Q3 2022 First Solar Inc Earnings Call
Both our current operating facilities as well as our third factory, which is currently under construction and scheduled to come online in the first half of 2023.
As a result of this expansion, we believe our Ohio nameplate capacity will increase by almost a gigawatt to just over seven gigawatts by 2025.
Approximately $1 billion will be invested to build a new factory.
Our fourth in the United States, representing an additional three five gigawatts of series seven nameplate capacity. This facility is expected to commence operation in 2025, we.
We continue to evaluate several possible sites across the southeast and expect to announce the location in the coming weeks.
Beyond this we continue to evaluate the opportunity for further investments in incremental manufacturing capacity, including throughput optimization of our current plant capacity. In addition, we are evaluating capital investments to support the advancement of our R&D initiatives.
In the United States, the enhancement and the enactment excuse me of the inflation reduction Act.
With both supply side manufacturing and production tax incentives as well as demand drivers, including the expansion of investment in production tax credits for solar and clean hydrogen.
<unk> long term clarity necessary necessary to support investments in manufacturing.
In India, we continue to see a supportive policy environment, given the decisive decisions by the government to diversify and grow domestic capabilities to avoid deeper dependencies on an unreliable volatile and high risk supply chain.
In Europe , we continue to work with stakeholders to advocate for long term manufacturing and supply chain strategies that would enable us to support the energy needs of America's allies with local manufacturing responsibly produce solar technology.
We recently joined other leaders in the European Union.
To provide highlight to highlight the PV for the supply chain the need for decisive actions from the EU if it wishes to deliver on its goal to scale manufacturing across the block by 2025.
While our immediate focus is on scaling our announced factories in the U S and India, we remain committed to exploring the long term potential for further geographical diversification contingent upon a supportive local policy and demand environment.
With regard to research and development today's announcement of an approximately $270 million investment will support a one 3 million square foot dedicated R&D innovation center in Perrysburg, Ohio, which pending final approval of various state regional and local incentives is expected to be completed in 2024.
Currently our R&D programs require transferring potential product advancements developed on specialized.
Development lines located in our California in Perrysburg laboratories to high volume manufacturing conditions by running engineering test tests authorizations or Etfs.
On our existing commercial production lines in Ohio.
Using these production lines increases operational complexity as well as limit cycles of learning.
In addition, the combination of a larger form factor module increased module throughput.
And our recently enhanced production based policy incentives have significantly increased the opportunity cost of the downtime required to run Etfs, an existing high volume manufacturing lines.
This new facility will feature a pilot manufacturing line.
Allowing for the production of full sized prototypes of both thin film in tandem PV modules.
Creating a sandbox separate from commercial manufacturing operations is expected to reduce operational complexity reduce costs allow us to accelerate our rate of learnings solidify our leadership in current and next generation technologies.
Turning to slide five as.
As previously mentioned, we booked $16 six gigawatts since the July earnings call.
Bringing our year to date bookings to 43 seven gigawatts.
With respect to future shipments after accounting for shipments in the quarter, a two eight gigawatts, which was in line with our expectations. Our total contracted year to date backlog is $58 one gigawatts.
While we have contracted volume for India, we have not recognized this volume and our backlog.
Excluding our new India manufacturing facility, we are sold out for 2024 as of the July earnings call.
As of now we are sold out for 2025 and close to selling out for 2026.
We anticipate having 26 sold out by the end of the year as we have a number of contracts in late stage negotiations.
As we transact further into the future. We are pleased with the pricing trajectory of our technology.
The $16 six gigawatts of bookings since our prior earnings call in July have a base ASP, excluding adjusters, where applicable or 31 six.
Note approximately 40% of this volume is reflected in the Q3 backlog number in the 10-Q.
During the third quarter certain amendments to existing contracts associated with commitments to provide U S manufacturing products as well as commitments to supply series seven vs series six modules increased our contracted revenue backlog by 52 million across one four gigawatts or approximately three.
Seven per watt.
As of Q3, the average portfolio based ASP.
Reflected in the revenue from contracted footnote in the 10-Q increased approximately 1.2 versus the second quarter end.
As we've previously address a substantial portion of the overall backlog includes the opportunity to increase the base asps through applications of Adjustors, if we're able to achieve.
Certain achievements within our technology roadmap.
As of the end of the third quarter, we have approximately 31 four gigawatts of contracted volume these adjusters, which if realized could result in additional revenue of up to approximately $2 7 billion.
Or approximately <unk> <unk> per watt, the majority of which will be recognized between 2024 and 2026.
As previously discussed this amount does not include potential adjustments for the ultimate module been delivered to the customer which may adjust the ASP under the sales contract upward or downwards. In addition, this amount does not include potential adjustment for increases in sales rate or applicable aluminum or.
Steel commodity price changes.
Finally, this does not include potential price adjustments associated with the ITC domestic content provision under the recently enacted inflation reduction Act.
As a reminder, not every contract includes every adjusted described here.
To the extent that such adjusters are not included in our contract. We believe that baseline asps reflects an appropriate risk reward profile.
