FSLR - Earnings call transcript Q1 2019

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Operator

Good afternoon, everyone and welcome to First Solar’s 2019 Guidance Call. This call is being webcast live on the Investors section of First Solar’s website at investors.firstsolar.com. At this time, all participants are in a listen-only mode.

As a reminder, today’s call is being recorded. I would now like to turn the call over to Steve Haymore from First Solar Investor Relations. Mr. begin. may you Haymore,

Steve Haymore

and afternoon, company thank announcing Alex investor.firstsolar.com. by and providing will and update. issued A press for Good Chief website a First available us Executive its for at today. Mark XXXX. release then Chief the Mark of The Alex a copy presentation everyone you. are you on XXXX me and business joining guidance associated With Solar’s Financial Thank press outlook. discuss are Officer. today Widmar, Officer Bradley, begin the will technology release

their review time will note Following remarks, involve could questions. we contained now statements is Executive differ Widmar, forward-looking you Harbor results presentation Officer. Safe have and will risks call release Mark? encourage Mark in current press pleasure for materially this actual a We uncertainties management’s more description. that then cause that that statements for Chief and to introduce expectations. to complete today’s Please include to my from It the

Mark Widmar

Good Steve. for joining thank afternoon you us today. and Thanks,

displayed we since neutrals. effort was want a year’s Analyst time, and business of on Before I for our XXXX, hundreds have to solve on provide X that that a qualify our perspective first of Series worth develop, At more December. complete module, transition outlook which of our combination recent last a than test update the event made and and Day progress discussing to we our

achievement, we accomplish XXXX noteworthy. in While more completing X to able our have is been an Series as what first module even important

And year-to-date, up started we X.X factories. course we million X of over the Over year, Series have this have produced modules. three

we production QX which are is X Series startup scheduled to planning ramp middle is at by start manage concurrently to point all at construction, is this significant a is facility, undertaking reach the fourth beginning start XXXX. at the a and different and of major construction, to is of activities the there accomplishment. to our addition, XXXX five production the the and under To factory In related factories, today of

As process goals to position improvements continuing are XXXX. we our efficiency and forward and will other upgrades us closed the on to throughput year, in tool meet we that push

addition these notable a achievements, success also In new business have and we module year. manufacturing to this had systems booking

I we which As during included our late past to bookings gigawatts X.X October, success, net today. business. complete of on of are our our we were which mentioned the relates systems XXX In combined gigawatts, than a earnings call X have X.X new development want especially year-to-date recent highlight would to I PPAs, in over activity call as business. be during bookings our more project DC. it providing the some update X not megawatts weeks, our signed

project deployment providers important AC our megawatt growing the the MCE, XXXX, megawatts of announced AC. community aggregators, other XXX benefits local in which consumers has was choice expand an XX-megawatt or project signed a increasingly Little electricity CCA now our load PPA and the first are in of customers control, a their and California driving into states. XXX offered Community renewable of is to CCAs, both energy. increased In number been Bear late aggregator have choice leading The AC with we of with requirements, expansion MCE PPA in met will necessary that initial California. of

support with deployment energy. their are solar cost to our effective continue MCE We and of excited association

will States. This AC We the project Western than also signed recently support customer solar. megawatt PPAs to XXX continuing this and DC X utility This the a booking signed corporate the see recent corporate available one following at resolution this will from months, highlights past to strong later a customers scaled most condition for XXX-megawatt are energy objectives. with more expect to the a In presented. of utility and than we we that of to This the brings United we outstanding are demand the PPA meet off-takers renewable be have corporate the project between collaboration utility or on megawatts signed major its their of related systems greater these buyers DC. in project be date More nearly with intended projects. by energy with customers PPA come details generated contracted projects to XXX customers our utilities corporate total will

solar earnings as continues corporate of As will for call, I demand production the down. power step solar as favorable to based last continue on customers we believe wind grow well the coming years indicated in like credit power, to economics our in tax

in Turning greater timing of systems recognized. model which projects, shipments, our detail PPAs which reviewing on on of growing the to keep contracted that based X, in today’s new Slide the mind, is specific does it call. the the year portfolio I’ll slides, correspond includes revenue In is to discuss necessarily announced in which

approximately of larger anticipating future opportunities. opportunities to shipments an X gigawatts time, by have nearly adding we An and in even exceed margin. point mind, of gigawatts bookings of note gigawatts this early slide, to already does important to than to more Keep shipment potential system XXXX, stage on the Adding and As DC. over our With of our systems X.X In stage contracted not XXXX, exceed X.X which opportunities year portfolio number. contracted in mid-to-late stage XXXX, target this include gigawatt have gigawatts per in and DC. X stage total early business. XXXX is XXXX the of already gigawatts opportunities gigawatts the over X.X brings our target both of are systems mid-to-late of annual shipments the gigawatts respectively, opportunities megawatts DC potential shipments after our we in XXX greater we’re more X.X prospective highlighted development X.X are X.X

solid XXX book This later or in mid-to-late megawatts and over as projects of Now arrangements, are not but emphasized our of feed-in-tariff in XXX pipeline Of volume activities, totaling continue development portfolio agreements. projects in have in certain projects not completion yet to are be XXX stage we in including fixed XXXX which Japan. we’ve includes DC, a yet the DC strong considered of contracted included will that pipeline the and past, interconnection a systems the megawatts have megawatts this bookings. of projects of

