Q1 2022 First Solar Inc Earnings Call
60 days since the prior earnings call, bringing our year to date bookings total to $16 seven gigawatts.
Further setting ourselves up for 2023 and beyond.
An important feature of many of these recent bookings as previously discussed is that they include adjusters to potentially increase asp's based on the realization of our technology roadmap achievements and sales risk sharing mitigation.
In addition, we have begun to employ a similar ASP adjustment mechanism related to aluminum exposure.
During the call we will provide an indicative view of how these pricing adjustments could result in an ASP potentially significantly greater than the baseline reflected at the time of our bookings.
In short while these contracts have a baseline asps that is reflective of the value of the product. We are manufacturing today that ASP has the potential to increase to capture the value of our product, our technology enhancements or offset sales rate and aluminum margin erosion risk.
We believe this agile approach to contracting will continue to attract customers looking for long term certainty and value the combination of reliable competitive pricing and supply certainty lower political and compliance risks and access to our best available technology is a tremendous value driver for sophisticated customers.
So may be fatigue, with the volatility uncertainty that can be experienced transacting in this industry, particularly in the current environment.
It's worth noting that many of these recent bookings are with long term repeat customers with the relationships that span hundreds of megawatts of previously installed capacity.
In addition, our most recent bookings include significant volumes from customers new to first solar.
These decisions to work with first solar and our technology speaks volume not just about the trust in our company the value of our differentiated cantel semiconductor and our adherence to principles of responsible solar.
But also the risks of pursuing a solar at any cost strategy.
By which we mean an approach that would otherwise compromise values and ambitions for projects powered by truly low carbon and environmentally superior solar.
Distressed is in part built upon the company's dependability and ethos of honoring its commitments.
Some argue that the current volatility in the industry in general and the module availability pricing specifically at this particular moment in time provides the company with an opportunity to pursue repricing of legacy contracts.
Tracks that we are delivering on today, but which were entered into and priced several years ago. We.
We take a different view we.
We are continuing to build for solar for the long term and our partnerships with our highly valued customers is critical as a critical aspect of that ambition.
We believe the benefits that come with continuing to serve a base of enduring strategic customers that seek to partner with a company for large scale multiyear procurements outweighs the potential long term adverse impacts that could result from taking a transactional versus relationship based approach in the short term.
Turning to slide three.
Like to review some highlights and provide some updates from the quarter.
As just mentioned, we booked 11 nine gigawatts since the March earnings call.
After accounting for shipments of approximately one seven gigawatts, which was in line with our expectation.
This brings our total contracted backlog to 36 four gigawatts.
Manufacturing and <unk> remained strong despite some planned downtime for upgrades in Vietnam in February and March and our Q1 production of approximately two one gigawatts.
With regards to supply chain and logistics as mentioned on our earnings call in March we have.
No direct tier one suppliers, however volatility in various supply markets, such as metals lumber and fuels.
Further exasperating the current inflationary environment.
In addition, we have some indirect.
Pools for our new factories.
Ohio in India.
Moreover, the conflict and current inflation.
Later in the call.
Regarding freight while pricing in the trans oceanic freight market continues to be.
The historic highs and to revenue.
Present, a headwind in 2022, we have recently seen increased container availability, which we believe is a result of China's pursuit of its zero Covid policy with associated locked transportation cost and transportation duration continue to be significantly higher than historic known.
For example, in Q1 shipments from Southeast Asia to the West Coast averaged over 130 days compared to approximately 60 days.
Shipping companies announced sensations.
Stranding equipment and vessels.
Plays in global shipping industry.
As we noted during our March.
2021, we received an unsolicited.
Product development and O&M platform.
Negotiations related to this potential sale are progressing well.
And we expect in Q2 to enter into definitive agreements to sell these businesses.
With closing taking place following satisfaction of customary closing conditions.
Okay.
As previously noted should this transaction not be completed for any reason.
We would expect to either continue our approach of selling down our contracted projects over time.
Finally, construction of our third manufacturer.
Factoring facility in Ohio, and our first manufacturing facility in India remain on track.