And while there can be no assurances that we will realize adjusters and those contracts where they are present to the extent we are successful in doing so we would expect a meaningful benefit to our current contracted backlog ASP.
Our recent bookings, which include large headline numbers ranging from 722, gigawatts, including a number of significant transactions with existing customers such as a robot.
Silicon Ranch and Swift current Erin energy in the United States.
The same is true.
<unk> is there a power who has worked with first solar for over a decade signed an agreement for 600 megawatts as the first customer to contract for offtake from our new facility in Chennai.
Note as mentioned during our prior earnings call in July sign contracts in India will not be recognized as bookings until we have received full security against the offtake.
As such deals signed but not fully secured included in this agreement with <unk> power will be reflected within the confirm but not book portion of our pipeline graph and the earnings presentation.
As reflected on slide six our pipeline of potential bookings remained robust.
Even after year to date bookings of 43.7 gigawatts through retain total booking opportunities of 114 Gigawatts.
Our 71 Gigawatts of mid to late stage opportunities includes 62, five Gigawatts in North America, four Gigawatts in India and three three gigawatts in the EU.
Even with our $16 six gigawatts of bookings since our prior earnings call. Our pipeline of mid to late stage opportunities has expanded by 52 eight gigawatts since the prior quarter.
In addition to previously noted demand drivers, including customers need for certainty around technology supplier integrity, and our ability to stand behind our contracts and deliver on our commitments demand has been further catalyzed by the enactment of the inflation reduction Act.
For many customers. This legislation has provided visibility into supportive long term policy environment to the extension of the solar investment tax credit the introduction of the production tax credit for solar and similar incentives respect to green hydrogen.
As a consequence, we are seeing increased demand.
From both existing and potential new customers.
And included in our pipeline are several opportunities with multi year multi gigawatt volumes.
Turning to technology.
We continue to make steady progress.
With our current roadmap as we worked on the operational and market readiness of our next generation series seven modules.
Our new Ohio facility, which will be the first in our fleet to produce this product is on track to commission in the first half of 2023.
Early test runs of the semiconductor deposition equipment performed as anticipated with full sized series seven samples delivering efficiency equivalent to the currently line modules.
The series set in module has been developed in close collaboration with Epc's structure and component providers.
And the product has benefited from working over the past year with our partners, including array technologies and next tracker to develop mounting solutions.
Their work along with the support of our customers' EPC partners is expected to help ensure the product ecosystem is ready and optimized for install costs. Once series seven enters the market.
Additionally, we are continuing to make progress advancing our CAD Tel bifacial modules based on our series six plus platform and expect to launch a pilot production scale run before the end of this year.
And a small scale infill deployment with a strategic customer as early as the first quarter of next year.
I'll now turn the call over to Alex who will discuss our Q3 2022 results.
Thanks Mark.
Starting on slide seven I'll cover the income statement highlights for the third quarter.
Net sales in Q3 was $629 million, an increase of $8 million compared to the prior quarter.
On a segment basis, our module segment net sales in Q3 was $620 million compared to $607 million in the prior quarter.
The increase in net sales was primarily driven by higher module volume sold from our plants in Malaysia and Vietnam.
Gross.
<unk> was 3% in Q3 compared to negative 4% in the prior quarter, primarily driven by the impairment of the <unk> project in the prior quarter.
Our Q3 module segment gross margin of 4% down from 5% in Q2 2022 was negatively impacted by two key sales freight and logistics items, partially offset by lower module costs and reductions to our warranty and module collection and recycling liabilities.
Firstly with respect to sales rates, while spot rates have begun to ease significantly in recent weeks.
Net sales rate charges under shipping contracts entered into at the beginning of the year continued to put pressure on our cost to deliver products during the quarter.
Secondly, with respect to logistics, we experienced an unforeseen demurrage charge of approximately $30 million.
And what about this charge, which is a discrete variable cost outside of the freight rate paid for transoceanic shipping.
The motive charges, our excess storage fees charged to the result of containers of modules remaining in port beyond a contractually agreed period.
Well, it's a shifting environment over the past two years has largely been characterized by container shortages and transit times, well above pre pandemic norms.
Recent significant reversal in vessel waiting times and contain a turnaround times, though welcomed on a long term basis if sustained.
Created near term logistical challenges.
In particular during the third quarter dramatically improved transoceanic transit times resulted in product delivered to port significantly ahead of both our expectations and contracted customer delivery dates, which drove a significant increase in demurrage charges as we waited for the customer site delivery window to open.
Long term, we believe our strategy of increasing manufacturing capacity proximate to demand reduces the need for and risks associated with transoceanic shipments.
In total total sales rate and unforeseen logistical costs included in our cost of sales reduced our module segment gross margin by 23 percentage points in Q3 compared to 16 percentage points in the prior quarter.
SG&A and R&D expenses totaled $76 million in the third quarter, an increase of approximately $12 million compared to the prior quarter.
Similarly, driven by higher share based incentive compensation and higher legal expenses.