portfolio, opportunity opportunities, requirements substantial uncontracted but be through As to the a preserve plan this to bidding to projects and for leverage Safe it US We for projects. for will and the provide Harbor of in relates XXXX us X which the these of to more requirements our our strategy, values contracted our we value of Alex to able to X, advantage more portfolio, allows we XXXX preserve value add expect I’ll not uncontracted projects. XX% competitive taking project PPA ITC sheet and will of only to up on but contracted higher Slide the to enable to XXXX. of the plan gigawatts financial balance side. that for in end for XXXX capacity of anticipate on will capacity ITC Continuing portion this development detail DC meet discuss

scheduled X anticipate With of by plan gigawatts Series the having best our order for U.S. As Series remaining XXXX, at early the quarter X factories our of X additional X XXXX, of of Malaysia next conditions. the scheduled our In for with of start begin Series future the beginning position second for communicated current roadmap to market in X.X company and XXXX. our previously, X the expansion factories Vietnam the roadmap at we to possibility shutdown factories second end to production of XXXX. operation outlines depending on nameplate current middle the capacity entering plans in factories

demand. X locations Greenfield add to of Series market of factory. capacity the Series to with customer final also or to volume X X.X roadmap, in in the entering XXXX. facility Series also we Note and X will X. capacity our in factory transition grow X.X this our production Series target X them and our to option nameplate that Series last and convert to gigawatts we manufacturing X.X expect the start gigawatts a factories the these in second X the to Ohio. to to to later of ability end to of Once to existing if our visibility immediately nameplate decision Series Now Malaysia conditions X, shutdown, convert provides an for enable X of XXXX contracts XXXX X other would XXXX in Vietnam bring from utilized and to option nameplate on depend converting to the Series capacity this in gigawatts This to to begin The whether we factory we Series the flexibility addition factories convert have have Series one at

discussed. and potential XXXX of planning these the Next, scheduled X.X end roadmap than Slide includes the XXXX production occur Total X gigawatts, XXXX factory production and the approximately we increase to to is should X.X in expect production based on provides X than and of levels range extent that which in level or we between gigawatts X.X reflection To ramp anticipated, X faster X, Series ramping ranges that Series earlier to showing and XXXX of most production The this can X total we in variation factories but startup XXXX production. In anticipated to is will production start are reach gigawatts, be able XXXX, to at all throughout similar point, high ranges. our a Series product. XXXX volume advantaged X at in the of are are capacity timing.

expected XXXX turn sight most is available are we as roadmap of levels line to we then XXXX to demand and in which detail approximately megawatts will will provide X.X X.X At XXXX As X in this from this visibility and a XXXX of to Alex Series the significantly of leaves with we is by more a positions XXX us to summary, of gigawatts time combined in strong that already who production in growing call production a over our XX capacity. position contracted of This gigawatts. to our remaining In on Series over encouraged up XXXX up our I booking of total XX% capacity period this between supply, reminder, is end to and production XXXX. X increase XXXX and now XX the outlook. midpoint with and the have approximately range, gigawatts XXXX. good

Alex Bradley

a I to discussed $X.X plans, we position a the in Thanks would cash X decision net have start, From our had accelerate billion. Mark we today’s of call the Mark. transition. X Series made late on at our Series to add perspective made to when of like the beginning To we sheet regarding XXXX balance progress what

maintain, only We have over liquidity, position not have $X grown a net strong place but Series X that’s The highlights our today since taking invested and the increase to CapEx in execution the has transition. approximately $X ability billion. cash billion throughout that to

Before covering XXXX, I guidance. will briefly XXXX our discuss

projects in indicated call QX. in anticipate October, selling we our two in in As Japan we

have they to closed, continue of to both expect close yet deals not before year. we the the Although end

timing guidance provided However, fall benefit these for guidance of XXXX, we for the XXXX an will XXXX were below earnings today’s if for be to offsetting will previous call. provided there sales the on push and

Slide Starting X, output year. upcoming our will volume. compared to to than more Series to I Turning discuss guidance is planned our with increase X a as the for XXXX next result increase expected of by year production, XX% in assumptions

the segment. of systems approximately versus to used any sales comprise with of planned majority The are revenue is X.X is than between Series XXXX to modules gigawatt the between mix more of of projects gigawatts including X to approximately volumes is and of X sold production are more systems systems. net XX% X to expected to be module projects system gigawatts, of The X.X XX% XXXX anticipated earlier, sales and consistent in reporting X of Sales provided gigawatts development system XXXX be of in Series than our mentioned to of segment XX% will gigawatts. the module approximately consist X. to and where gigawatts X.X mix sales. sales. view be X is XX% That module production X.X As targeted reflected

two which Our is operating of costs, impact $XXX by income million existing XXXX of Series X expense. an to incurred driven $XXX costs Manufacturing is to and ongoing in primarily startup million This is Vietnam. which million treated million ramp our XXXX is to factories plant ramp cost capacity half as through of and $XX to first $XX projected to million. million expected the operating sales comprised expansion $XXX $XX be in are by of are of

is of half factory, which will in first to Vietnam startup first production of XXXX. be The anticipated to costs the ramp towards QX. ramp weighted factory is part projected second the started the expense September, second transition Plant to into XXXX startup have in and residual from

expense transition startup we Vietnam QX. factory prior Firstly, ramp first aforementioned expect the in at to to our

online our X most to expect we X the the of expense workforce significant Series as XXXX. Perrysburg and startup is in course startup factory over our to be Ohio factory. factory our transition The Secondly, expensive Series we location the bring geographic existing to-date due estimated of second