Related to equipment manufacturing and delivery schedules.
Beyond the further expansion opportunity opportunities.
Ladies.
As we have discussed before with our new factories anticipated to represent the lowest cost of production in the fleet their proximity to demand and given our large fixed operating cost structure growth is expected to provide significant incremental contribution margin.
As we considered options for growth we have increasingly been approach to consider further expansions with various financing ownership and offtake structures as industry participants continue to embrace the value of entering into long term partnerships with reliable module suppliers.
We have made no decisions at this time, we are receptive to enabling the ambitions of our partners taking dedicated supply.
To this end, we continue to engage with our tool and equipment vendors to ensure visibility into and the ability to support any potential expansion.
Turning to technology.
We are pleased with the opportunity.
<unk> excuse me our current roadmap provides both in terms of enhancing our form factor product design and energy profile in utility scale markets as well as providing a potential route to scale into the residential solar market.
With regard to form factor, we expect our series seven module, which has to be produced at our new factories in India.
Io in India will feature a glass area, then it's approximately 14% larger than our series six plus modules.
Unlike crystal and silicon modules, which are constrained by the industry standard cell sizes and risks such as cell cracking cat.
<unk> has no such form factor or size limitation.
The larger form factor benefits, our cost per watt produced and allows our customers to install more watts with less balance of system costs.
In terms of design, we expect the mounting system to be regionally optimize and U S to a tracker application and in India to a fixed tilt application.
We believe the redesigned structure will combined lower cost to produce with greater installed speed in the field benefiting both for solar and our customers.
As it relates to energy in addition to benefits associated with irrigation temperature coefficient spectral response and shading.
R&D team continues to make progress on developing a bifacial attributes of our CAD Tel semiconductor.
We are continuing to run test that we expect will enable us to commercialize this technology across our modern platforms and have recently produced another set of preproduction prototypes for additional field and product testing as we work to reaffirm the commercial financial and operational thesis of Vitelle Bifacial Casto.
Looking at the residential market, we recognize the value of high efficiency, aesthetically pleasing and domestically manufactured product.
To that end, we continue to evaluate the prospect of leveraging the high band gap advantage of Cantel, and a disruptive high efficiency low cost tandem or multi junction device.
We believe that a thin films semiconductor is essential to achieving the highest performing tandem PV module and that CAD Tel is well placed to enable this leap forward and high performance.
With a path in the midterm to achieve a 25% efficient multi junction PV module.
As we seek to grow our presence and competitive position in the residential and C&I space. This type of module has the potential to be disruptive and provide us with a competitive advantage.
In that spirit, we are in discussions with sunpower to potentially develop and eventually introduce an advanced residential solar panel a stacked handed module platform that combines our advanced thin film CAD Tel semiconductor with responsibly sourced crystalline silicon cells.
We do not intend to disclose further developments with respect to this discussion except to the extent an agreement is reached.
Finally as highlighted in our last earnings call. Our technology team has been conducting extensive testing to measure the full performance entitlement of cure in high volume manufacturing conditions.
Since our last update in March we have concluded that while the potential procure remains its implementation will be delayed beyond 2022.
We will prioritize other aspects of our R&D stack in the near term to ensure a focus on the three current technology pathways that we believe can be commercialized in the near term.
<unk> seven bifacial cantel in tandem multi junction devices.
The success of these three pathway is not contingent on cure, which will continue to be developed in parallel.
We have continued to advance progress on our previously discussed amendments and advanced stage negotiations to amend certain customer contracts utilizing <unk> technology by substituting our enhanced series six product.
We maintain our expectation that these amendments will impact 2022 revenue and gross margin by approximately $60 million, which is reflected in our guidance.
Moving to slide four.
With the aforementioned 11 nine gigawatts of bookings since the prior earnings call, bringing our total year to date bookings to $16 seven gigawatts and factoring in shipments of one seven gigawatts in the first quarter, our future expected shipments, which extend into 2026 or 36 four gigawatts.
Including in our year to date bookings, we are sold out for 2022 in 2023 have nine six gigawatts for planned deliveries in 2024 and have seven six gigawatts for planned deliveries in 2025 and beyond.
