Q2 2023 First Solar Inc Earnings Call
Hello, Good afternoon, everyone and welcome to first solar first quarter 2023 earnings call. This call is being webcast live on the investors section of first solar as Bob said at Investor Day first solar Dot com at this time all participants are in a listen only mode. As a reminder, today's call is being recorded.
I would now like to turn the call over to Richard Romero from first solar Investor Relations. Richard you may begin.
Good afternoon.
Afternoon, and thank you for joining us.
Today, the company issued a press release.
Second quarter 2023 financial results.
Copy of the press release and associated presentation.
One first of all with web site at Investor first of all their dot com.
With me today are Mark Widmar, Chief Executive Officer, and Alex Bradley Chief Financial Officer.
Mark will provide a business update.
Alex will discuss our financial results and provide updated guidance.
Following their remarks, we'll open the call for your questions.
Please note. This call will include forward looking statements that involve risks.
And uncertainties 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.
This presentation for a more complete description.
It is now my pleasure to introduce Mark Widmar, Chief Executive Officer.
Thank you Richard good afternoon, and thank you for joining us today.
With half of 2023 behind US we continue to see strength in commercial operational and financial foundations, both in 2023 and in the coming years as we continue to grow.
The second quarter of the year continued to steady progress established in the first as.
As we ramped up production.
And delivery of our next generation series seven modules Green.
To reinforce our global leadership in thin film PV with a strategic acquisition.
And continued our strong bookings and ASP momentum.
Moreover, continuing our commitment to sustainable long term growth.
Earlier today, we announced that we will invest up to $1 1 billion and building a new fully vertically integrated manufacturing facility in the United States, our fifth in the country.
Driven by compelling market fundamentals support of trade and industrial policies and robust customer demand as reflected in our year to date bookings total contracted and booked backlog.
Pipeline of mid to late stage opportunities.
We're pleased to continue to expand and invest in domestic manufacturing in United States.
This new facility is anticipated to be completed and began production in the first half of 2026.
And along with our Alabama facility currently under construction.
Produced R series, seven module, which is expected to be a fully domestic product as determined by the current guidance issued by the U S Department of Treasury.
This new investment puts us on track to grow our manufacturing footprint to approximately 14 gigawatts in the U S and 25 gigawatts globally by 2026.
Reaffirming the growth thesis, we established in November 2016.
As noted on previous earnings call.
The position we're in today is enabled by our points of differentiation.
Our unique can't sell semiconductor technology.
Vertically integrated manufacturing process.
Decision to locate manufacturing close to demand and develop robust local supply chain.
And unwavering commitment to responsible solar.
Makes us a partner of choice for large sophisticated developers.
<unk> in the U S and internationally.
As reflected by our continuing bookings progress since the previous earnings call.
This depreciation continues to be a driver of long term growth and competitiveness.
<unk> seen us in a position to exit this decade, and a stronger position than we entered it.
Beginning on slide three I will share some key highlights from the second quarter.
We continue to build on our backlog with eight nine gigawatts of net bookings since our last earnings call.
<unk> was $29 three per watt, excluding adjusters where applicable.
Notes for approximately half of this volume the customers responsible for the associated freight cost, which are therefore not reflected in book Asps.
Including typical freight costs the average ASP across these bookings with increased increased to over 30 per watt.
These bookings, bringing our year to date net bookings to 21, one gigawatts.
Our total backlog of future bookings now stands at 78 three gigawatts.
Including 48, five gigawatts of mid to late stage opportunities.
As it relates to manufacturing we produced two four gigawatts of series six modules in the second quarter.
With an average watts per module of $4 68.
Tom Ben Class $4 75 watts.
The manufacturing yield of 98%.
As noted in Q1 earnings call, our third, Ohio factory, which establishes the template for high volume series seven manufacturing began.
Missions in January .
And it is continuing to ramp.
Demonstrating our manufacturing production capability up to 13000 modules per day.
Which is approximately 84% of nameplate throughput.
The factor has produced a total of.
425 megawatts in Q2.
Total first half 2023 production of 595 megawatts.
The factory recently demonstrated a top module wattage produce.
540 watts.