While should than otherwise will the manufacturing reap this place Series take sooner and ramp. will a maintain decision plant highly us to the optimal transfer of in operations, workforce it the the skilled for fall allows XXXX of with benefits we be of X a workforce

to materials. we X the reduce of reason investing Thirdly in and in-house higher bill operations anticipated than Series the that certain XXXX, to XXXX are are is bring the module plant startup in

its benefit these beyond will return lower be expense XXXX coming sufficient up startup watt. Final will the if module $XX million per projects. these expense it’s there cost XXXX, resulting not from a realized with be of lower months valuations While we is in XXXX completed to in initiatives determine and startup increased be these in associated could and in programs

we second around the better are X of guidance reduction watt over the the to the the mind to will projected highest. per come most per cost Series not XXXX, module improvement that should from cost when improvements. in half we specific planned is result materials at reductions the of significant in reductions anticipate The year. X providing significant Keep for watt per course While in throughput, watt the of rates factory Series further year utilization in the efficiency and be bill do cost

include development we ITC meet in the of slide, storage. order Safe to up planned a portion Harbor this which project X XX% ICC gigawatts to of sites, Plus requirements to PD in will to on the Lastly XXXX preserve

not into these million sites Some otherwise as $XXX and targeted opportunities. in $XXX project contracted off-take an procured be investment later. XXXX agreements contracted will of XXXX have already bid who or others and PPA is while been between be The have are inventory effectively to future of would acceleration million

Sunshine utilized. a review sales the lower we projects, in with operating most project next XXXX, we the various projects approximately Slide cash the on XXX Sun year Japan X, and pull such included Seabrook balance U.S. recognize spending Safe in Harbor and this forward megawatts significant our in of anticipate list expect to While in India in in and investment we will development form of DC in this return values flow and XXXX, of and net Streams, comprised a Chicago cash this higher sold to Valley inventories key On assets. be of as internationally provide of

internationally. or Solar were and all We the revenue recognize GA most also projects plan of that the to certain U.S. Rosemont including Beryl remaining in projects in X the on XXXX, and sold

list AC because in recognizing Texas this revenue timing Keep out the projects the an in Phoebe that factors, from impact the subject of megawatt most of is revenue. next also the included mind anticipate it’s we can recognized variety year. While XXX the past, on sold which on to ultimately as not project a EPC agreement, of

Slide be Total investment R&D, levels in to support other an portfolio in an to XXXX to and not due necessary are in our as have to order largely our to certain we startup. operating programs relative plans. contracted in in highlights we Mark spending on resources profile are scaling R&D production higher This expenses increasing advanced XXXX, rate. plan sales systems the our our development will necessarily and updated expense did basis structure we in On specific production ongoing a our view a pipeline increase to we a The growth actively XXXX. fixed pursuing XX XXXX. increase fund noted, that XXXX is long-term reflect evaluated opportunities which trend excluding of and as of have effectiveness operating and Beyond OpEx strong bookings

expected While scaling income. improved to XXXX OpEx years per benefits watt in reduction per total decrease versus on of operating of the improvement X XXXX. basis, one-third The watt the we past over have discussed per our watt, is a $X.XX ultimately OpEx OpEx significant frequently to and dollars results are increasing a highlights in

we reduce. as cover now I to X.X on XXXX guidance more continue ranges to nameplate ramp Beyond our to capacity XXXX full of the OpEx capacity we gigawatts add beyond watt potentially that, and XX. expect Slide will per would

with Our billion to Gross projected slightly of to be net year. half margin. between margin second for significantly anticipated to margin segment several higher sales Gross to with and weighted XX% $X.XX of be reasons. half XXXX weighted profit is sales be more the to guidance module segment and more systems expected second billion the between is the than XX% $X.XX the the is

$XX included half cost of million which ramp planned first of Firstly, year. the in sales of the for to are primarily cost million are $XX

our per of higher years target cost reduction original at outset excluding in module per over cost $X.XX and costs this the watt year is QX cost fully line factories ramp X cost a To module transition. improve X throughout frame. Series per course is This X our this per increase. a the by XXXX as to adjusted impact of set Series cost cost efficiency watt anticipated that for the illustrate the point, ramp impact ago watt of watt we expect lower have of XXXX, XX% related we with than essentially the to the Secondly, is of the over to

our two will million of of have than project was margins second and projects this which anticipate estimated be cost $XXX $XXX class XXXX higher increase This is the surrounding may $XXX of all Until combined means the covered action. the $XX to EPC startup the our year. expense been ongoing which development development expense of our million million item we and million first One the under Thirdly, operating startup of to and and defense the targeted we guidance the midpoint possibility in We for higher point, has XXXX, insurance $XXX legal million, of and lawsuit and XXXX. the between in approximately of range. action $XXX that expenses essentially related insurance expense million in income expense. half million lower SG&A and our the plant including million are million $XXX is policies. of Operating the million. includes we our expect sales goes be But of to $XXX costs between has ramp to in with the exceed quarters of production number $XXX litigation higher R&D of defending coverage ongoing from highlight with the between $XXX potential sales XXXX that costs our to of projects carry as class uncertainty case trial filed that XXXX been case limits. years the given well for in