Included in these bookings are gigawatt size deals entered into over the past several weeks with among others Silicon ranch energetic renewable energies.
And Leeward renewable energy for.
We're delivering in North America and internationally.
Turning to slide five I'd like to take a moment to walk through the recent changes in our contracting structure.
This change in approach provides product certainty today as our baseline Asps is reflective of today's technology.
It further provides ASP upside to the extent, we realized future module technology improvements, including new product designs.
Which deliver a better energy profile for our customers.
And finally, it provides greater logistics and commodity gross margin risk mitigation through asps adjusters linked to aluminum and sales freight costs.
Every contract is different and not every recent contracts includes every adjusted described here too.
To the extent that such adjusters are not included in our contract.
We believe that Blake baseline ASP reflects a commensurate risk and opportunity profile.
As it relates to technology and product Adjustors, we have previously and we will continue to have both upward and downward adjustments to asps to reflect the <unk> class delivered.
<unk> of the baseline has been committed under the contract.
As it relates to other technology roadmap and product features under our previous structure, we would forward sell assumed improvement with no upside and a downside risks in the event. These were not achieved.
As represented by the Red circles on the slides.
Under our updated structure, we forward sale today's technology with upside for technology improvements as shown by the green circles.
As shown by the dotted box on the slide.
And as we have reflected in the 10-Q filing as of March 31 2000.
And 'twenty two we had approximately $9 eight gigawatts of contracted volume with these adjusters, which if realized could result in additional revenue up $2 3 billion or approximately <unk> <unk>.
Note of our four eight gigawatts of calendar quarter bookings one four gigawatt did not include technology adjusters, but was priced with an approximately 10% premium to the remainder of the calendar quarter bookings.
As it relates to standard versus high load modules, our previous structured assumed a certain mix and any deviation from that mix could imply greater high load modules.
Which have a higher cost per watt to produce could have resulted in reduced gross margin.
Under our updated structure, we have received an increased ASP to offset this additional cost therefore, preventing gross margin erosion as represented by the Blue circle on the slide.
As it relates to sales straight in aluminum.
We have previously we were previously exposed to incremental cost and logistics of commodity markets under our updated structure, we have contractual adjusters designed to offset such incremental cost and prevent gross margin erosion.
As of today, we have 23, two gigawatts of contracts with either sales trade coverage or no sales freight exposure.
The aluminum coverage clause was introduced after Q1 quarter end and has been present and 11 gigawatts of our most recent bookings.
Indicative Lee assuming today's sales Freddie and aluminum environment, a contract with the sales rate in aluminum gestures would increase asp's by approximately <unk> <unk> per watt above the baseline.
Finally, as it relates to policy many of our updated contracts in the United States now specify sharing related to a potential upside for U S made modules under an extension of the investment tax credit.
As reflected on slide six our pipeline of potential bookings remained robust even after booking 11 nine gigawatts in less than 60 days, our total bookings opportunity of $54 one gigawatts.
Our 23, seven gigawatts of mid to late stage opportunities include $16. One Gigawatts in North America, five four Gigawatts in India, one seven gigawatts in the EU and <unk> five gigawatts across other geographies.
We are especially encouraged by the continuing growth in our India pipeline, which we believe positions us well to realize multi gigawatts of bookings over the next several quarters.
The global sustained market demand is driven by the fact that we are on the edge of a new age of electrification, one in which essentially everything that can be electrified will be.
It is our next big evolutionary leap and our best bet at fighting climate change as we power transportation and virtually every aspect of our lives including power.
Producing fuel cells with electricity.
Before turning over the call to Alex on Slide seven I would like to address recent policy developments in the United States Europe and India.
<unk> and industrial policy decisions and the up ending of the global geopolitical status quo. Both play a significant role in impacting market dynamics as well as continuing to inform our growth strategy.
Starting with the U S. In late December 2021.
President <unk> signed the we're forced Labor Prevention Act.
Which received widespread bipartisan support in Congress.