Production startup, which is included in operating expenses totaled $20 million in the third quarter, an increase of $7 million compared to the prior quarter driven by increased startup costs associated with our third Ohio factory.
Okay.
Q3, operating loss was $68 million, which includes depreciation and amortization of $67 million production startup expense totaling $20 million and share based compensation of $12 million.
Partially offset by a 6 million gain on the sale of Australia, and Japan operations and maintenance platforms.
We recorded a tax benefit of $13 million in the third quarter compared to tax expense of $84 million in the prior quarter.
Decrease in tax expense is primarily attributable to the decrease in our pretax income certain losses in Chile in Q2 for which no tax benefit can be recorded in.
And EQT discrete expense related to the reevaluation of Vietnam deferred tax assets due to the receipt of a high tech incentive certificate.
Combination of the aforementioned factors led to a Q3 loss per share of <unk> 46.
<unk> Q2 earnings per share of <unk> 52 on a diluted basis.
Next turn to slide eight to discuss select balance sheet items and summary cash flow information.
Cash flow generated from operations were 129 million and capital expenditures were $223 million in the third quarter.
Our cash cash equivalents multiple securities and restricted cash balance ended the quarter flat with $1 9 billion.
Module segment operating cash flows and draws under our credit facility with the U S International Development Finance Corporation for our India manufacturing plant.
Offset by other operating expenses and capital expenditures associated with our new Ohio in India factories.
Total debt at the end of the third quarter with $260 million, an increase of $85 million at the end of Q2 due to the first disbursement of the credit facility for our India manufacturing plant.
$175 million of our outstanding debt is nonrecourse project debt and one color come off the balance sheet. Upon the closing of the new litho North project sale.
Our net cash position, which includes cash cash equivalents restricted cash and marketable securities less debt also ended the quarter flat at $1 7 billion.
Okay.
Continuing on to slide nine I'll provide updated guidance.
With regards to our legacy systems business and impacting our other business segments. In Q3, we completed the divestiture of our Japan business is the conditions precedent will close the sale of the O&M platform. Following on from the closing of the project development platform in Q2.
Additionally, this week, we signed a sale and purchase agreement for the sale of our <unk> project in Chile closing of which we expect in Q4 of this year subject to customary closing conditions.
Full year financial impacts of this sale are expected to be within the previously forecasted guidance range as provided on the Q2 call in July .
As it relates to our module segment forecast to net sales of two four to $2 5 billion down $50 million at the midpoint of the range due to project timing shifts which results in a full year average asps.
Slightly lower than previously forecast.
In addition, approximately 200 megawatts of volume previously expected to be sold in the year is now expected to be recognized as revenue in 2023.
Combined with our other segment revenue consolidated full year net sales is forecast to be two six to $2 7 billion compared to $2 55 to $2 8 billion previously.
Q3 module segment gross margin guidance of $175 million to $215 million is updated to $125 million to $155 million driven by three key items.
Firstly, the impact of reduced revenue driven by the aforementioned lower full year average ASP and volume sold.
Secondly, the aforementioned unforeseen logistics costs estimated at $35 million $30 million of which was reflected in Q3 results.
And thirdly, our previously forecasted cost per watt produced reduction from year end, 2021% year end 2022, a four 4% to 6% is updated to 3% to 5% largely as a function of unfavorable mix shift in production of high loads versus standalone modules.
A couple of sold forecast previously even to be unchanged year over year is now forecast to increase approximately 2% from Q4 2021 to Q4 2022 is a function of this unfavorable mix shift in high versus Standalone modules as well as an increase in the percentages of Q4 volume sold coming from a higher cost.
Perrysburg facility relative to our previous forecast.
These are partially offset by warranty and module collection and recycling benefit of $18 million recognized in the third quarter.
Okay.
Combined with the other segment impact gross margin forecast to be between negative <unk> $45 million to $50 million compared to negative $50 million to $60 million previously and which includes the impact from the Q2 impairment of the <unk> project.
Total gross profit is forecast to be between 75 and $110 million compared to between 115 and $165 million previously.
Within gross profit the underutilization loss assumption of 10% to $15 million remains unchanged.
With the increase in demurrage charges total sales rate and unforeseen logistics costs are now expected to impact gross margin by 19% to 21 percentage points compared to 18 to 20 points previously.
Our forecast SG&A and R&D expenses of $270 million to $280 million remains unchanged.
Forecast startup expenses reduced from $85 million to $90 million to $80 million to $85 million.
Therefore, our total operating expenses forecast is reduced from 350 to 365 million to $345 to $360 million.
Yeah.
Operating income is estimated to be between negative 30, and positive $20 million down from previous guidance of positive $5 million to $70 million as a function of the above impacts to net sales and gross margins.
Yes.
Other income and expense guidance of $25 million remains unchanged.
Okay.
<unk> expense forecast increased from 55% to $70 million to 65% to $80 million TJ shifts in jurisdictional mix of income partially offset by an increase in forecasted R&D credits.
This resulted in full year 2022 earnings per diluted share guidance range of negative <unk> 65 to negative <unk> 35.
