Q4 2022 First Solar Inc Earnings Call
With me today are Mark Widmar, Chief Executive Officer, and Alex Bradley Chief Financial Officer.
Mark will begin by providing a business update.
Alex will then discuss our financial results for the fourth quarter and full year 2022.
Following these remarks, Mark will provide a business and strategy outlook.
Alex will then discuss our financial guidance for 2023.
Following their remarks, we will open the call for questions.
Please note. This call will include forward looking statements that.
And that involve risks and uncertainties, including risks and uncertainties related to the inflation reduction act of 2022.
That could cause actual results to differ materially from management's current expectations.
We encourage you to review the Safe Harbor statements contained in today's press release and presentation for a more complete description.
It is now my pleasure to introduce Mark Widmar, Chief Executive Officer Mark.
Thank you Richard good afternoon, and thank you for joining us today.
We began 2022 with the expectation that it would be it would be challenging from an earnings perspective.
As we face unprecedented logistics and commodity costs.
But we also expected it to be a year of transition setting the stage for growth and profitability into 2023 and beyond.
We entered this year in a significantly stronger commercial operational and financial position with increased R&D investment, new domestic and international capacity coming online and a new series seven product.
We also began the year with a record contracted backlog.
<unk> pipeline of bookings opportunity.
And robust demand in our core markets.
This momentum is driving our points driven by our points of differentiation, including unique CAD Tel technology vertically integrated manufacturing process domestic production strong balance sheet and commitment to responsible solar placing us in a position to respond to emerging opportunities.
Particularly those enabled by the rapidly evolving policy environment.
This momentum is also due to the hard work commitment and passionate.
<unk> associates.
Beginning on slide three.
I will highlight some of our key 2022 accomplishments.
From a commercial perspective in 2022, we saw a precipice shift towards long term multi year module procurement.
This record volume of multi gigawatt deals spanning multiple years as was driven by a combination of competitive pricing.
Competitive technology.
Agile contracting shared values and trust in our ability to deliver the certainty that our customers are looking for.
As a result, we had an excellent year from a bookings perspective.
During a record 48, three gigawatts of net bookings in 2022.
This was an increase of 38 gigawatts from our prior annual record of $17 five Gigawatts set in 2021.
Our total backlog of future deliveries as of today's earning call now stands at a record 67 seven gigawatts.
Financially, while Alex will provide a more comprehensive overview of our 2022 financial results. Our full year EPS results came in towards the high end of the guidance range. We provided at the time of our third quarter earnings call.
We ended the year with gross cash of $2 6 billion or $2 4 billion net of debt.
Which is an increase to gross and net cash of $800 million versus the prior year.
This puts us in a position of strength to expand our capacity.
And research and development and technology improvements and pursue our strategic opportunities.
From a manufacturing perspective, we produced a record nine one gigawatts in 2022. Additionally.
Additionally, at the start of 2023, we achieved a significant milestone producing our 50 gigawatts since commercial production began in 2002.
Average watts per module produced in 2022 increased to 462 lots an increase of 14 lots and we increased our top production been from 465 Watts in 2021 to 475 watts in 2022.
We exited 2022 with 9.8 Gigawatts of nameplate manufacturing capacity and last month, we commenced initial production at our next generation series seven factory in Ohio, which will continue to ramp through 2023.
We are also on track to complete the construction and commenced the ramp of our series seven factory in India during 2023.
Furthering our manufacturing expansion program in 2022, we announced a new three five gigawatt series <unk> factory in Alabama and.
And a 0.9 gigawatt increase to nameplate capacity at our Ohio factories.
By 2026, we expect U S nameplate capacity of approximately $10 seven gigawatts and global nameplate capacity of approximately 21 four gigawatts.
We also announced that 2022 and additional investment in a dedicated $270 million research and development facility to be located near our existing perrysburg manufacturing plant in Ohio.
We expect that this investment will improve cycles of learning and innovation and reduce downtime on our commercial production lines, while allowing us to produce full sized prototypes of both thin film in tandem PV modules.
Strategically we were able to largely exit our legacy systems business in 2022.
Which enables us to focus on our greatest technology and competitive advantages.
Alex will discuss potential remaining legacy costs and opportunities related to this business. When he provides guidance later in the call.
Looking forward, we continue to evaluate the opportunities for further investments in incremental manufacturing capacity, including both greenfield expansion and throughput optimization at our currently planned capacity.