This acts rebuttal presumption against the importation of goods produced in Xinjiang region is soon to be produced with force flavor is set to go into effect in June this year.
There exist practical solution is to reduce the risks of purchasing modules associated with forced labor.
<unk> for instance.
Responsible business alliance the world's largest.
Industry correlation dedicated to supporting the rights and well being of workers and communities and the global supply chain offers the leading standard for onsite compliance verification and effective shareable audits in the form of a validated assessment program.
Yet this established model has not been widely adopted by the solar industry with first solar being the first and at this point only large solar manufacturer to join RBA.
In our view transparency and traceability are crucial to reinforcing our industry social license to operate.
The transition to a sustainable and that comment the price of human rights.
Turning our focus to domestic and trade policy.
Biden Harris administration as the opportunity to deliver a meaningful and durable long term solar industrial policy through the use of a manufacturing site.
Dennis.
We remain fully engaged in advocating for legislation that would rebuilding the framework for manufacturing.
Tax credits established by the solar.
America Act introduced by itself.
On the trade front.
I understand.
Thoughts of addition by oxen solar the U S Department of Commerce has initiated and a circuit.
Convincing inquiries against crystalline silicon imports to the United States that undergo minor processing, if any and for southeast Asia countries.
We believe this is a positive step towards addressing the problem of mainly crystalline silicon Chinese modules and cells that are completed in seed from the Chinese head.
At quarter and subsidize companies that have.
Okay and fair trade.
Data shows that since the underlying antidumping and countervailing duties on China.
<unk> cells and modules were put in place the value of Chinese import parts to the United States decreased by 86%.
During the same period.
The value of imports from for Southeast Asia countries that issued increased by 868%.
Prior to the underlying antidumping and countervailing orders there was virtually no crystalline silicon cells and modules produced and these four southeast Asian countries.
There is still a very limited poly silicon ingot or wafer production in these nations instead, they source the high value wafers from China.
Which controls 99% the dominant supplier of the others such as aluminum silver pace.
Sheets back sheets aluminum frames.
And junction boxes.
Simply the data truly speaks for itself.
We heard the Sky is falling narrative pushed by lobbyists advocating for China to have free rein in the U S market.
Theyre Doom and gloom is compelling.
Suggests that they are afraid that the department of Commerce will find that the Chinese solar manufacturers in fact engaged and circumvention and will hold them accountable for their unsafe.
Fair and unlawful trade practices.
While the lobbyists characterize oxygen as a single company seeking to inappropriate to exploit the law. Indeed commerce is conducted 85 circumvention inquiries covering all types of industries and of these approximately 80% have been decided in the firm.
Sure.
We also reject the false narrative that commerce investigation in pursuit of the rule of law will adversely impact the administration's climate ambitions.
Trading away responsible ultra low carbon solar manufacturing for a dependency on China is deeply misguided because China policy of Silicon is heavily reliant on coal.
Full produce electricity.
When the price of coal goes up so does the price of polysilicon.
And crystal and Silicon solar panels.
Where the produce an jing Zhang or in the United States emissions.
<unk> the global climate crisis.
Smokestacks not visible from Pennsylvania Avenue are no less harmful to the environment.
To be clear the anode circumvention investigation is not about prohibiting employee we welcome the robust international competition and its fair and rules based.
Backdrop.
The problem today is that is that dumped and subsidized enforced historic competition and cycles of innovation.
The Chinese government working investment decisions and dictating outcomes.
The rules are enforced we're confident.
And that the U S solar demand will be met and then we will have a stronger American solar manufacturing industry, serving as a secure environmentally responsible source of supply.
More broadly we firmly believe that the United States needs, our trade policy and the enforcement of the rule of law and order to build back American solar manufacturing and innovation.
At no point should this vital transitioned to a sustainable energy future come at the cost of American jobs investment innovation for National Energy Security.
Moving to Europe , we are seeing three pivotal shifts in the policy space. The first is the growing momentum around accelerating renewable energy deployments and bringing forward targets.
The second is the recognition that dependencies on third Italian states, our strategic vulnerabilities.