Which implies a record production efficiency of 19, 3%.
We sold 215 megawatts of series seven modules in Q2.
We're pleased to note that the product is.
He is already being deployed in three projects in Arkansas, Arizona and Mississippi.
Staying on technology, we also announced during the quarter.
<unk> production run of our first bifacial module panels utilizing an advanced in terms of semiconductor the module, which is undergoing field and laboratory testing.
On the track record that energy advantage attribute first solar successful series six mono facial module platform.
And we expect to begin lead light commercial production by Q4 2023.
Notably.
The bifacial module features an innovative transparent back contact pioneered by first solar as research and development team.
Transparent back contact in addition to enabling bifacial energy gains.
Infrared wavelengths of light pass through rather than be absorbed that seat.
This is expected to lower the operational temperature of the bifacial module resulted in higher specific energy.
We believe that the transparent box that contact is a foundational step towards the development of future tandem products.
Similarly, our acquisition of the whole or the European leader in citizens Perovskite since <unk> technology is also expected to accelerate the development of next generation TV EV technology.
Including high efficiency tandem devices.
By integrating nimble ours Knowhow with first solar is existing research and development streams.
Intellectual property portfolio and.
And expertise in developing and commercially scaling thin film PV.
Moving to slide four we continued to make steady progress at our manufacturing and R&D facility expansions.
Starting with India construction of the factory is now complete.
Preproduction testing of the installed tools is ongoing.
With the first complete module, having been produced in June .
We expect this facility to begin production by the end of August this year.
And when fully ramped at three four gigawatts of annual nameplate manufacturing capacity.
Sure.
We're also on track to expand and upgrade our Ohio series six factories to achieve an additional aggregate annual throughput.
One nine gigawatts.
With the additional capacity expected to come online in 2024.
Similarly, our new Alabama facility is also on schedule for completion by the end of 2024.
With commercial operations ramping through 2025.
This facility is expected to add three five gigawatts of annual nameplate capacity once fully ramped.
Increasing our annual nameplate capacity in the U S to over 10 Gigawatts by 2025.
As it relates to our fifth U S manufacturing facility announced earlier today.
We continue to evaluate siding options based on the availability of suitable land and related infrastructure.
Oximetry to our supply chains.
Access to skilled labor and other factors, including the availability of state level incentives.
We expect to announce our location decision shortly.
Our dedicated R&D facility is also on track with construction, well underway and tool sets or.
As previously noted this facility will feature a high tech pilot manufacturing line.
Allowing for production of full sized prototypes of thin film antenna TV modules.
This we believe will allow us to optimize our R&D efforts and progress our technology roadmap.
With significantly less disruption to our commercial manufacturing lines.
No since the announcement of the inflation reduction at <unk>.
Approximately one year ago, we have committed over $2 8 billion in capital investments since the United States across our existing Ohio manufacturing facilities are new.
Manufacturing plant in Alabama.
Our new research and development Center in Ohio, and most recently our fifth.
Factory announced today.
We expect this will result in the creation of approximately 700, new direct jobs as well as multiples of this number and incremental indirect jobs, including across our supply chain.
Before we move to the next slide I would like to take a moment to discuss the policy environment in our key markets.
Starting in the United States.
We are appreciative of the work done by the by the administration to issue IRA related guidance on section 48 C direct pay.
Tax credit transfers and domestic concept.
We are pleased with the direct pay regulations issued during the quarter clarifying that a five year direct pay period under section 45 X may be elected on a facility by facility basis.
Which will benefit our previously announced factory in Alabama as.
As well as our new facility announced earlier today.
We are actively engaged with the administration and working with our customers to ensure that the guidance, particularly with regards to domestic content.
We'll deliver on the Iras intent is sustainably grow U S manufacturing and we sure are vital clean energy supply chain.
Before specific specifically more specifically on domestic content.
We have shared our comments on the current guidance with the administration and are working to provide our customers with a direct cost information needed to enable their ability to benefit from the bonus credit for using U S made contact.
Our U S produced modules.
Ah well position to enable our customers to qualify for the domestic content bonus credit.
Both our vertically integrated manufacturing process for the entire module, including the sale.
Is manufactured in America.