Compared to previous guidance of negative <unk> 25 to positive 25.
Capital.
This guidance is revised from 850 million to $1 $1 billion to 800 million. So 1 billion due to expected timing of purchase orders through the end of the year.
Our year end 2022, net cash balance is anticipated to be between one six and $2 billion, an increase to the midpoint of $400 million, primarily driven by increased module booking deposits and lower capital expenditures.
And finally shipments guidance at $8 99, four gigawatts is updated to nine 1% to nine four gigawatts.
With that I'll turn the call back over to Mark will provide an update on policy.
Alright, Thank you Alex I would like to discuss the U S policy environment.
Which has evolved significantly over the past quarter.
As you May recall, the joint announcement from Senators mansion, and Schumer regarding the inflation reduction that preceded our last earnings call by just one day.
Since then we have seen the act signed into law and first solar had the privilege to be part of the White house events of September celebrating the groundbreaking piece of legislation.
And our view by passing in enacting the inflation reduction active 2020 to Congress and the Biden Harris administration has entrusted our industry with the responsibility of enabling and securing America's clean energy future and we recognize the need to meet the moment in a manner that is both timely and sustainable.
Thanks to our strong foundation, including a repeatable vertically integrated manufacturing template proven technology platform and solid balance sheet, we were able to respond rapidly to enact to act by accelerating the decision to expand our U S manufacturing base.
Our confidence in committing to $1 5 billion expansion in American manufacturing and R&D was backed by a healthy order book.
Thus pipeline of opportunities and approximately to get two decades of experience in scaling U S solar capacity.
However, we still have a substantial journey ahead as the relevant U S government agencies work to implement the act.
Providing interpretive guidance and alignment on process and administration.
Specifically, we wait department of Treasury guidance that will apply to what we believe is the legislations intent to incentivize vertically integrated U S manufacturing under the section 45 ex provision, allowing our thin film manufacturing process to access the entire integrated tax credit.
Similarly, we also anticipate guidance on the domestic content bonus the project owners may seek under the new production tax credit and the extended an investment tax credit for solar.
Given our unique manufacturing process with transforms raw materials into finished module under one roof.
We expect that our product will qualify as U S domestic content and help enable the bonus incentive.
As a crucial first step towards delivering clarity.
Rss solicited comments from interested stakeholders that will then shape the guidance provided around aspects such as the administration and value of tax credits under the 45 ex provision.
Moreover, while we understand the urgent need for clarity, we encourage a healthy degree of patience as the details are normalized.
The effectiveness of this landmark climate legislation hinges on the thoroughness of this administrative administrative process and resulting guidance.
We strongly support the thorough thoughtful approach being pursued by the department of Treasury and IRS.
As America's largest solar manufacturer, we remain actively engaged with the U S government and intend to respond to the public requests for comment and provide input as an interested stakeholder to aid the guidance process.
Internationally, we observed a strong growing focus from governments and Democratic nations towards addressing the use of force labor in the supply chain.
In addition to the President said in U S weaker force labor for perfect snack.
<unk>, Australia, Canada.
In the United Kingdom has introduced measures to tackle the issue of businesses profiting from human rights abuses, particularly in China's Xinjiang region.
More recently, the European Union released a draft law that could come into effect by 2025.
Which would ban the import of products linked to the use of force labor, regardless of where they are made.
These actions point to the growing compliance risks are continuing to rely on Chinese crystalline silicon.
The increase in urgency with which solar industries and Democratic Nations need to provide sustainable solutions in response to the significant threat.
Meanwhile, our responsible solar standard.
It is not simply emerged as a key competitive differentiator.
It's also been driving factors behind our industry, leading ESG ratings we.
We are proud that earlier this week first solar made its debut in investor's business Daily 100, best ESG companies of 2022.
<unk> six across all included corporations and first among energy companies.
Being the only solar manufacturer included in this list of leading companies that mix profitability with ethical and social responsibility is a testament to our commitment to responsible solar and.
And attribute to the sense of purpose with with thousands of our employees around the world make the most of each day.
With that I conclude our summary on policy deployment.
Alex will now summarize the key messages from today's call.
Turning to slide 10.
But a Q3 loss per share of <unk> 46, and updated our earnings guidance, including for the impact of unforeseen logistics costs.
We raised our year end net cash forecast midpoint by 400 million to reflect higher module bookings prepayments as well as lower forecast capex.
Operationally, we produced two four gigawatts and shipped two eight gigawatts of modules.
In addition to our recently announced three five gigawatt U S Greenfield plant.
Today announced the $270 million investment in a new dedicated R&D line to be located in our Perrysburg, Ohio campus.
Finally series six demand remains robust with 43, seven gigawatts of year to date net bookings leading to a record contracted backlog of $58 one gigawatts.
The $16 six gigawatts of new bookings since our prior earnings call in July at a base ASP, excluding adjusted 31, 6%.
And with that we conclude our prepared remarks and open the call for questions operator.
Thank you at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.
We will take our first question from Kashi Harrison at Piper Sandler.