As referred it relates October, to as the Court the case U.S. U.S. Supreme to the in them

connection CERC. our in with for General Solicitor petition pending

any the of Court as recommendation review accept General. are the the Supreme is awaiting of The timing or is the We of to recommendation Solicitor whether final case. decision uncertain

impact lawsuits. the Our any of the of into not account resolution and take financial litigation guidance continued the figures do

and contribution already half projected to we the and $X.XX Factory be impacting weighted factors equity no second items, $XX share earnings the expense non-operating is due to estimated $XX XXXX million. of approximately towards gross to from to resulting per net interest earnings. be is of margin of discussed. expect million to approximately $X.XX Turning The income

be significantly breakeven flow Turning to to projected is impacted has items. operating approximately cash by in two cash, XXXX which

we when that debt. operating an to relating had the project asset its liabilities the with by the transactions. associated million of Firstly, cash to assumed these project sell than assume flow is debt expect not with buyers is level In assumed of less we approximately $XXX buyer, the XXXX, sale supply

our Capital we to that item expenditures to balance our Safe watt cash billion. $X.X project Harbor second operating to primarily module range inventory million $XXX XXXX of from including million million, $XXX is our depreciation the XXXX to cost projected ending $XXX is invest billion to partially million Note in be and of plan are full reducing XXXX million to approximately in of The for CapEx $X.X in Safe $XXX Harbor is flow sales. investment inventory. and is Series balance Vietnam and we million. initiatives Series per Ohio associated that dedicated and year, CapEx The is remainder expansion. investment enable in estimated to and expense the for $XXX approximately associated of X $XXX expect XXXX, X Ending scaling the the decrease by to with R&D second capacity factories. improve and cash capital due the cash of between anticipated offset expenditures business. net flows module cash The net Majority

As in view it XXXX, we deploying balance liquidity cash from to relates continue we and position. our the sheet how to see in strong flexibility value

we plan opportunities in how expanding use this of follows. market examples flexibility take that’s as global are the to advantage of Some to

not market commit Firstly, conditions strong option we a in our additional continue balance the in warrant. announced Series XXXX, investing capacity, us to manufacturing if to investing with but provides X to in sheet only plan

but to the maintaining Harbor return. which sheet commenced prior business. A guidance, attractive construction few to have with by ability the pursue in we Secondly, has to invest the potential to balance this were the us generate to our inventory able it need we provides months in flexibility, and anticipated opportunity would systems XXXX, in not grow ITC Safe ago invest

liquidity action capital Returning flexibility the into is maintain consider the during the will maintain a maintain is reason opportunities acquire evaluate class also for lawsuit. and of XXXX. similar to that the continue will projects to year to new take This investment to need position, next flexibility potential to evaluation minimum the account to need the or resolution of course there development we Another shareholder something maybe XXXX, this pipelines. opportunities

provided Series expenditures capacity X summary years. Turning next to X of have a Slide the expansion we over related to all XX,

ramp factory our decrease XXXX be of and on with indicated, which In the previously of is Series As at range. planned our total Startup driven expect roadmap to production the are and ramp million gigawatts anticipated of Malaysia starts capacity, X X to of second plant production our midpoint of the to $XXX decline estimated startup we combined to expenses $XX XXXX. is cost start in the second X.X combine to are million by primarily current million significantly. startup factory, Series $XX in XXXX Ohio at and associated costs at which end to XXXX Ramp beginning of based XXXX.

or $X.X $XXX spend and at X between reach X Series million is $X.X for So end of total cumulative initial CapEx Series CapEx $X.X and XXXX, Series $XXX The of year. for next the would targeted billion million between billion X planned only do the billion that’s been for and X capacity incorporate CapEx mind $XXX Series CapEx purposes. of include these which corporate that of numbers and And in leaves gigawatts committed, in keep X.X million not R&D between XXX other of XXXX. million capital

of would numbers the CapEx on to commit gigawatts that addition In capacity, X.X to started we the initial beyond ramp expansion increase. in extent XXXX

Slide to the messages call. Turning key will I XX, today’s from summarize

on Series demand X to both our transition Firstly, perspective. continue make from we supply significant progress and

pipeline On side, demand the is our systems strong.

in XXX of megawatts Module over all In system project our strong over sales. the development in including bookings sales to XXXX X OpEx underpin approximately of production in next expect will XXXX, X growth lower have years. we continue to nearly contracted sales gigawatt, to X this largely to fixed sales grow production, scale to and We gigawatts. of With approximately XXXX. profile expected $X.XX are expect forward to our OpEx significantly

between XXXX $X.XX revenue $X.XX on expect Secondly, our based billion. solid and in guidance we billion of growth

per continue with Series enables significant are chain. take manufacturing other of conclude ramp to that, Our the to X $X.XX this positioned is our to And guidance be growth. the to startup Series us value of sheet and stronger X balance costs the million in for continues thirdly, share capacity for between open remarks our our in prepared transition earnings capacity with we expansion Operator? future $X.XX XXXX. ability And $XXX opportunities provides call and in invest us by investment earnings across advantage questions. combined and and impacted our with And flexibility of and

Operator

And Instructions] with question the [Operator Shen you. Thank first Capital ROTH come Philip will Partners. from

Philip Shen

questions. good the Hi, morning. Thanks for

first a little It your sounds set like is around your going get by margin appears throughputs structure the are I bit you you ideal know improving and of QX. The light, questions cost guidance. it are to to

to to know happen – earlier is want about In XXXX our than have I guys out could in XXXX – for there a people confirm of to how and could appreciate and I one, risk relates issues the a terms a coming? you throughput lower So, there the pretty visibility there some is into have if as the all not two result some thanks any bookings, locked in is used kind challenge XXXX of little bit addressing or the be expected? Series talked gigawatts us X for is X then that is whether or idea bookings So chance you Series I that QX they questions and want these shifted to it bookings margin there XXXX, much. is and that give those XXXX, and to very of are you for as see than can X the outlook there