And the last is the rapid strengthening of bilateral Trans Atlantic relations are being driven by Russia is an invasion of Ukraine earlier this year.
With regards to renewable deployment.
Face not just with the risks and uncertainty of GAAP supplies, but also the prospects of continuing to funnel billions of dollars to Russia through gas purchases European leaders are working to speed up the region's energy transition.
European Union's Repower EU initiative aims to cut dependency on Russian gas by deploying more renewables and accelerating R&D and future fuels such as hydrogen.
Individual European countries are accelerating accelerating their transition plans.
For instance, Portugal aims to have 80% of its electricity from renewables by 2026 up from our original target of 60% in the same timeframe.
Germany is also moving forward with a goal to double renewable energy generation from 40% today to 80% by 2030, an increase of 15 percentage points over the previous target.
Significantly the coalition government in Berlin included a cause in the renewable energy legislation package acknowledging that renewable energy deployment is in the best interest of country security.
With regards to strategic vulnerability there is growing concern in the EU about.
While replacing energy dependency on one authoritarian state with another including and especially China.
Which supplies virtually all of the solar panels to the region.
European leaders are underscoring China's position as a systematic rival and threat.
That operates in an opposition to Europe , social and Democratic model Liberal values and recognition of international law.
Finally, we are encouraged by the strength of the bilateral relationships between the EU and the United States near term cooperation is focused on the immediate needs to alleviate gas shortages in Europe longer term share climate sustainability and energy security goals.
Can lead to more collaboration on clean energy technologies and their deployment.
As both the United States and Europe worked through the challenges of rapidly scaling domestic solar manufacturing capacity. They should consider the template that India has established.
There are few better examples of how our combination of trade safeguards manufacturing incentives.
Tangible clean energy goals can spur domestic is expected to have 40 gigawatts of new cell capacity and 50 Gigawatts of new module capacity come online by 2025.
If all of this is new capacity does materialize it would not only.
Make NDS self sufficient but would also create a significant amount of export capacity.
This is a direct result of the effective combination of tariffs and non tariff barriers to level the playing field.
The Indian government's production linked incentive scheme for domestic manufacturing and government clean energy targets that would see 25 gigawatts of new capacity deployed every year until the end of this decade.
Indias Olive government approach is clearly working and is perhaps one that we can all learn from.
It is now.
Turning to turn the call over to Alex who will discuss Q1 results.
Thanks Mark.
On slide eight I will cover the income statement highlights for the first quarter.
Net sales in Q1 were $367 million.
Decrease in net sales was primarily driven by lower module volume sold reflecting the fee.
Seasonality and increased transit times, and lower average module asps.
As well as a decrease in revenue from our residual business operation following the signing of three projects in Japan in Q4 of 2020.
My second basis compared to 27% in Q4.
Q1 module segment gross margin was.
In Q4 of 2021.
Is negatively impacted by $4 million, one percentage point of gross margin of Underutilization expense stemming from planned downtime for throughput and technology upgrades.
Additionally, sales freight and warranty expense included in our cost of sales.
Reduced module segment gross margin by 14 percentage points in Q1.
13 percentage points in Q4 of last year.
SG&A and R&D expenses totaled $64 million in the first quarter, a decrease of approximately $4 million convinced the prior quarter, primarily driven by lower R&D testing expense.
Production startup, which is included as an operator.
Operating expenses totaled $7 million in the first quarter, an increase of 2 million compared to the prior quarter driven by increased cost associated with our firm.
Q1 operating loss.
Depreciation and amortization of 65%.
Million Underutilization.
And the utilization and production startup expense totaling $11 million.
Share based compensation of $4 million.
On the sales of certain O&M contracts of $2 million.
We recorded a tax benefit of $19 million in the third quarter competitive tax expense of $36 million in the prior quarter.
Decrease in tax expense attributable to the pre tax loss in Q1 compared to pretax income in Q4 of 2021.
Yes.
Combination of the aforementioned items led to a first quarter loss per share of 41.
<unk> Q4, 2021 earnings per share of $1 23 on a diluted basis.