This evaluation will require among other things and understanding of the anticipated IRS and Treasury IRS guidelines.
Including the respect to domestic content as well as confidence in the presence of robust supply chain that supports our expansion objectives.
Therefore, no expansion decisions have been made at this time.
Turning to slide four.
Next discuss our most recent shipments and bookings in greater detail.
We shipped approximately two three gigawatts in nine three gigawatts for the fourth quarter and full year 2022, respectively.
Which was within the guidance range that we provided during the third quarter earnings call.
As a reminder, we generally defined shipment is when the delivery process to a customer commences, whereas revenue recognition our volume sold.
Occurs at a transfer of control of the modules to the customer which is commonly upon arrival destination Port project site.
With regards to bookings, we have sustained our reasonable manner with.
With 12 Gigawatts of net bookings since the third quarter earnings call at an average base ASP of <unk> 38 per watt.
As previously noted we are seeing a perceptible shifts and procurement behavior as evidenced by the volume of multi year multi gigawatt of orders placed by our customers.
At the beginning of 2022 large developers such as intersect power <unk> VP national grid.
<unk> energy Savion, Silicon Ranch and Swift current among others.
<unk> orders for at least two gigawatts.
The fact that many of these transactions are with repeat buyers as an indication of the trust and shared values that underpin our customer relations.
And it is clear differentiator from the most more transactional approach taken by many of our competitors.
After accounting for shipments of approximately $2 three gigawatts during the fourth quarter, our future expected shipments, which now extend into 2029 or 67 seven gigawatts.
Excluding India and including our year to date bookings were sold out through 2025.
We have in recent months pivoted from.
Negotiating solely for 2026 volume to work with customers, who are looking to secure multiyear contracts over the remainder of the decade.
As a result of this commercial shift we have not as previously expected as of the third quarter earnings call fully sold out of our non India production in 2026.
We have sold more of the more volume than previously expected for deliveries in 2007 and beyond.
Total.
We now have 25, five gigawatts of planned deliveries in 2026 and beyond an increase of $12 three gigawatts from our prior earnings call.
I'll now turn the call over to Alex who will discuss our Q4 and full year 2022 results.
Okay.
Thanks Mark.
Starting on slide five I'll cover our financial results for the fourth quarter and full year 2022.
Net sales in the fourth quarter of one 1 billion, an increase of <unk> 4 billion compared to the prior quarter.
Our module segment net sales were $846 million, an increase of $226 million from the prior period.
The increase in module revenues driven by higher volumes sold.
We offset by a slight reduction in asps.
The remaining increase in on net sales was attributable to the completion of the sale of our <unk> project in Chile.
For the full year 2022, net sales were $2 6 billion compared to $2 9 billion in the prior year.
This decrease was driven by <unk> 4 billion of lower revenue from our residual business operations.
Can you just divestitures of our project development businesses in the United States, Japan, along with the divestitures of our North American and international O&M businesses.
The decrease in our other segment revenue was partially offset by a <unk> 1 billion increase in our module segment revenue due to higher volumes of module sold partially offset by a reduction in asps.
Yes.
Gross margin was 6% in the fourth quarter compared to 3% in the third quarter, primarily due to lower module and freight costs, partially offset by a reduction in asps.
For the full year 2022, gross margin was 3% compared to 25% in the prior year.
Full year gross margin was negatively impacted by reductions in module asps.
A sale of certain projects in the prior year higher sales freight and demurrage charges and the net impairment and sale of our Lucedale Northern project, partially offset by lower module costs.
Sales freight logistics costs adversely impacted our financial results, reducing gross margins by 19 percentage points in 2022, compared with 11 percentage points in 2021, and six percentage points in 2020.
Given the recent decline in spot rates and the reversion of the shipping market towards pre pandemic conditions, we expect sales freight and logistics charges to be less of a headwind in 2023.
As a reminder, many of our module manufacturing peers report sales rate as a separate operating expense outside of the gross margin.
For comparison purposes, we encourage you to consider this factor when benchmarking our module gross margin percentage with our peers.
Yes.
SG&A R&D and production startup expenses totaled $107 million in the fourth quarter, an increase of approximately 11 million relative to the prior quarter.
This increase was driven by a $13 million increase in production startup expense primarily related to the addition of our third factory in Ohio, which was partially offset by lower share based compensation expense.
Our fourth quarter operating loss was $46 million.
Which included depreciation and amortization of $71 million.