Alex Bradley

a self-developed blend the from the what dollar XX% blend systems the XX% consistent is basis, the margin we’re will module where with talk is on which think about a and gross the still I on guidance but and we start the a very said to a X, and Mark are. expansion side, piece The margin can of is systems margin historically. Series basis, with of business market The on business happy total to obviously on expand – I of gross range business. Self-developed is XX% EPC business. asset systems XX% of and we in margin

all back last out If to in up when to try Analyst the it parts side. get to break you those it constituent our Day, we on range XX% systems you and XX% to that you’ll into add aggregate, go

than in margins which blended you’re a blended are So the higher obviously side that slightly self-developed lower basis, on margins seeing XX% XX%. the on module implies systems you are to

You’re going a a year, total margins seeing to basis on dollar basis a which is there, percent lower be a EPC dilutive still basis, it significant in still the look on on and basis. accretive but business percentage at always it’s additive when also percent a again you on of to amount

you’re we’re on system X look Series pleased would I say coming a business line thought think EPC coming margin what bit the I’d in, accretive module what So but is basis, total but higher basis. on gross of on revenue some is from business where in profit is business, with in we it of terms and again still a the we a dollar be, are seeing dilutive with the percentage which little

Mark Widmar

it relative going the an I margin that – the or together we’re to and will Series at for particularly, is original on around percent, business the – gross we Philip, be even X achieve to actually Yes, case. and look would if rate original expectations for exceed business you our say, average that just the case put energy

for anticipated. exceeding of we is our the combination is if look much the cost you the particularly and for higher rate, originally X at Series Again, ASP exit look So average than the you at percent module for expectation. margin it year and if

moving very think any Series we XXXX. customers go about I so your and good having X into or was and happening. as X from X into feel So of leveraging position very around, risk Bookings that we comfortable on that question

it’s – clear. I sure make Just want to

already in Series comments X X. Series volume contracted have remarks shifted our XXXX, Series and is One in that, the of the XXXX in we’ve we made to X excuse that me volume prepared

our we’ve So customers. already worked with

We have for before contracts. flexibility particular referenced We’ve Series could in into that X. them that customers move we

us faster we production And that, Series shift. for again, reason So have part to us of create do optionality allowed greater X then X to more ramp XXXX we already Series and volume made some it particular. in down allows of in to that the want

So we that. completed

other but very right are XXXX that make to to look our are because at they’re constrained we’re current into for have for of also for contracted going contracted, to that other Series point they for time to to at that’s It It’d options their As shipment, obligated customers. they’re in it that also be means our committed, shift, now, the in constrained projects all we this be redesign product. XXXX. product that to changes X make customers relates and take Series any would already try difficult to X Series to efforts us customers necessary relative designed where X

real quarter call our any customers addressed quarter, last bookings. XXXX from been that we into the would opportunity do willingness see did but very to us, lot points some booked of really I I on probably into Again, don’t put a to I’ve some XXXX XXXX, and lot, there. board and in I Asia, start not demand, out recently, in continue go hear encouraged of is last for to Europe have in north be movement continue We volume very XXXX. do I for I’ve traveling to in it horizons strong what So XXXX. talk bookings, gigawatt multi-year expect a we XXXX. been anything to

that a now I and large customers that opportunity on we’ll bucket right fill reasonable close we’re be we’re would on to negotiating think that’s start a is ‘XX able of up what really that couple orders focused now. with to right there that

having sold our we’re beyond. with and the we out XXXX start As right ‘XX in all we do through now our selling negotiation, indicated, volume is and conversations customers we’re through essentially the how

Operator

our will Goldman with Lee Sachs. next come from And Brian question

Brian Lee

first I for the it, may bar thanks volume just have look Philip. but at missed X, of EPC. on for most from follow-up Maybe taking development question real that your if guys, in Slide questions. XXXX I to it’s looks quickly like that Hey not systems

bit EPC So – comments margin was elaborate what for there? like on mix margins weighing just wondering, a could was sounded you but ‘XX if just the the it’s the help systems,

Alex Bradley

Yes.

you that bar, look of development business. about about XXX business you’re at EPC and So seeing XXX if of roughly

is Day business margin you indicative those the So you’re a if at the in guidance those Analyst expected. blend if projects, numbers back that hold you the roughly last we coming we capital the together and year, at EPC to around XX% for is that margin structure the in margins, on gave self-developed look the overall although on XXX assets, module margin that of business somewhere gross in range. is in rest get that business still EPC to XX% megawatts X% range but going gross self-developed And still there the good of that

does a blended across on weigh basis. that down So

Mark Widmar

XX%, would be gross XX%. bit of that would that self-developed is said upper XX% the our in more Yes. at XX%, before EPC the so that, XX%, But at is alright, would the maybe of business total XX%, we’ve that end what lower is, be at of be to end, add the north I Brian and margin range systems little to and range a

Now includes – again, the just put sure perspective, that right, we put that that right. so make in module,

for business, the for high-end low-end you EPC. both got business module EPC systems XX% and self-developed, So and in systems, XX% both the for

is that’s X the that with thing we’re say is XX% also still margin we teen, pointed be of to going mid-teen Series number that mid-to-upper our X gigawatts and to But that Series of that, on in are the to said volume. again, below so realization other that’s and the The we selling – kind we that X. through happy

upward gross at business, of average, the very revenue the and in average on to the sales what a below third-party the clearly Series being So when module that represent to that blend balance you – total look X would from business, it X development strong being basis. margin Series order on points the EPC volume would you

indicated year Series we’d the business anticipated X originally even we number. or little as we we’re around a around the year, case. on that margin Series X above progress, bit helps see but that as the what realization without to or towards X, the better specifics, at those created trend when starts And we’ve hopefully, Series we’ll margin so are expectations all previously above again, at giving So percent and

Operator

Suisse. Michael Credit hear Weinstein will with from now we And

Maheep Mandloi

Hi, this is Maheep Mandloi on behalf of Michael Weinstein. Thanks for taking the questions.

margins Safe the Just to building away Harbor. from

using So the be X% pre-buy? the I satisfy to wanted higher the gigawatt implies And what you versus rule? understand to X%, lastly, of million just pre-buy in driving would what’s buying And party [ph] X $XXX the many or the democratic you tax been have investment, a sites if follow-up, identified for today? X do to projects gigawatt, is And credit how say, risk push the that to able extensions? of see as any the Thanks.