Okay.
Good afternoon, everyone and thanks for taking the questions.
So.
I'm just going to I'm.
I'm just gonna combine a bunch in here. So you indicated that some of the contracts.
That you signed recently have adders associated with the higher ITC I was wondering if you could help us quantify.
How much revenue upside you may expect entering calendar 'twenty three and four.
<unk>.
As we think about those years and then maybe just some color on how youre thinking about financing all of these investments.
The $1 5 billion that you've talked about and then finally, maybe just some color on how you expect to recognize these credits within your financial statements.
In the coming years. Thank you.
All right I'll take the first one.
And then I'll, let Alex do the financing it and how we expect to recognize the credits in the in the P&L.
So.
So our contracts have and we've been doing this for for extended period of time now incorporating provisions that relate to domestic content to the extent there was any.
Legislation that would be passed that would differentiate domestic content value for incremental ITC or even now with the PTC. So we've incorporated those matters.
What I'll say from our prepared remarks as one of the things that we highlighted is that.
We recognized as part of our backlog there has already been contracted as of the end of last quarter for about one four gigawatts, we have modified those contracts.
Would include value now for domestic manufacturing.
And it was $52 million against that one four and in my prepared remarks, I indicated was about $3. Seven. So there is a significant uplift what's been contracted so far is.
We'd be recognizing across 23 and 24, but we have a lot more volume that we have to go out and contract, but I think it has had an encouraging first step.
To have $1 four now contracted at a pretty.
Nice increase to their baseline ASB.
Yeah, Kashi only all data credit fastest quicker answer we would expect it to be.
In the statement as a reduction to cost of sales so you'll see it hit gross margin and flow through the P&L from there.
From a financing liquidity perspective, you start with where we are today, we're forecasting ending the year at about $1 8 billion of net cash at the midpoint of the guide.
At that point, and we'll have about $200 million of debt associated with our India plant the assumption being that I'll, let Donna I'll say project and the debt associated with that is sold by the end of the year. So that's about 2 billion gross cash $1 8 billion net at the midpoint.
If you think about uses of that capital by the end of the year. We will have spent substantially all of the capex associated with our perrysburg.
Perrysburg factory, which is nearing the end of construction will have double digit millions remaining there, but the majority of that Capex will have been spent.
As it relates to the India Capex will have.
Two to three maybe slightly higher 400 remaining by the end of the year. The majority of what's left that will be covered by that draws against the facility. So the limited impact of net cash. There. So you can think about between those what will be effectively through that capex spend all have that associated that capex spend by the end of the year.
We recently committed to about $1 5 billion of spend so that's 200 million to expand the high of about $1 billion for off our fourth plant in the U S.
Just under 300 million for an R&D line that $1 five will get spend over 2023 and 2020 for potentially a small amount into 2025, if you think about sources for that.
We've recently been getting significant prepayments for module sales, so we've been working with customers.
Helping to provide capital to finance the expansions that we're undergoing if you look at that we had about $150 million of module prepayments come in in Q3, and if you look at the balance sheet is as of the end of Q3, we've got just a little under $600 million of module prepayments on balance sheet at that point.
The high point of the guidance assumes another 400 or so coming through by year end.
We have signed books.
Bookings as you can see on the.
And the bookings table in the presentation of about just under 10 Gigawatts from the end of the quarter.
So that the deposits associated with those are not reflected in the Q.
We also have significant additional contracts the way in late stage discussions on which would add more down payments. So I think there's opportunity to increase the downpayment number as well beyond that if you think about other sources of cash we've got non booking deposit module business operating cash flow over the next couple of years, which we haven't guided table, which will be significant.
And that's all before you look at any of the proceeds coming from the section 45 X impact onto the IRI. So if you think about it today, we can finance the currently announced growth through a combination of cash on hand, and operating cash flow.
However, if you look beyond that I do think we are continuing to evaluate opportunities to deploy more capital accretively be that through the potential for additional manufacturing facilities expanding at our existing facilities, putting more money into R&D.
Actually helping develop supply is long supply chain and then there'll also be some limited maintenance capex and other upgrades so.
Today, we can finance the current growth with the combination of cash on hand, and operating cash flow as we do look at spending additional capital we may get to a point, where we either need or would like to go out and raise money and I will give a view around that when we gave guidance for next year in February at that point, we'll look at more of a comprehensive view of <unk>.
Capital and funding needs and determine if there's a need to raise capital. If we do I suspect today would be viewed more as bridge capital given that we expect to see a significant inflow of cash from the section 45 X and therefore, you need most likely as a bridge to those proceeds but I wouldn't rule out anything at this stage, including the potential for equity or equity linked.
Capital as well.
Okay.
We'll move next to Philip Shen at Roth Capital Partners.
Hey, guys. Thanks for taking my questions.
First one is on bookings so you've had a really nice bookings were on for the past couple of quarters.
It looks like Q4 should be strong I was wondering if you might be able to quantify what that might be and then also for Q1 and two would you expect things to slow down then or do you think the bookings could continue.