Some startup expense of $33 million.
Share based compensation expense of $8 million.
Our full year 2022, operating loss was 27 million, which included depreciation and amortization of $270 million.
Since startup expense of $73 million.
Net losses of $48 million associated with the sale of our <unk> project and.
Share based compensation expense of $29 million.
Partially offset by a 254 million net gain from the sale of certain businesses.
With regard to other income and expense in connection with the sale of our <unk> project in the fourth quarter. The project's lenders agreed to forgive a portion of the outstanding loan balance, which resulted in a gain of $30 million recorded within other income.
Separately interest income in the fourth quarter was $18 million, an increase of $8 million compared to the prior quarter.
And interest income for the full year, 2022 was $33 million and lease of $27 million compared to the prior quarter.
Both increases were driven by higher interest rates on our cash and marketable securities balances.
We recorded an income tax expense of $1 million in the fourth quarter.
For the full year, we recorded tax expense of $53 million, primarily attributable to the sale of our Japan project development platform and uses certain losses in Chile, which we know which no tax benefit could be recorded.
Fourth quarter loss per diluted share was <unk> <unk> compared to <unk> 46 cents in the prior quarter.
For the full year 2022 loss per diluted share was <unk> 41.
Compared to earnings per diluted share of $4 38 in 2021.
2022, EPS results came in above the midpoint of the guidance range that we provided during the third quarter.
Next turning to slide six to discuss select balance sheet items and summary cash flow information.
Okay.
The balance of our cash cash equivalents restricted cash restricted cash equivalents in marketable securities was $2 6 billion at the end of the year, an increase of <unk> 7 billion from the prior quarter and <unk> 8 billion from the prior year.
Our year end net cash position, which includes the aforementioned balance less debt was $2 4 billion, an increase of <unk> 7 billion from the prior quarter and <unk> 8 billion from the prior year.
The increases in our net cash balance was primarily driven by module segment operating cash flows, including higher advanced payments received for module future module sales, partially offset by capital expenditures associated with our new plants under construction in the United States and India.
Yes.
Cash flows from operations were $873 million in 2022, that's a $238 million in 2021.
Capital expenditures were $327 million in the fourth quarter compared to $223 million in the third quarter.
Capital expenditures were $904 million in 2022 compared to $540 million in 2021.
With that I'll turn the call back to Mark will provide a business and strategy update.
Alright, Thank you Alex.
Looking forward to 2023 were pleased to enter the year with solid fundamentals, including a record backlog of orders and the manufacturing capacity growth plan that is well underway.
We are on track to add six two gigawatts of global nameplate manufacturing capacity. This year as our new series seven factories come online in the U S and India.
We expect to exit 2023, 16 gigawatts of annual nameplate capacity.
We also expect 2023 to be a pivotal year as we build on the foundation established in 2022 to scale manufacturing invest in R&D.
And evolve our technology and product Roadmaps.
In addition, we expect to begin benefiting from the advanced manufacturing and production tax credits provided for under section 45 ex of the inflation reduction Act.
We await IRS and treasury guidance that we expect will reflect the statues language and intend to incentivize the domestic production of modules and the related components.
Given our fully integrated thin film manufacturing process.
We expect that this guidance will entitle us to integrated tax credits for wafers sales and module Assembly.
Which we estimate will equal approximately <unk> 17 per watt per module produced in the United States and sold to a third party.
Finally, we expect to host an analyst day event at our manufacturing facility in Ohio later this year.
On a date to be announced to deliver an overview of our technology product and manufacturing roadmaps as well as to highlight our newest Ohio factory.
Turning to slide seven as previously noted our new series seven factories remain on schedule.
The U S factory commenced initial production in January of 2023 and.
And we will continue to ramp over the remainder of 2023.
Our India factory is forecasted to begin production in the second half of 2023 and ramp into 2024.
Once fully ramped these factories are expected to leave the fleet in terms of module wattage and efficiency and regionally on a cost per watt basis.
Based on our current technology roadmap, we see the potential for meaningful improvement in our module performance with our mid term goal of achieving a 571 mono facial series seven module.
As we significantly increase our nameplate capacity, we believe this anticipated growth when balanced with liquidity and profitability will.
We will drive earnings accretion as contribution margin expansion is leveraged against our largely fixed operating expense structure.
As a reflection of this expansion roadmap.
And continued optimization of the existing fleet.
We have summarized our expected exit nameplate capacity and production for 2023 to 2026 on this slide.