Next turn to slide nine <unk> select balance sheet items, and summary, cash flow multiple securities and restricted cash balance ended the quarter at $1 6 billion compared to $1 8 billion at the end of the prior quarter.
Module segment operating cash flow was offset by ongoing project spend in Japan, other operating expenses and capital expenditures associated with our new parents go ahead in India factories.
Total debt at the end of the first quarter with $252 million, an increase of $12 million in the end of Q4, primarily associated with lower loan drawdowns in Japan.
A reminder, all of our outstanding debt continues to be project related and will come off our balance sheet with a corresponding projects are sold.
Our net cash position, which includes cash restricted cash and marketable securities less debt decreased by approximately $285 million to $1 3 billion.
All of the aforementioned factors.
It is used in operations were $139 million capital expenditures were $155 million.
Continuing on slide 10, our full year 2022 guidance is unchanged from our call in early March However, I'll provide some context around some of the risks uncertainties and opportunities within the year.
Firstly as Mark mentioned negotiations related to the potential sale of our Japan project development and O&M businesses are progressing well and we expect in Q2 to enter into definitive agreements to sell these businesses.
The anticipated value in local currency has remained in line with our expectations. When we gave guidance in March.
Due to the global macro environment, and the bank of Japan, maintaining a commitment to economic stimulus. In contrast, the tightening U S. Monetary policy. The Japanese yen has in the last two months experienced a sudden and significant devaluation relative to the U S. Dollar.
While we continue to anticipate U S dollar pre tax gain on sale of $270 million to $290 million.
<unk> a sale in the state in the currency markets at closing may adversely impact on value.
Secondly, as it relates to commodities, we continue to see volatility and increased pressure in major commodity market, including aluminum in London.
As mentioned on previous guidance call, we continue to face challenges in 2000, and a pathway towards mitigating our aluminum exposure, particularly as it relates to hedging supply from Malaysia, and Vietnam factories.
Certainly the global sales rate environment remains challenging with Q1 freight costs tracking largely as expected. We continue to see full year sales rate approaching five per watt or approximately 18% to 20 percentage points of gross margin.
Okay.
And lastly, as we maintain our forecast we are comfortable produced reduction from year end 2021 to year end 2022.
4% to 6%.
In a flat year over year comfortable with solid fourth.
Turning to slide 11, and I'll summarize the key messages from the call.
From a financial perspective, our Q1 loss per share of <unk> 41.
As in line with our internal expectations, and we originate our full year guidance.
Operationally production of two one gigawatts shipments of one seven gigawatts were in line with expectations and we continue to advance our technology roadmap across series seven bifacial reality in terms of multi junction devices.
Finally series six demand has been robust with $16 seven gigawatts of year to date bookings, which includes 11 nine gigawatts since the previous earnings call leading to a current contract backlog 36 four gigawatts.
And this includes recent bookings with our updated contracting structure, providing ISP upsides and gross margin risk mitigation.
I will now conclude our prepared remarks and open the Gulf Coast.
Thank you, Sir we will now begin.
If you would like to ask a question. Please pizza.
Christine Star one on your phone and Ken Press Star followed by the number one on your telephone keypad. Please be reminded to limit yourself to one question to give opportunity for other participants to ask a question. However, if you have more than one question you May press star one to be in the queue again.
Additional questions as time permits.
Please standby.
Thanks for your question.
Your first question comes from Philip Shen with Roth Capital Partners. Please go ahead.
Thanks for taking my questions and thanks for sharing all the detail on the contract structure.
No.
<unk> on the on pricing in general, but you had mentioned mark.
<unk> per watt or a $300 million of potential ASP upside for 'twenty three I think on the Q4 call. So I'd like to explore how much more upside there might be beyond. This for example, which adder is not <unk>.
Included in your three per watt estimate.
I believe its series seven bifacial and origin others.
Can you talk through how much volume.
In terms of megawatts, we could see for each of these in 'twenty, three and what kind of contribution in terms of cents per watt could each represent.
And then beyond this.
Can you talk through how the anti circumvention chaos, maybe incrementally supporting even higher based pricing for your base ASP.
For incremental contracts and then finally this is more of a housekeeping question for pricing.