And our commitment to investing in domestic supply chain.
Today, our U S operations use a 100% U S made glass and steel among other components.
As it relates to trade we are awaiting the department of Commerce's final determination and its investigation.
Chinese manufacturers accused of circumventing U S antidumping and countervailing duties.
We believe that the department's investigation is a step in the right direction and sends a clear signal that the United States remains committed to the rules of international trade law.
And to trade that is both.
That's fair.
Relatedly, we applaud the role of U S customs and border protection and enforcing the we're forced labor Protection Act and its transparency and reporting statistics through a public dashboard.
Given the significant undertaking required to execute its mandate under the act.
We believe the agency needs to be more adequate resource to ensure the enforcement.
He has extended beyond the handful of high profile Chinese solar manufacturers currently being scrutinized.
The relatively narrow scope of enforcement.
There'll be allow lesser known solar panel manufacturers, who may source their polysilicon from the Xinjiang region of China.
Freely export their products into the U S without risk of attention.
Internationally.
We continue to follow a policy developments in Europe , where the EU is working towards a path to energy self sufficiency.
However, we are cautious and that the market given the recent collapse in poly silicon pricing.
And the impact that irrationally cheap solar panels, driven by oversupply and dump it into Europe may have on the political wellness to deliver a comprehensive legislative solution.
Both levels, the playing field and incentivizes domestic manufacturing.
While we remain engaged with the EU. We are pleased to see its member states move forward.
With their own plans to reassure silver manufacturer.
Most notably, Germany, Federal Ministry of Economics, and climate protection.
<unk> launched a request for expression of interest.
And our plan to build approximately 10 gigawatts of vertically integrated solar manufacturing capacity in the country.
The Ministry launched the initiative under the Europe's temporary crisis and transition framework.
And we intend to submit a nonbinding expression of interest.
However, we continue to hold the position that manufacturing capex incentives alone are not adequately sustainable solution. So Europe's challenges.
Its mechanisms are not fully in place for domestic manufacturers have a sustained level playing field for their capital investments.
Eric will find it challenging to see achieve what the U S and India have been able to do in a relatively short period of time.
Moving to slide five.
As of December 31, 2022.
Our contracted backlog totaled $61.
Four gigawatts.
With an aggregate value of $17 7 billion.
Through June 2023.
We entered into an additional $13 six gigawatts of contracted.
And recognized.
<unk> seven gigawatts of sold volumes.
Resulting in a total backlog of 73, gigawatts with an aggregate value of $28 billion.
Which equates to approximately $29 six per watt.
An increase of eight tenths of a penny compared to end of year 2022.
And 2.8 per watt compared to June 32022.
Since the end of the second quarter to date, we have entered into an additional seven five gigawatts of contracts, bringing our total backlog to date to a record 77 eight gigawatts.
Included in our backlog since the previous earnings call our contracts of approximately one gigawatt or more.
With new customers capital power development and matrix renewables USA.
As well as with our large European customer.
We also signed and announced on July 16.
A follow on five gigawatt deal with <unk> renewables.
A leading Israeli.
Oliver and repeat customer.
Four gigawatts, which sits within our bookings and one gigawatt of which is contracts subject to conditions precedent.
In addition, we.
Concurrently amended a previously booked.
Deal with <unk>, increasing the module ASP and committing to providing U S modules for 815 megawatts of their projects.
Since the announcement of the.
We have amended certain existing contracts to provide U S manufactured products.
As well as to supply series seven modules in place of series six.
As a consequence over the past.
Four quarters up to the end of Q2 2023, we have increased our contracted revenue by $312 million.
Cross nine two gigawatts or approximately $3 four per watt.
No. We are still progressing additional amendments associated with providing U S manufactured and series seven products, which.
Which we expect to be reflected in our Q3 contracted revenue backlog.
As we've previously address a substantial portion of our overall backlog includes the opportunity to increase the base ASP.
Through the application of Adjustors.
If we're able to realize achievement within our technology roadmap.
The required timing of for the delivery of the product.
As of the end of the second quarter, we had approximately $36 four gigawatts of contracted volume.
With these adjusters if fully utilized realized would result in additional revenue of up $2 7 billion.