Yes.
Turning to slide eight.
Our total bookings opportunities of 93, one gigawatts remained robust.
With 58 Gigawatts in mid to late stage customer engagement.
When combined with our current record backlog of 67 seven gigawatts.
We believe we are well positioned for growth with a solid foundation of demand visibility.
As it relates to converting the pipeline into future bookings a record bookings in 2022 were driven by the favorable balance of near to mid term available supply aligned.
Aligned with customer demand for large volume multiyear procurement.
Timeline into which we are now selling as longer dated and historic U S sales cycles.
As a consequence this could result in year on year reduction in bookings volume as we look to sell long term forecast for supply in 2026 and beyond.
Our commercial strategy remains largely focused on supporting long term multiyear customers, who prioritize price and product availability certainty as well as ethical and transparent supply chains.
Furthermore, this demand environment supports the rationale for the <unk>.
<unk> future capacity growth.
Subject to the aforementioned considerations related to expansion, including those related to IRA domestic content guidance and the assessment of our supply chain.
Before turning the call back to Alex I would like to take a brief moment to touch on the global policy environment.
Broadly speaking 2022 placed us on the cost of significant growth in domestic solar manufacturing within our core markets as policymakers here in the United States and leading democracies abroad demonstrate they are serious about tackling the unhealthy over concentration of solar supply chains in China and the.
<unk> that come with it.
In fact, 2022 saw industrial policy designed to spur investment and create jobs at scale.
The year saw a tangible progress in the U S with the passage of the inflation reduction at in India with the production linked incentive program and movement towards sparing domestic manufacturing within the European Union with the introduction of the Green deal industrial plan.
Furthermore, we've also seen a significant uptick in legislation focus on tackling the issue of forced labor with the passage of the weaker force Labor Prevention Act in the United States, and similar laws and initiatives either implemented or under consideration in Europe , the United Kingdom, Australia and Japan.
Significant recent and ongoing policy developments demonstrate that governments around the world are supportive of solar technologies that can be scaled in a sustainable manner for both people and the planet.
I'll now turn the call back over to Alex who will discuss our financial outlook and provide 2023 guidance.
Thanks Mark.
Before discussing financial guidance I'd like to reiterate our approach to growth and gross margin expansion.
As discussed on our second quarter earnings call. This strategy includes our approach of contracting out our capacity several years in advance of production.
We anticipate a reduction of our cost per watt produced.
<unk> benefits from capacity expansion through scaling a largely fixed overhead structure in order to generate incremental contribution margin.
And our agile contracting approach with both both provides the potential realization of incremental revenue and is expected to mitigate freight and certain commodity risks.
As we look to 2023 guidance, we continue to see this approach benefiting our forecasted financial results relative to 2022.
For the full year, we expect to recognize an average ISP sold of $28.05 per watt approximately one penny higher than in 2022.
Looking across the horizon as I showed in the 10-K filing as of 31 December 2022, we had a total contracted backlog of 61, four gigawatts with expected future revenue of $17 7 billion.
For a portfolio average base ASP of $28 eight per watt before the application of potential justice.
Okay.
As it relates to cost and our contracting approach and their impacts on both the potential value of the technology Justice, which reflected in the 10-K filing and our 2020 financial guidance.
I'd like to provide a brief update on the timing of our technology and cost Roadmaps.
With technology roadmap perspective, we continue to work to prove out both by face reality, and our copper replacement or cure program.
<unk> well with both initiatives.
However, even if ready for high volume manufacturing deployment, we expect to elect to push out implementation of these technologies across the majority of the fleet for two reasons.
Firstly technology implementations typically necessitate manufacturing downtime, both to make tooling and process changes and to conduct preproduction trials.
And as we are sold out through 2025 with limited ability to delay shipments significant downtime would be suboptimal to executing on our delivery commitments.
Secondly, we typically rollout technology improvements that our perrysburg facilities and then once fully optimized across the remainder of the fleet.
This leads to a potential for greater downtime in perrysburg during initial rollout, which has the highest opportunity costs given the anticipated value of domestically produced modules.
From an IRI domestic content and section 45 ex perspective.
Our new dedicated R&D facility projected to be operational in mid 2024 is expected to alleviate the need for choosing between downtime and implementation.
By providing a means to optimize these technology improvements with significantly less disruption to our commercial manufacturing lines.
With respect to the potential value of the adjusters related to potential future technology improvements as reflected in the 10-K.
