible solar, continue to set First Solar apart from the competition, and are the primary enablers of our long-term competitiveness. Beginning on slide three, I will share some key highlights from the first quarter. This quarter, we strategically built on our backlog with 4.8 gigawatts of net bookings since our last earnings call at an average ASP of 31.8 cents per watt. The saluting adjusters were applicable. This brings our year-to-date net bookings to 12.1 gigawatts. But at the same time, our total pipeline for future bookings opportunities has grown to 113 gigawatts and includes 73 gigawatts of mid- to late-stage opportunities. From a Series 6 manufacturing perspective, we produced 2.3 six gigawatts of product in the first quarter, with an average watt per module of 467, a top-end class of 475 watts, and a manufacturing yield of 98%. This solid performance is the result of a relentless focus on manufacturing excellence. Regarding Series 7, the ramp at our third Ohio facility, which began production in January, is progressing well. We produced 170 megawatts in the quarter, and recently both demonstrated high-volume manufacturing production capability of up to 10,000 miles per day, which is approximately 60% of main plate throughput, and achieved a production top bin of 535 watts. Developed in close collaboration with EPCs, structured and component providers, Series 7 reflects First Solar's ethos of competitive differentiation. Responsibly manufactured in America, largely using domestically sourced components, including American-made glass and steel, and entirely produced under one roof. It is optimized for the utility scale market and features a large form factor and an innovative new back rail mounting system. This design is expected to deliver improved efficiency, enhanced installation velocity, and unmatched lifetime energy performance for utility scale projects. We are tracking to begin customer shipments as early as June of 2023. And towards that goal, we are pleased to have recently received 37 IEC and UL product certifications. From a technology perspective, in Q1, we certified a new world record Cattell cell with a conversion efficiency of 22.3%. Most importantly, this was achieved in our Cure technology platform. which provides a significantly improved energy profile. In addition, we recently received an award from the U.S. Department of Energy related to our tandem module development. Moving to slide four, we are pleased with construction progress at our manufacturing and R&D facilities expansions. In India, at our new Series 7 factory in Chennai, final building and facility works are nearly complete, and the factory has been energized. Tool installation is ongoing. And we received our first consent to operate and expect to begin production and ramping activities during the second quarter, second half, excuse me, of 2023. Once fully ramped, this facility is expected to add 3.54 gigawatts of annual nameplate manufacturing capacity to the fleet. As previously announced, the Indian facility has also been allocated financial incentives under the Indian government's production length incentive program. First Solar was one of only three manufacturers selected to receive the full range of incentives, which are reserved for fully vertically integrated manufacturing. The incentives are subject to the facility meeting product efficiency and domestic value creation thresholds, which we will evaluate on a quarterly basis beginning in the second quarter of 2026 through 2031. In Ohio, our project to upgrade and expand the annual throughput of our Series 6 factories by an aggregate of .7 gigawatts is also advancing. Tools have been ordered, and the additional capacity is expected to come online in 2024. In Alabama, our fourth U.S. factory has received its environmental permits, and foundation and early factory construction is underway. Tools have been ordered, and the facility remains unscheduled for completion by the end of 2024, with commercial operations ramping through 2025. When fully operational, these expansions in Ohio and Alabama are expected to increase our annual nameplate capacity in the U.S. to over 10 gigawatts by 2025. Our dedicated R&D facility has also commenced construction and will feature a high-tech pilot manufacturing line, allowing for the production of full-size prototypes of thin film and tandem PV modules, and will provide a means to optimize our technology roadmap with significantly less disruption to our commercial manufacturing lines. This facility is expected to commence operations in 2024. Looking forward, we continue to evaluate the opportunity for further investments in expanding our production capabilities to best serve our key markets. Moving to slide five, I would first like to draw your attention to a change in the way we present our contract backlog. In the past, we have shown expected module shipments Going forward, we'll show expected module volume sold, which takes into account the timing of revenue recognition and aligns with