Ultimately the goal to potentially even book out through the end of the decade, perhaps even over the next year.
As it relates to the module cost structure.
Solar given this new FEMA building requirements that is up for vote. If solar is required to build at risk category for versus.
Now, which is risk category, one and I know.
She is fighting for risk category too.
How much more cost with that.
Bring to your cost structure, if we need to go to category for my understanding.
Category two there's no increase in your cost structure, but to get to category. Four is it one or two pennies or potentially more and then finally from a housekeeping standpoint for Q3 can you share.
How many gigawatts were ships that were recognized in revenue. Thanks, guys.
Alright, I will take the first two and let Alex take the last one.
First off so as we as you can see what we announced in our.
A presentation deck that.
If you look at our total pipeline of opportunities and when you look at our mid to late stage opportunities as I said in my prepared remarks of 114 Gigawatts of total opportunities in mid to late stages is around 70, Gigawatts, which both of those are a record highs for us in.
Meaningful opportunities for us to continue to see strong bookings momentum I think this is the fourth quarter in a row that I think we've had double digit bookings. So if you go back and if you look.
Starting with.
At the end of last year Q4 of last year, we've had four quarters now of double digit bookings in this quarter here at <unk> is now at all time record.
When I look at the near term and I indicated we'll sell through 2026 by the end of the year in <unk>.
I also indicated we have a number of multi gigawatt multi year opportunities that are still in our pipeline and we are seeing.
Customers that are wanting to commit through the end of this decade, and we indicated in our prepared remarks, most of the bookings that we've seen right now are through 2027.
So now we're seeing longer dated opportunities and again, multi gigawatt, which would be a historic record high individual bookings transactions for us as a company and I think where we said before our highest bookings we did before I think with somewhere in the range of about 5455, something like that within individual counterparties, we've got multiple opportunities that would be.
Definitely higher than that if we were able to close on those and so I don't see the momentum.
Changing at this point in time, and we will continue to book as long as we see strong asps as we indicated in this last quarter.
The bookings were at 31 six.
Before adders.
And if we can continue to see very strong asps going further out into the future that have a very balanced risk reward profile.
Then we will continue to do that it also will continue to inform as we as we see that activity will continue to inform our views around additional factory expansions.
We didn't indicated our most recent expansion, which would come online in 2025.
There is still a window to to impact the second half of this decade with more factors here in the U S and so as we see stronger demand that will inform our views around incremental capacity expansions.
Your next question as it relates to.
The female requirement in the category for.
So we're very well of what's going on there.
What I would say is that.
If there is a cat category four requirement for the power plant. It is not uniquely defined at an individual component level.
Our products with our contracts are to deliver against our specification and the specification as defined in those agreement to the extent that there is a decision made that ultimately.
Individual components would need to be modified.
To enable a power plant to meet a certain criteria a different category than what exists today, then that would be a modification to the contract because the specification requirements for the product with change.
So that is something that could evolve and we will address that to the extent that it does the other thing that I would say is I don't believe that.
The changes in order to hit the requirement of a category four.
When necessarily be achieved by modifying or changing the model I think more of it will come from the structure then it will come from the module.
And there are certain things potentially you could do with the model as it relates to changing the frame or potentially the backgrounds or modify the thickness of the glass all of that is going to do is add weight to the product, which also creates challenges around installed.
These modules.
Labor two men or three men lift there are some limitations around weight. So I don't know if youre optimal solution will be modifying the module I think it would be more or less a modification to the structure that could handle the incremental requirements in our category for them.
And Phil just to your last question. So we produced two four we shipped two eight gigawatts on a sole basis is about two and a quarter to two five if you look at that against the 600000 of revenue implies about a 27 offset ASP recognized.
Okay.
We will take our next question from Colin Rusch with Oppenheimer <unk> company.
Thanks, So much guys could you talk a little bit about the maturity of your process around that our assumption process and product that you guys are looking at that coming to market with and then as well with the price increases that you've been able to push through.
Any of that price increase related to the manufacturing tax credit level.
Yes so.
Tom I think you are talking about our multi junction product that we've announced our development around.
<unk> referred to a tandem.
Look as it relates to the technology, we have made significant advancements in that regard in terms of the capabilities and improving.
Delivering high efficiency products, along the lines of the roadmap that we've envisioned so far and ultimately we'd love to get to a point, where we're sitting at.
24% to 25% type of efficiency at the module level.
The biggest issue that we still have around I think we made good progress and allow the real question is ultimately how do we commercialize and when do we come to market and one of the challenges that we've had in that regard is finding the right silicon supply chain.
One that meets the criteria that are aligned with our approach around responsible solar so I think the technology is evolving quickly. The real question is how quickly can we bring it to market and how quickly can we get confidence in that supply chain that we would have to be dependent upon for the bottom sell which is at least as currently envisioned as top sell.
Thin film CAD Tel bottoms cell crystalline silicon overtime, we could look to evolve that too thin film thin film construct but that would be further out into the horizon.
As it relates to pricing.
Again what.
What we said in the prepared remarks was that we are just in the process of realizing domestic.