Our quick calculation for the Q&A Asps roughly 21.
That compares with I think Q4 closer to 31, one so that's a big change.
Can you help us understand what's missing in our calculation meaning.
Typically your megawatt ships may be a little bit different from your megawatts recognized in revenue. So ultimately what was the pricing ASP in Q1, and what do you expect in Q2 and three thanks guys.
Alright, So Phil let me, let me make sure I understand your first question, so and actually if you look at that contracting.
Slide that we have in the presentation indicative contract and there is a.
Ordered box, it's around I think four different components. One is the temperature coefficient the long term degradation rate bifacial already.
And series seven I think before that it's around and those if you look down at the bottom. There is a note down there that indicates that that is.
Reflected in the 10-Q disclosure so that so that three up to 300 million number that we referenced is taking the value of those four items into consideration.
You referenced a few things around or what's not included so yes. There are there are certain things that are not included such as <unk>.
Domestic content so if we.
Source from our facility.
In Ohio with our existing facility, our new facility. There are some provisions in our contracts that we'd say there is a premium for U S made content.
And thats, even independent of whether or not it even gets captured in a U S content.
So we highlight at the bottom of the slide that another thing that we've done with our contracts is that to the extent that there'll be there becomes a U S content criteria that.
That is used for the ITC, we've contracted that now to provide upside so there is pretty.
Pretty significant value.
For that 10 percentage point, which is what's currently being considered for domestic content for ITC, but beyond that there's also a domestic source content that some some of our customers just would rather have U S made in domestic source product and to the extent they do there's a premium that we are asking for in order to reserve that type.
Of the allocation from the factory.
As it relates to the.
And in circle mentioned and the impact of pricing.
Look it's pricing and it's not just near term, but as you can see we booked 12 gigawatts since the last earnings call.
A lot of that is going out into 'twenty, four 'twenty, five and even starting to see some momentum going into 2006 as well.
That's obviously it is a strong indicator fundamentals underlying demand and one of the things that we alluded to in our prepared remarks as we referred to this kind of the.
Edge of electrification in kind of this revolutionary age that we're in right now we're seeing a lot of really strong demand and the way I always sort of positioned it from from our perspective, we sit on the front end. So we are an enabler of that and electrification and so you have to start off with taking photons and making a lot of time.
So then whatever evolution happens for electrification of transportation or <unk>.
Building or other sources of fuels and other things along those lines, we're going to be a critical critical strategic enabler of that and we're starting to see a lot of a lot of momentum and demand in the marketplace right now, especially for <unk>.
Green hydrogen and green ammonia and not just in maybe some of the places you would anticipate it maybe in the middle East.
And in Europe , and in India, and even here in the U S. We're starting to see some inflection points around that so there is just a strong fundamental underlying demand for our traditional PV and pds market, but also as we're starting to see inflection points now with new demand curve is starting to come off for things such as green hydrogen and Green Green.
Yes, we are.
We're seeing better pricing.
If you look at the backlog of where we are.
Our baseline price has improved from the average that was there at the end of the year.
And then when you factor in the benefits of the technology.
Adjusters that we have as well as to the extent that sales rate stays inflated where it is now and as well as with aluminum the combination of those two could could add up to <unk> a lot to where our current pricing is on the baseline.
So anyway, we're encouraged but we're seeing deposit size I'll, let Alex talk with them about Q&A SP, yes, so on the <unk>.
ASP side the shipped volume was about one seven on a sole basis. It was more like one three so if you do the math on one three against about 355 of module revenue get somewhere around 27% and change on an ASP basis, and what Youre seeing there is so volume on a sole basis is down partly with some seasonal.
Typically Q1 at a lower shutdown solid quarter for us and ramps through the year.
You've got a little bit of.
The impact that.
So we had more DDP vessels CIP times in Q1 relative to last quarter and then you've got trying to time as Mark said in prepared remarks, we're still seeing timed into the U S being a record high as up at over 130 days in Q1, So you've got those impacts coming through on the gross margin side.