Mark Widmar

I or that our case module because it, little pretty use do majority I though bit, we’re mean, concern just are, looking more specifics with Alex potential want to the whatever a looking say to of transparent that the and we in of procuring that don’t the I through would and creates that contracted choose I’ll to would that in would we and own the achieved is going look I those But to a signal the is and are more drive Harbor, thing what pricing get use we’re Safe is to looking be think some that the me the and otherwise source that, get have to do that work how component secure the system, physical don’t of give we have specifics to we’re far their let test we want pressure we today related whether along one I regard. don’t in to development. higher question there potentially engage sites whether transparent of into that into be we that’s be want than third-party procure market, to Let address would balance of – whatever to a how we on

X%, given to strategy going don’t different Harbor options do we’re how I to we’ve be we buy to how the want but the need transparent ensure exactly ourselves with so many would of And perfect Safe we and our that.

answer the Alex So I’ll rest. let

Alex Bradley

Yes.

well. sites un-contracted not and going you that so do than X%, may mind other that, you majority is spend couple math that, on costs get have so would in the yes, that you’re the if the blend to one see exact going of these split, obviously of things, sites. raised, is higher bear but incur of as point storage you to some so may the we capital in to give we’re And for but you the different a And on

contracted to talked un-contracted million we bit So will Mark sites the XXXX, have that that, to precure that work to that the of strong what million the the in that spend be talked if in pretty about we you and $XX into physical with are work around $XXX little be XXXX we bit a but to somewhere business. at not believe $XXX about, be reminder over a look balance systems million of be in on specify the going in continue But mostly XXXX, beyond, will across the million and as of the used to bit fall is associated about to $XXX $X back little equipment system. and range module million will going physical will test that

determine is that it we the X% be that The the generally, to And the the going other to indication to to to may is higher market who has again capital generated those of if be of I used fair acquisition cash cost. thing actual market cost. value fair against make basis sure an value just in put market flow ITC want perspective for the relative and fair the the acquisition value of more know DCF capital than is

so want using X% structuring Safe go Harbor done just an to you other have many therefore are in XXXX alright, you Safe may of of going and to perfect going that buffer, the the air, you yourself, the you the to So may to is the comfort to equity thing a go have number. you yourself threshold are to instead actually tax even issue X% are want as to XXXX. Harbor to ultimate you to X%, some value higher gets going want you want ability in And when to result expose then to don’t not have give creation a some because that, or you around

commodity. there other and components on to as [indiscernible] extension is focus get at pulling The just the in going question forward are are one your our as around indicated ITC and an relates we working Alex we largely to capital it of

to commodities. and such lower that with do there to to potentially risk are those some commodity was looking in time rising if point value if not environment, commodity in at are procured technology happen, and had it XXXX. that are extent components you you did have we commodities if And a that wait extension So unforeseen this the you associated ITC to an it, in procure

now a I So time don’t in the will feather plus are risk associated end we between at in see is at our the point this there as ‘XX. with and looking it that this strategy way we of

was and at of we extension tax asses the an to engage point pivot got time. evaluate there event, So to to in can any We a credit. make and type continue have in likely some XX months

Alex Bradley

ITC. a I the risk downsize think not as will I the against capital outlaid, the pretty against of upside is assumption return think we Yes, at the the that spend an compelling cost case of worst on is is as I the significant carry there small extension risk

it’s investment. prudent a feel we So

Operator

with America/Merrill Dumoulin-Smith our And come next Lynch. Julien will question from of Bank

Julien Dumoulin-Smith

for afternoon. the good time. Hey Thanks

a quick if Just questions few I can.

could a about the us secondly ramp little Then point we higher sense or – dollars on little X SX this without about flex X at of more that think just on that you equivalent the going know potential you gigawatts bit the least cheaper to of CapEx firm First, and the little Malaysia a you is X clarity time higher etcetera, detail it ratably should some initial lastly the down? piece pretty of about I exposure, then given Safe at to decision just can potential wanted you dollar certain only Harbor, just securing little lawsuit, are to clarify that but the give with the bit and a just I maybe to in early respect a little scenarios? this X% Series give bit be think a bit as but pretty in bit more this? X know putting you being the expand or that gigawatts to XXXX, it’s or are potentially higher, of And about

Mark Widmar

on at the around too Julien, of take This can’t thing. been will way a has for comment it’s we really case this early I anything lawsuit and time. in number years. point

the one Court standard to in been filings was as involving at of of number it until the minimal a case which loss and primary case causation this and it to and of used, be the it’s [indiscernible] get they X-Ks now will appeal and Supreme the appeal after case uncertain around clarity And relates way level under another loss the and damages, are is determine it’s one been the continuous, it to it’s say issue could or causation. case, and cases the our termination should trying used that has it’s status had have in that that be go really and We significant. if line more it’s which clarified, if could certified determined that of

would clarity that it’s exactly happen. we And when around get unclear timing the of know So, until we don’t that.