Push out of these technology programs will result in a reduction in the supply of products with these technology improvements leading to an expected reduction in technology at Justice, particularly in 2024 and early 2025.
We are correspondingly reduced our estimate for these adjusted from <unk> 7 billion across 31, four gigawatts in Q3.
To <unk> 5 billion across 31, five gigawatts in Q4.
From a cost reduction roadmap perspective as it relates to cost what produced we ended Q4 2022, 5% lower in Q4, the previous year at the midpoint of our original forecast of production range of 4% to 6%.
This was used the throughput yield and efficiency improvements and reductions in variable costs.
Slightly offset by increases in fixed costs.
We've been able to achieve a sustained cost reduction roadmap over the last several years, having reduced our cost per watt produced by 18% from Q4 2019 to Q4 2022.
On a full year 2022 to 2023 basis, we expect a 1% to 2% reduction in cost per watt produced driven by improvements in throughput yield efficiency and inbound freight.
Partially offset by higher fixed costs and a headwind from the conversion of all production to hide mechanical load modules in 2023 to optimize order fulfillment management and logistics.
With regards to high versus standard mechanical load modules, we may reintroduce the standalone product in future years and in doing so we would expect to see a cost benefit.
As it relates to exit rates, comparing Q4 2022 to Q4 2023, we're forecasting a cosport produced increase of 4% to 6% or approximately <unk> <unk> per watt.
It is driven by several factors, including costs driven by the expected implementation of <unk> at our lead line in Perrysburg in Q4 of 2023, which results in a reduction in front sidewalk offset by the higher energy production profile.
Planned downtime associated with our series six throughput optimization in Ohio.
And a headwind associated with our series seven factory in Perrysburg exiting its ramp phase in mid to late 2023, but not yet operating at full scale by year end.
As it relates to costs what sold we ended Q4 2022 with a 2% year over year increase over Q4 2021 in line with our most recent forecast.
This was largely due to higher sales freight and logistics costs.
2023, we expect sales freight and logistics costs trend back towards pre pandemic levels throughout the year.
Several key metrics, including reliability of schedule Transit times and congestion are currently trending positively. However, transit time volatility generally and labor relations in west coast ports pose potential headwinds.
We are working to mitigate these issues through shipping routes and port of entry optimization and through further utilization of our warehousing network.
In addition, as part of our contracting strategy approximately 67% of our volume sold in 2023 as some form of sales rate risk coverage look given the forecast a reduction in sales freight and logistics costs.
Limited excess recovery in 2023.
On a cents per watt basis, we expect our full year sales freight and logistics costs to be approximately $2 seven per watt.
International transit costs remaining above pre pandemic.
Taken together, we forecast Cosport produced.
On the utilization and sales freight and logistics costs combined to yield a Q4 2022 to Q4 2023 net reduction in cost per watt sold of 9% to 11%.
And full year 2022 to 2023 cost what sold reduction of 7% to 9%.
On a full year basis expected to ramp in underutilization costs impact our costs, what sold reduction by approximately four percentage points.
Okay.
With respect to other commodities, we continue to largely mitigate exposure to loss costs through strategic long term predominantly fixed price agreement with domestic suppliers.
Economic benefits to us as we achieve high levels of production.
We do expect some near term volatility in glass pricing given that the contractual provisions in our supply contracts relating to input cost adjustments.
On a backward looking basis.
And therefore, you're seeing a slight increase in cost in the first half of 2023, which is expected to then reduced in the second half of the year.
From a frame perspective, theres been a reversion of aluminium and steel rates back to historical levels. We expect these costs to be less of a headwind in 2023.
Ladies disclaiming costs, we have hedged 90% of our aluminum exposure for our series six U S plants in 2023, which is approximately one third of our series six production.
In addition, substantially all of our series seven production, which utilizes a steal back rail is subject to contractual steel of justice.
Okay.
And lastly, with respect to operating expenses. Despite a forecasted increase in operating expenses in 2023, particularly related to research and development we.
We continue to scale manufacturing capacity at a greater rate than operating expenses, leveraging our fixed cost structure to reduce operating expense per watt and increase operating margin.
Yes.
With this in mind I'll next discuss assumption.
'twenty three financial guidance, please turn to slide nine.
Strategically in 2022, we completed the sale of our Japan project development business, our Japan O&M business on our Chilean <unk> multi asset.