volume sold in contracts with customers for future sales disclosures represented in the 10-K and 10-Q quarterly findings. As of December 31st, 2022, our contracted backlog totaled 61.4 gigawatts with an aggregate value of $17.7 billion. In March 31st, 2023, we entered into an additional 9.9 gigawatts of contracts and recognized 1.9 gigawatts of volume sold, resulting in a total backlog of 69.4 gigawatts with an aggregate value sold of 20.4 billion, which implies approximately 29.3 cents per watt, an increase of approximately half a penny per watt from the end of the prior quarter. Since the end of the first quarter, we have entered into an additional 2.2 gigawatts of contracts, bringing our total year-to-date backlog to a record 71.6 gigawatts. During the first quarter, certain amendments to existing contracts associated with commitments to provide U.S. manufactured product, as well as commitments to supply domestically produced Series 7 modules in place of Series 6, increased our contracted revenue backlog by 35 million across 8.8 gigawatts, or approximately 4.5 cents per watt. Since the second quarter of 2022 and up to the end of Q1 2023, cumulative amendments to existing contracts associated with commitments to provide U.S. manufactured product, as well as commitments to supply Series 7 versus Series 6 modules increased our contracted revenue backlog by 157 million across 4.1 gigawatts, or approximately 3.9 cents per watt. Note, we are currently processing additional amendments associated with providing U.S. manufactured product, which were reflected in our Q2 contracted revenue backlog when reported. As we previously addressed, A substantial portion of our overall backlog includes the opportunity to increase the base ASP through our application of adjusters if we're able to realize achievements within our technology roadmap as of the required timing for delivery of the product. As of the end of the first quarter, we had approximately 34.5 gigawatts of contracted volume with these adjusters, which if fully utilized or realized, could result in additional revenue of up to approximately or approximately two cents per watt, the majority of which we recognize between 2025 and 2027. As previously discussed, this amount does not include potential adjustments for the ultimate bin delivered to the customer, which may adjust the ASP under the sales contract upward or downwards. In addition, this amount also does not include potential adjustments for increases in sales rate or applicable aluminum or still commodity price changes. Finally, this does not include potential price adjustments associated with the IETs and domestic content provision under the recently enacted Inflation Reduction Act. As a reminder, not all contracts include every adjuster described here. To the extent that such adjusters are not included in a contract, we believe the baseline ASP reflects an appropriate risk-reward profile. And while there can be no assurance that we'll realize the gestures in those contracts when they are presented. To the extent that we are successful in doing so, we could expect a meaningful benefit to our current contracted backlog ASB. Our today contracted backlog extends into 2029, and excluding India, we are now sold out through 2026. Regarding future deliveries, as a reminder, our contracts are structured as firm purchase commitments. In limited circumstances, often related to customer regulatory requirements or a portion of a large multi-year framework commitments, our contracts may include a termination for convenient provision, which generally requires substantial advance notice to invoke and features a contractually required termination payment to us. This fee is generally set at a substantial percentage of the contract value and backs up by some form of security. Termination for convenience provisions apply to approximately one-tenth of our entire contracted backlog, with the majority of the applicable megawatts scheduled for deliveries between 2024 and 2025. Should a customer fail to perform under a contract, the ensuing default would, in addition to their incurring potential dispute resolution and project financing complications, entitle us to remedies that could the receipt of the termination or would include the receipt of termination payment. That said, we and our customers, including many of the largest, most respected developers and utilities in the industry, have long taken a relationship-based versus transactional approach to contract. As a result, this year alone, we have booked multi-gigawatt deals with the peak customers, including EVP renewables, LightSource VP, and Leeward Renewal Energy. which signed a two-year, two-gigawatt order announced prior to the call, further expanding their long-standing relationship with us. In choosing to contract with First Solar, our customers value and prioritize significantly more than just the module ASP, including contract integrity, product availability and certainty, ethical and transparent supply chains. For First