at it’s case. case, evaluate They they As the still indicated, Court not the the to Court. Solicitor to make hear make Court case. look to recommendation a General Alex will to Even it. decide will if recommendation the – asked the can hear a They Supreme the the Supreme Supreme has

clarity have really outcome. to premature we it’s on until any potential too that, unclear determine it’s So

defend situation we a really settlement which in have to case expenses coverage exceed we to support potential could has to or current we case assuming our XXXX thing to to highlight other were to this The could this is we insurance insurance of start coverage. were trial that continue been to that either go see is ongoing trying given the since again, XXXX because had the duration

So, update any forward, to more early provide it’s really as any continue too indication range. give move will we but to we of

make time. anything to Harbor the think about in that, for thing and preserves continue decisions our it easily of Safe the And As If XX%. that other Julien. longer to had the XXXX preserves in that right, XX%, strategy we we it period around XXXX can a could, to we relates do is

are will we and greatest to look going very capture to try to that it decisions make XXXX have made So and will what there have we can. balance liquidity to that to strong are is compelling assess sheet we value be investment continue is in the sufficient we and those still decision though very to fortunate

between XXXX, forward I that. to now in the XX there look see U.S. think and into I demand opportunity XX positioned a As to to and full pull take and we best advantage and XX, tremendous be to we type XXXX going of want a are from of going is forward be projects

let will Alex the question. CapEx So, answer I

Alex Bradley

Yes.

priced what CapEx, spent is being On of you to similarly about average we can the far. incremental so factor the think

a having have $X.XX additional We about of CapEx watt talked profile CapEx. about it per

the throughout are X.X So, for building size gigawatt million. today factory, is we about a which $XXX

about factored that XX from take what us So existing in you have another to if sites $X X.X would gigawatts of plans. little you up talked took isn’t essentially the into would about billion over the a today we have we today’s our up that beyond gigawatts capital insight spend

Operator

And we will hear from Ben Kallo with Baird.

Ben Kallo

Hi, thanks taking for my questions guys.

cost? remind throughout just that? us balance with going about kind types comfortable and talk then you triggers Thanks. Could in are cost, second talk how the cash talk of kind different kind because pulled look ramp about to look you And for with the us, up ramp what on year is and are you the comfortable the you my you ramps. know capital question originally at square just allocation, the the lines Can shareholders that back cost mentioned returning Just how could Analyst you year? evaluating I and you I possibly your on thoughts you forward capital production to just thought, original on of some forward of this of I Day, what the

Mark Widmar

the we the exact that that second one with I look of front I on specifics. ramp unfortunately cost. cost the compare that those factory factory those I actually each in look ramp can accelerated for let will will number accelerated successive Vietnam. come and Vietnam has have scale to we first which and in And on tell me to on plant, you When we Relative actually our down. come now cost, of that, have the in because is you, highlighted the have for Ben, to showed What the and will back has the to we actually Analyst our in you have continue we ramp. each on ramp you we we to come our – though Steve get at factories plant startup three have been first factories you able to a first we anticipate numbers what in to our the Day us to at don’t back back plant

Alex Bradley

expansion, how And capital, cash waterfall Ben business, for as in approach talking the elsewhere end terms buffer funding this capital can’t think accretive capacity and we operations, return. a at we multiple M&A looking of capital capital have of we little development industry occasions, bit about a discussed of uses that through volatility and looking see if at so manufacturing in about we of

XXXX end of to to $X.X to with of cash in billion billion $X.X billion current terms billion end are In of we to $X.X cash position, XXXX net when net going forecasting when $X cash.

terms you of sorts as of other corporate debt for In we liquidity level have know. don’t us,

the $XXX of revolver the when balance states it. time project That facility around that we credit facility solar legacy cash off We debt we as have sold. have rolls very to level some requires That of And $XXX first capital the the that majority is is structured minimum and working when the maintaining with profile a that to million against exists underlying in revolving really million. different. a actually XXXX, project is

cash. permanent LCs, tax is the well for cash. cash we in and So, our use The less that have some given and some but as we maintain LCs given for it has now relevance we jurisdictional maintain offshore jurisdictional managing reform, still status investment relevant bilateral lines

of makes that. looking above amend we it about seeing whether we the So fact, a and million sense are but at liquidity get or dispense to $X only that, revolver in actual of

take you as experience, most sector capital So and our our is factor financial the this given and when we clear, but in conservative getting today, not track approach the as strategic that in and people of think if resource it it a this to a we liquidity. resource of we right, clear full record we about are total reflects for strategic view need volatility value a think

in about events of EPC systems both think capital development but look business the maintain and prudent coverage. business. support us some today don’t of commitments historically how expect be will liquidity we several we guarantee through million and you if That’s business course the So it that, return normal and LCs $XXX parent we to and and against for

manufacturing to roughly XX maybe gigawatts needed about capacity, We putting talked Again, have the we billion talked could $X cash just another that if differences there. generating there expand now of about spend the are generative, between capacity in want when up we when cash. are we but we there capital timing money we be is and were to to

year. year. $XXX to So The would we $XXX earlier flexibility. that have Safe That’s not million maintain have something to last we Harbor would needed this we thought want is million

a So to flexibility again that do having important. is

we this. So, continue to monitor will

risks we we defense. either unknowns known good believe make a the and current want meritorious example sure have is also class about or to action We liquidity we We right. against talked maintain

not require would ongoing favor, if continue We to are and also increases liquidity. will defense costs likely were rigorously, OpEx that require going resolution defend that there but to in our

a put If place in not work don’t needs for are we believe a some declare position believe we to position to capital, a you give recurring to we are dividends. number be. of what firm in we capital the position to or anything I in So today

and to I the progresses look year. as risks of unknown the to requirement the evaluate liquidity throughout buyback and But minimum think more to will relative likely over will we ‘XX parameters keep giving continue that know authorization. updates that look share will business the we form a opportunities we and we