Domestic content value.
That has been embedded in our base contracts. So we've contracted.
One four Gigawatts, if you look at 'twenty, three four and five.
We have just a capacity nameplate capacity perspective, we've got north of 20 Gigawatts.
Volume that will be available on our nameplate capacity will be slower slightly lower than that when you think about actually realization of capacity given the overall ramp of the new factories, but theres a lot of volume still to go through.
We're happy to see the uplift which is right now.
A little bit it's about $3 seven or so of value. So we did one four gigawatts of $52 million of Asps.
Value creation, so a lot of opportunity to still go after the balance of that we're just still in the early innings and will continue to provide updates as we progress.
Okay.
We will go to our next question from Julien Dumoulin Smith with Bank of America.
Hey, Congratulations Steve again, well done I've got to say I just wanted to follow up on a couple of pieces you talked about capital allocation. A brief can you talk about I was just.
Expansion, you alluded to Europe as big an opportunity clearly they have their own mandates are preliminary mandates in 25 can you talk about that I'll also note that the European bookings opportunities a little bit modest.
Julian we lost you.
Alright.
Look I think the question was around further expansion.
Yes.
We are continuing to evaluate expansion whether in the U S or outside of the U S.
I think we're very well positioned in both the U S and India, we're happy with the progress, we're making with our new factory in India, We're happy with.
Interest in our technology and the building out of our pipeline and very happy with the fact that we are now starting to contract for that volume off of that factory and we're looking at multi year agreements in India as well.
U S.
The momentum is strong and the pipeline is very robust and it's a matter of continuing to see that fill up and then as we do we will inform our visit our views on incremental capacity.
Right now, we still would like to see better clarity around policy and as indicated.
Among others are involved in the EU for manufacturing standpoint, or supporting the market.
Written letter assigned a letter that would hopefully encourage the EU to provide clarity around long term stability of policy that would ensure that.
Enable an environment that is constructive to investments that we would need to make in the EU to support their long term goals and climate change goals. So a lot going on a lot of opportunity, it's a matter of priority prioritization.
We're happy to see.
We're happy that we have options that we can consider.
We will go next to Brian Lee at Goldman Sachs.
Hey, guys. Good afternoon, thanks for taking the questions.
Apologies in advance I'm going to ask about pricing again, I know, there's been a lot on the call about that but.
A couple of quarters in a row, now where base asp's for out year bookings are increasing.
I mean, it sounds like based on your commentary Mark you still have upside levers.
Not talking about the address just on the base Asp's.
Across portfolio of bookings going forward. So just curious if that's the right read across here.
And then.
How we should be thinking just in general around trends Youre seeing for I would assume use capacity versus Malaysia, and Vietnam capacity are getting priced differently going forward and then my follow up would be.
Just with all the capacity you are building in some of the commentary coming from some of your peers clearly encouraging that we're seeing some onshoring of the supply chain here, but how are you thinking kind of longer term back half of this decade, you guys have always been a bit more prudent about adding capacity when others are maybe a bit more irrational or have been.
What do you think about the landscape of new players coming into the U S. And then what the implications for your kind of longer longer term build strategy and then maybe Isps would be if you think about kind of beyond the next three plus years. Thanks guys.
Yes.
In terms of.
Base Asps and opportunities yes, we.
Clearly are seeing an opportunity there as it relates to what was already contracted as of.
Our last quarterly filing.
As at the end of June .
As indicated we have provisions in our contracts and in some cases, even versions that are not in our contract customers are reaching out to us and asking for an opportunity to get U S.
Supply, which will enable their value creation on domestic content and then we have a discussion with them.
Dino appropriately adjust the amount of contracts or the incremental ASP value. We think is appropriate for dedicating that that allocation to a particular customer.
So that's momentum and we'll continue to see how it progresses like I said, we're very early innings, but we've got a lot of us continuing to pursue.
As it relates to U S capacity versus Malaysia, Vietnam as of now as we see the horizon sold through 2026 by the end of this.
Year.
All of that volume in Malaysia, India excuse me in Malaysia, Vietnam has been committed and sold as part of that overall volume.
And we are distinguishing asps.
In a meaningful way for that volume and nowhere near.
Sure.
No it <unk>.
Substantiated by the difference in the relative cost structure between Malaysia, and the U S.
On a landed cost basis. So we are seeing some of that but it's not.
So far has not been material and it will continue to evaluate it as we move forward to ensure that we can sell through that capacity and if we find that it's difficult to sell it into the U S. We will look to sell and support other markets internationally, such as the EU from our Malaysia, Vietnam facilities over time.
Look we know that new capacity is going to come into the market.
We believe we're advantaged established player we've got a unique differentiated technology, where the partner of choice with.
With a number of key.
Key customers here.
In the U S.
We also firmly believe that capex is going to be higher to bring production into the U S and the cost is going to be higher to manufacturer here in the U S. R series seven product.
Is a low cost product relative to series six relative to <unk>.