There is a little bit of a mix shift as well, which are impacting us so you've actually got a bit more perrysburg volume on the solid volume coming through in the gross margin with a little bit offset as you get some benefit in the sales rate, which is why if you look at sales rate on our gross margin percentage points basis. In Q1. It was down at 14 points on our full year expectation on the guided to 18 to 20, so you've got a little bit.
Offset that some higher cost coal product, a little bit of benefit of sales rent coming through but.
That's why you've got this low.
Solid volume and the impact you're seeing the gross margin.
I think so.
Annuity to answer your broader question as well is that.
We're seeing strong demand, we feel like we're getting.
<unk> pricing in the market.
We're continuing to drive cost down it as Alex indicated given the backdrop of all the challenges we are dealing with we still anticipate a 46% cost per watt reduction and then as we've highlighted before series seven when introduced will be the lowest cost products in our fleet. So that's even a lower cost profile than we have today. So the combination of all of those coupled.
With the contribution margin flow through from the incremental growth.
We're pretty excited about 'twenty, three and beyond and the opportunities that we are positioned for right now and continuing to look to grow beyond what we already have committed to with the strong backlog that we have right now.
Great. Thanks, guys.
Your next question comes from the line of Ben <unk> with Baird. Please go ahead.
Alright, Thank you guys.
Maybe just two.
Take a step back going back to when you module gross margin targets could be.
Greater than 25%, but.
Good luck.
So all this stuff together.
Slide five.
Technology.
Technology advancements.
How does that shape up versus <unk>.
Original.
Outlook.
Hello.
Yeah, So Ben I think.
If you just.
Look at it.
Right now when you.
Pull out the effects of sales rate on the quarter I think we are in the high teens 17, 18% something like that from a from a gross margin without the impact.
Of sales right.
And then if you.
If you say if you then include the technology Justice, which is another 10 percentage points on top of that you're going to get to a gross margin thats going to be at 25% or north of that 25% number that you referenced and so thats one way to look at the other way to look at look at it even if we have the commodity adjustors and this curve.
Quarter.
We would have added 10 percentage points to work to where we are right now including the impact of.
Sales rates from a commodity standpoint, and we also had a very low shipment quarter. I mean, this is one of our lowest shipment quarter set that we've had in a long time as Alex indicated one three it should be sold quarters. One three gigawatts is one of the lowest quarters that we've had so that's obviously John kind of weighed against some of our fixed cost in our production facilities.
<unk> had drove to a lower gross margin, you'll see that deleveraging as we grow sales volumes.
And throughout the year, we'll be averaging close to around two five or two six gigawatts of quarter. So essentially double where we are right now on a sold basis to hit our revenue targets for the year, Yes, I think if you look at the backlog that we gave in the in the Q, you'll see the number tomorrow, you're going to still see 27% and Asps, we had a very large booking quarter. So you've seen.
Asps relatively flat going out of the outer years as we talked about on the call. So important to understand that the baseline number we talked about it being up to <unk> a technology analyst essentially now.
Positives for you how do you think about.
Expanding capacity.
As you saw.
There are no contracts.
Thank you very much.
Okay.
Yes so.
Right.
What we've always said that we want demand drive supply for us right and when you look at the bookings momentum.
You look at it right now we've got 36 Gigawatts in our pipeline. If you go back last year. At this time, we were about 15, we've added 21 gigawatts to two the backlog within a 12 month period.
And the momentum if you look at the pipeline is still is $50 55, gigawatts of the total pipeline and as I alluded to.
Easily see over the next several quarters.
Capturing multi gigawatts volume in India.
Which which we've been very patient in terms of taking that volume at this point in time to ensure we get optimal pricing and what we want to capture in India and I think we're in a good spot there right now so we're going to work.
I wouldn't be surprised by the middle of this year that we're largely sold out through 2000.
25, 24 excuse me.
Got a few more gigawatts knockout, India, which I think we can be in a good position and as well as some more volume here in the U S with few gigawatts, but we could be in a good position of having 24 sold out in even a more meaningful position into 2025, all of that sort of gives us the backdrop and the policy support in the environment that we're seeing.
And our.