In January of this year, we completed the sale of our 10 megawatt America operating asset in India, bringing our PV solar power systems balance on our balance sheet as of today two zero.
With these sales we have effectively transitioned back to a module only company we.
We do have set remaining risks liabilities indemnities warranty obligations accounts payable accounts receivable announce cash collection dispute resolution and other legacy involvement related to our former systems business.
Given the given the declining impact of our other segment, we will no longer provide segment specific guidance.
But shallow in the future note any significant impact from the other segment to our consolidated financials.
Okay.
As it relates to capacity expansion of factory expansion and upgrades remain on schedule and are expected to impact operating income by approximately $195 million to $220 million in 2023.
This is comprised of startup expenses of $85 million to $90 million, primarily incurred in connection with our new factories in Ohio and Indiana.
An estimated ramping underutilization cost of $110 million to $130 million.
We anticipate these expansions and upgrades will contribute meaningfully to our production plans in 2024 and beyond.
Operationally in 2023, we're expecting to produce 11 five to $12 two gigawatts of modules and.
And after taking into account reductions in inventory sell 11, 8% to 12 three gigawatts.
From a capital structure perspective, our strong balance sheet has been and remains a strategic differentiator, enabling us both to weather periods of volatility as well as providing flexibility to pursue growth opportunities.
<unk> self funding our series six and series seven transitions.
We ended 2022 and a strong liquidity position.
With strong forecasted operating cash flows modular of advanced payments and our existing India credit facility, we expect to be able to finance, our current capital program without requiring external financing.
We are evaluating and putting in place a revolving credit facility to support jurisdictional cash management.
Well as to provide short term optionality.
We expect to address more details on our capital structure and liquidity outlook at our analyst day.
Finally, a few words on the inflation reduction X.
The IRI offers amongst other incentives.
Reduction tax credits for solar module and solar module components manufactured in the U S and sold to third parties.
Although we continue to await guidance from the IRS and Treasury regarding these credits under section 40 <unk> of the statute.
Based on our view of both the intention of the credit and the language of the legislation we intend to begin recording a corresponding benefit in our financial statements in Q1 of 2023.
Following consultation review with outside advisors, our auditors and the SEC.
We expect to recognize these credits as a reduction to cost of sales in the period such modules and the integrated eligible components are sold to customers.
In addition, these credits will also be shown as government grants receivable on our balance sheet.
We encourage you to review the Safe Harbor statements contained in today's press release and presentation to the risks related to our receiving the full amount of tax benefits that we believe we are entitled to under the IRA.
Yes.
I'll now cover our full year 2023 guidance ranges on slide 10.
Our net sales guidance is between three four and $3 6 billion.
Gross margin is expected to be between one two and $1 3 billion, which includes $660 to $710 million of advanced manufacturing production tax credits under section 45 acts of the IRI.
And $110 million to $130 million of ramp and Underutilization cost.
SG&A expense is expected to total $175 million to $185 million compared to $165 million in 2022 and $170 million in 2021.
R&D expense is expected to total $155 million to $165 million.
It's a $113 million and $99 million in 2021 and 2022, respectively.
2023 expenses, increasing primarily due to our expectation of adding head count to our R&D team to further invest in advanced research initiatives.
SG&A and R&D expense combined is expected to total $330 million to $350 million and total operating expenses, which includes $85 million to $90 million of production startup expense.
<unk> to be between $415 and $440 million.
Operating income is expected to be between $745 and $870 million.
That is inclusive of $195 million to $220 million of combined ramp and on the utilization costs and plant start up expenses.
And $660 to $710 million of section 40 by next credits.
Turning to nonoperating items, we expect interest income interest expense and other income to net to $60 to $75 million, which is predominantly driven by higher expected interest rates for deposits.
Full year tax expense is forecast to be $60 to $85 million.
Tax expense for 2023 is largely driven by the U S blended tax rate of approximately 25%. However, we also expect a significant loss in EMEA as we begin manufacturing for which we will not receive a current benefit leading to a higher effective tax rate.
This results in a full year 2023 earnings per diluted share guidance range of 7% to $8.
Okay.
Note from an earnings cadence perspective, we anticipate our earnings profile will be higher in the second half of the year.
Just use contractual delivery schedules as well as the timing of such sales of our series seven products, which are forecast to begin shipping in Q3 of this year.
This is forecasted to result in increase in inventory at our distribution centers in the first half of 2023.
Which is expected to reverse in the second half of the year.