Solar, this approach provides the opportunity to partner with customers who share our values, and also provides greater offtake visibility, which helps support our long-term capacity expansion plans. This alignment of interest, which has been validated in the past through multiple pricing and supply-demand cycles in this industry, informs and guides our commercial strategy of continuing to enter into long-term multi-year contracts. As reflected in slide six, our pipeline of potential bookings remain robust, with total bookings opportunities of 112.7 gigawatts and an increase of approximately 20 gigawatts since the previous call. Our mid to late stage opportunity increased by approximately 15 gigawatts to 72.6 gigawatts. That includes 65.6 gigawatts in North America, 4 gigawatts in India, 2.7 gigawatts in the EU, and 0.3 gigawatts across all other geographies. Included within our mid to late stage pipelines are 4.7 gigawatts of opportunities that are contracts subject to conditions precedent, which include 1.9 gigawatts in India. As a reminder, signed contracts in India will not be recognized as bookings until we have received full security against the off day. Turning to slide seven, our research and development efforts have continued to be the driving force in the advancement of our technology. In Q1, we established a new world record research conversion efficiency for Cattell, achieving 22.3% efficiency, as certified by the United States Department of Energy's National Renewable Energy Laboratory. The record-setting research cell was constructed at our California Technology Center. Notably, this new record is based on our current technology, which in addition to increasing efficiency, as meaningful lifetime energy improvements in real-world conditions. Driven by a superior temperature coefficient, best-in-class cell stability, while maintaining First Solar's industry-leading quality and reliability, our CURE technology provides for an up to 6% increase in expected lifetime energy relative to our previous record cell technology. Additionally, the U.S. Department of Energy recently provided two grants associated with our industry-leading points of differentiation efforts. These include a $7.3 million award to First Solar to support the development of a Cattell tandem module for the residential rooftop segment, and a $1.3 million award to the University of Kansas, which is collaborating with First Solar and the Idaho National Laboratory to develop a low-cost next-generation method to optimize solar module recycling. Before turning the call over to Alex, I would like to take a moment to discuss the policy environment in our key markets. In the United States, with respect to the Inflation Reduction Act, we continue to await guidance related to the domestic content bonus provision. We believe it is imperative that the United States Treasury Department issue guidance consistent with congressional intent of the IRA, which is to nurture true domestic solar manufacturing ensuring a robust domestic supply chain for American-made solar bonds. It is critical the guidance recognize that to qualify for the bonus, at a minimum, the manufacturing of solar cells must occur in the United States. This is not only consistent with clear objective of the IRA, but it's also supported by the legal framework under the Buy America Act regulations expressly referenced by Congress in the enactment. While the intent of the IRA the regulations governing it are clear, it is unfortunate that sections of the industry are advocating that Treasury grant some form of waiver that would allow bonus credits for solar panels assembled using foreign sub-components such as solar cells. We believe that any such waiver runs contrary to the letter of the law and congressional intent. The purpose of the bonus credit is to incentivize domestic manufacturing and the creation of a domestic solar supply chain and not to create an entitlement simply to support foreign manufacturers. With regards to international policy, we are seeing some progress in the EU, which has released its new state aid guidelines in the form of the temporary crisis and transition framework and a draft of its net zero law. The state aid guidelines create the framework for allowing EU member states under certain to match aid received by clean energy technology manufacturers elsewhere, including under the IRA. The net zero law would establish new ambitions to meet regional needs with domestically produced content, prioritize net zero projects and technologies, and address existing issues such as permitting. As previously mentioned, policy, among other considerations, continues to influence our evaluation a potential additional manufacturing expansion. Such expansions would require further clarity, including in the U.S., satisfactory Treasury guidance with respect to domestic content, and in Europe, further clarity on EU member states' incentives for domestic manufacturing. And I'll turn the call over to Alex, who will discuss our Q1 results.