Mark Widmar

and was we showed at – Steve there’s looked I think Analyst slide, a start-up. and show at similar you taking and Ben, was – and so ramp today, Alex what we the show Hey, when just performance showing we still I what to look Day we’re we the

have we’re as ‘XX, think right. The between the a that there number increased $XX ‘XX significantly side. startup significantly million start-up, If I that costs year number at is pretty XXXX what added those the you number consistent And is biggest look so, in means that showing now. one and million that are was has The ramp a second changed things numbers the around or start-up well in factory and higher. is, Perrysburg, two we’ve $XX on is with

we the and expansion And made we not Alex is, alluded not on is workforce on Day, when have much to that going our commitment in higher start-up, production expense our reason the part we in Perrysburg, did would but did anticipated Analyst of have envision really to optimal. So in the than comments require which we Perrysburg much in sooner shutting because than we’re – the And Series as Perrysburg, new PVGX, over a higher we’re to we we’re X that Perrysburg. we’re plant that start-up down otherwise. workforce in would moving that’s bringing his

otherwise. than us factory XXXX much doing that faster the that to enable in would an we’re experienced we ramp then Now is also reason will workforce the

Perrysburg have remarks, looking we’re in – prepared couple we actually will vertical a $XX material understand our our embedding that projects just it’s is the north $XX and cost. some of startup bring jurisdiction, have house. of in to included that higher is we But when there important is So so build million again, we slightly current – do other for inefficiency is to self that of to million integrated cost some drive one highest our

that’s associated made we house by in million. bringing we a a $XX and expenses believe those down the decision versus components drive make not have as that, start-up those to final little but buy components, couple cost with that faster north we maybe on on of bit We to look able a of

negotiating Analyst evaluate If in As vendors then that buy, will have makes buy how so but terms that continue sourcing. are with make move continue suppliers, our sense something but leverage to an we what much to is cost still of see it benefit will we our vertically that with on in products, start-up differently, and get it’s we internal there is a will not, initial will versus maybe which if build about Day. in material the lower to be was we then will and we look million, not our can and we component we do depending to outcome of in-source XXXX, some $XX

Operator

Oppenheimer. come question Rusch final Colin our from And with will

Colin Rusch

reduction higher Thanks couple the beyond volumes? as talk geographic of the what a so in with much opportunities you’re got years? in-sourcing, other for out me in that of trends next Can about bookings terms squeezing in. you the for And of about even diversity at and scaling then in you terms little – bit to on look just there opportunities the your customer and we’ve are supply material talking chain cost the

Mark Widmar

Yes.

are I even not much traditional C&I product X smaller, geographic with and especially demand. to globally things interest think a megawatt type have smaller parts historically Series line bit in like we XX it that as to of it, along and with, megawatt kind X a that car Series are so is of larger and not other our largely Series car now it’s of that we they or scale, of lines It’s our haven’t opportunities. of so support thought demand is application. to in of X just lot will market robust product our in patients customer sight type the X to quite even really visibility had our segments, our actually trying of utility call scale, our and some one diversity, even on for interest And of use seeing ability ports ability of those utility So to which interested of the issue has and is get

also are And customers, out diverse we a with. still lot of ‘XX matter conversations, and even in jurisdictions, it’s interested involved having some ‘XX of of So demand of been our applications supply. supply. lot and is focused a but have those going available international ‘XX with that up just customers U.S. on don’t more into of there which that of them and but is are ‘XX lot really segments more It’s and not lining our geographic we a a historically haven’t just

bit we quarter, broke that with XX% And of is would XXX customers last and it’s to happy until in profile to beyond to little intent. international because great but it’s pricing. standpoint. our XX:XX, – the of gigawatts want Supply ways focused support get more long-term like enables chain, supply megawatts that north U.S., robust a longer the we more XX% but to Now, to international, what such going find trade trying was U.S., term our be profile mix the there the down maybe or last concentrated question. more add challenging, with incremental it’s to our was X that, very I now the see target not to and current we maybe we to that us demand enable capacity that’s customers We right XX:XX closer near-term but from continue and sorry, trying maybe is really international look take I to to

that’s We power, why are looking right the can, at mentioned are purchasing opportunities is we alright. we in. the ones And are other at looking looking at that leveraging everything now other integrated is one our that these Colin. And variably we that you

the north X. As volume X of market, to and X given potentially X, we that ramp it we the in are are going seeing out north the closer of only not into

Vietnam as facility that is of in, [ph] close cost suppliers down are forward-looking capturing and some referenced some to that that visibility therefore as leveraging power to done that Vietnam purchasing Glasgow, the further We facility our was then before the drives thing to facility to our at Ohio, in cost with down things in drive put to close there we which even tried at was have the and co-locate regard the in Ohio associated have of value that same we and we Glasgow is that. our we

them, with with motivation everyday just sure today of work So of the it we our supply as materials that’s way we them, got driving chain, we is possible on to try competitive as partner of it’s our well. cost a everything the bill do as do have be can competitive we to as intense cost but not have find and we and we that activities bill materials. our work and and freight It really find wins make know how that to

advantage how crystalline to to relative do modules. in down and drive our we aggressively silicon sure if our them One of our that the are to costs our we things we better costs freight costs, or ability equal on freight make do freight working for how trading is not

the has continuously all regard. be cost structure of So, to monitored aspects in that

Operator

conclude that our does your And participation. for today. Thank call you for

may now disconnect. You

First Solar (FSLR) 12 Dec 182019 Q1 Earnings call transcript