Additionally, section 45 X credits.
Recognized will increase after Q1, driven by both the timing of volume sold as well as the inventory lag whereby products sold in the early part of 2023 may have been manufactured in 2022.
Capital expenditures in 2023 are expected to range from one nine to $2 1 billion as we complete the construction of our Ohio in India series seven plants.
Construction on our Alabama series seven plant implement throughput upgrades to the fleet.
Best in other R&D related programs.
Our year end 2023, net cash balance is anticipated to be between one two and $1 5 billion.
The decrease from our 2022 year end net cash balance is primarily due to capital expenditures, which we expect will be partially offset by financing proceeds in customer advance payments.
Turning to slide 11, I will summarize the key messages from today's call.
Demand has been robust with 12 gigawatts of net bookings since the prior earnings call leading to a record contracted backlog of $67 seven gigawatts.
Our opportunity pipeline remains strong with a global opportunity set 93, one gigawatts, including mid to late stage opportunities of 58 Gigawatts.
On the supply side, we continue to expand our manufacturing capacity and expect to exit 2026, approximately 21, four gigawatts of nameplate capacity.
Including approximately $10 seven gigawatts of nameplate capacity in the U S.
We are as previously announced adding a new dedicated R&D facility in Ohio projected to be operational in mid 2024, which we believe will allow us to optimize technology improvements with significantly less disruption to our commercial manufacturing lines.
Okay.
We ended the year with a gross cash balance of $2 6 billion or $2 4 billion net debt, which is an increase to both gross and net cash of $800 million versus the prior year.
But we believe this puts us in a position of strength to expand our capacity invest in research development and technology improvements and pursue other strategic opportunities.
Finally, we are forecasting full year 2023 earnings per diluted share of seven to $8.
With that we conclude our prepared remarks and open the call.
Operator.
Thank you and everyone to ask a question simply press Star then one on your telephone keypad.
And then at Star one interim Mckee, Great question and answer session and now we'll take a question from Philip Shen of Roth.
Okay.
Hey, guys. Thanks for taking my questions.
First.
Topic here is on bookings congrats on your Silicon Ranch light source deals.
It looks like you had seven gigawatts of incremental bookings in the quarter.
Can you share what the pricing might look like.
It incorrectly higher or lower versus the last quarter I think from Q3.
Your incremental bookings were maybe 31 six versus <unk> 31.
31 cents per watt in Q2.
And then how should we think about bookings momentum ahead. It sounds like you are expecting more multi year agreements.
And what do you expect some pricing there and then shifting over to domestic content.
Yes.
In the last call you guys talked about.
Contracting one four gig domestic content I think in 'twenty three.
Representing roughly <unk> of value.
How much have you done since then and how much of that is ultimately factored into guidance and then finally for housekeeping question here.
I think you shipped two four gigawatts in Q4, but how many megawatts recognized in revenue versus the $846 million of module.
Revenue in Q4, thank you very much.
Alright.
On the bookings side.
So.
Since our last earnings call, we booked 12 gigawatts.
Since year end, we bought seven three gigawatts.
If you look at our.
Disclosure thats in the K, I think Alex referenced it as well or.
Contracted backlog revenue is a little less than $18 billion as of the end of the year 2000.
$17 seven.
Implied the implied.
ASP on that is like 28 eight.
And if you do the math on the walk from the prior quarter I mean, youll get something around 31, I believe theres a lot of routing and stuff that's going on in there.
What we did say is that on the 12 Gigawatts that we book since the last earnings call. The ASP on that was <unk>.
38.
If I look at the Asps for what we booked in the first quarter. This year, so far right through the earnings call here today that asps higher than that 38. So the average asps that we booked for the seven three is higher than five that we book since the other portion of the total.
Bookings since the last earnings call. So Isps are pretty in a pretty solid position I guess, the other way I look at it as just from the Q3 10-Q, two the 10-K at year end I think we added about eight tenths of a cent or something to the average asps. So you saw it looks like 2008 or something like that in the prior quarter now it's like 28.
Eight.
We're seeing a lot more bookings now obviously.
Here than that and if you were to include the.
The bookings that we have for January and February I think the Youll add about two to $2 3 billion of revenue or something like that and the average ESPN that contracted backlog I think goes to be slightly above 29. So we're very happy with with what we're seeing from from it from an ASP standpoint, obviously, the trajectory and remember.
We're booking a lot more volume that is not.