Series, six in Ohio, but also relative to and competitive with our international factories for series six. So we believe we've got a differentiated technology and low cost technology and we also believe that competition to put.
<unk> here in the U S. Whether it's at the module level to sell level org.
<unk> down to the wafer level.
That will be a higher cost.
Cost of product that we still believe we can differentiate ourselves and maintain attractive asps, even if that were to happen.
We will take our next question from Mohit <unk> with credit Suisse.
Hey.
Thanks for taking my question, maybe just one question on the contracted backlog.
Can you talk about how many of the contract manufacturing PTC all the domestic content.
The book to Bill.
But when you're trying to think how much of that 18% reward close to.
Bottom line and how much could we expect.
We shared with the end customers and.
Separately just wanted to understand more on the R&D line investment what could we expect that seems like its like one gigawatt capacity, but just wanted to understand what appeared to change is going to mix like that.
Yes.
On the backlog, we do not have any contracts, where we are passing through loss sharing.
Section 45 production manufacturing tax credit so.
Let's be clear, that's all staying with us as we continue to build manufacturing develop we're going to use the proceeds from that credit to continue to expand both manufacturing and development in R&D here, but we're not sharing that credit with our customers under these contracts.
As it relates as it relates to the R&D line look at as I indicated.
One 3 million square foot facility.
It.
We envision that that line will probably start as it relates to ETA'S may not run at 24, 7%.
We may run at five days, a week kind of thing may not run again 24 hours, we're probably going to be doing something in the range of.
1000, maybe 1200 place.
<unk> a day for engineering test.
So.
As capacity, obviously, you can do much more than that but it's more or less as needed given the development requirements that we have for various programs. Both on our thin film as well as our multi junction tandem and we'll utilize that as well over time to even think about next generation technology, whether it's <unk> or some other thin films that could evolve over time. So we're excited about <unk>.
The R&D lined it it decoupled from being constrained by our manufacturing capacity, it's going to improve our cycles of learning and we really believe it will accelerate.
Our technology roadmap and time to market.
We'll go next to Keith Stanley at Wolfe Research.
Hi, Thank you just one clarifying question on slide four.
Year end nameplate capacity it looks higher for the new series seven plants than the slides you showed earlier in the year for Ohio and Indiana.
Driving that at a little ahead of schedule or anything else going on.
Yes, it relates to and what we get when we announced the $1 two.
Billion dollar investment in about four four gigawatts of capacity, we did that and I believe was August .
We indicated we were driving incremental throughput through our existing footprint. So the factory was initially.
Specced into do about 16 to about $16 5000 modules a day now we're now we've taken it up to 17000 modules a day so by that incremental throughput, we're getting more capacity out of the new factories, plus we've also optimized across the existing footprint.
Perrysburg, one in perrysburg two.
Which will drive more throughput so combination of those two gives you almost a four gigawatt of incremental capacity, but for the new factories in.
Evaluating doing that for India as well so we may pull another couple of hundred megawatts out of India based off of the throughput improvements and capital that we would deploy there. So so it's really driven driven by that.
Just incremental throughput through the factories with a little bit of capital to make sure that it happens.
And we'll take our final question today from Joseph Osha at Guggenheim Partners.
Hey, I made it. Thank you three quick questions for you first I'm wondering I know, it's hard to comment do you know much about what the cash timing.
45 ex benefits might be versus when you when you book them I'm curious about that.
I'll just do all three.
Second question is looking at your tandem cell technology I'm curious is that more aimed at some of what you are looking at doing a rooftop.
Might we see that deploy in in utility scale, and then third and finally.
Could we see new given the magnitude of this U S footprint expansion may be think about starting to export some of that product.
Those are my questions.
Yes, so on the cash timing.
That's going to come with more clarity when we get IRS treasury guidance.
Typically at the end of the year, we would file a tax return six to nine months. After the year end and then there'll be some time after that for us to receive.
Cash we're still it's still not clear exactly what process that will go through so we're awaiting guidance.
Stand them all.
And then as it relates to our tandem product the initial targeted market is going to be.
Rooftop residential.
Largely through we've talked before about our partnership with Sunpower. So that's largely the channel to market and initially a rooftop but the expectation would be over time as we continue to drive cost out.
<unk>.
Optimize it more to a utility scale application versus a rooftop application that will be able to make that transition from from our targeted initial target market of rooftop into utility scale.
And then as it relates to exports theres clearly an opportunity to export.
Even if there is a point I know there was a question I think Brian May have asked earlier about the.
The excess capacity in the U S market.
The capability at the right time, if need be to export into international markets and still avail ourselves to the full benefit in the full integrated benefit under the manufacturing tax credit. So it's something to be evaluated but what I would say is near term.
So that when you look at it look at our pipeline gross pipeline of 115 Gigawatts of 114 Gigawatts excuse me.
There's more than ample opportunity here in the U S. As you can see by that pipeline. The vast majority of it sits in the U S.
And so that's our primary market that we will be focused on for the near term.
Okay.
And that does conclude today's question and answer session and today's conference call. We thank you for your participation you may now disconnect.
[music].
Okay.