Approximately <unk> <unk> per watt, the majority of which would be recognized between 2026 and 2027.
As previously discussed this amount does not include potential adjustments, which are generally applicable to the total contracted backlog.
For the Ultimate module, then delivered to the customer which may adjust the ASP under the sales contract upwards or downwards.
And for increases in sales rate or applicable aluminum or sales commodity price changes.
Finally, this amount does not include any remaining potential higher rate domestic constant price adjustments.
Of the already amended nine two gigawatts referenced above.
Our contracted backlog extends into 2030, including our most recent bookings.
Excluding India, we are sold out through 2026.
Note some production from India.
Is expected to be used to support U S deliveries in 2020 for 2025.
As reflected on slide six our pipeline of potential bookings remains robust.
With total booking opportunity so 78 three gigawatts.
A decrease of approximately 34 gigawatts since the previous quarter.
Our mid to late stage opportunities to decrease by approximately 24 Gigawatts to 48 five gigawatts.
That includes 41 Gigawatts in North America.
Five five gigawatts in India.
One eight gigawatts in the EU.
0.2, gigawatts across all of our geographies.
The decreases in total in mid to late stage pipeline from Q1 2023.
Q2 2023.
As a result of both.
Converting certain opportunities to bookings.
As well as the removal of certain other opportunities given our sold out position and diminished available supply.
They also reflect the removal of one large multi gigawatt multi year opportunity.
When we were unable to come to terms with the customer.
As we previously stated.
We will continue to for contract with customers to prioritize long term relationships and value our differentiation.
And given the strength and duration of our current contracted backlog, we will be strategic and selective in our approach to future contracting.
Included within our mid to late stage pipeline, our six seven gigawatts of opportunities that are contract subject to conditions precedent.
Which include one nine gigawatts in India.
Given the shorter timeframe between contracting and product delivery in India relative to other markets, we would not expect to save multiyear contracted commitments that we're currently seeing it in the United States.
As a reminder, signed contracts in India will now be recognized as bookings until we have received full security against.
Yeah.
Right.
Moving to slide seven.
Well Lee.
We will release, our annual sustainability report in the coming weeks, we'd like to take this opportunity to preview a few highlights with you.
As we have consistently noted our commitment to responsible solar is not a tagline.
On our way of doing business.
This commitment is underpinned by the belief that solar should never come at the expense of the environment or human rights and.
And drives our company's environmental social and governance strategy and differentiation.
It is this commitment that has driven down our greenhouse gas emissions.
Energy water and waste intensity for work produced.
And increased the percentage of women in our workforce in 2022 relative to the preceding year.
Our achievements built on previous year's successes.
And we have developed a roadmap with additional initiatives to reduce our absolute scope, one and scope two greenhouse gas emissions by.
By 34% by 2028.
And achieve net zero emissions relative to 2020 by 2050.
Crucially, we also recognize that we cannot get to net zero without a circular economy.
And we continue to make progress on building circularity and so our next generation modules and manufacturing processes.
Raw material sourcing to high value recycling with closed loop semiconductor recovery.
This is reflected in the fact that the series seven modules designed with sustainability in mind.
And as our most eco efficient product today.
It's also reflected in the fact that our new facility in India, which is located in the region of high baseline water stress.
It's designed to be net zero water withdraw TV manufacturers.
Which we believe to be the world's first.
As a purpose driven company.
We consistently hold ourselves to a higher standard.
And probably set new benchmarks in the hope that by leading by example, others in the solar industry will follow.
I'll now turn the call over to Alex who will discuss our Q2 results.
Thanks Mark.
Starting on slide eight I will cover our financial results for the second quarter.
Net sales in the second quarter with $811 million, an increase of $262 million compared to the first quarter.
Increase in net sales was primarily driven by strong market demand led to higher volumes sold commencement of sales of our next generation series set of modules and an increase in module asps.
Gross margin was 38 states in the second quarter, that's 20% of first quarter.
This increase was primarily driven by the increase in module Asps.
Sales freight costs and higher volumes of modules produced and sold in the U S. Resulting in additional credits from inflation reduction Act.
Based on our differentiated plus came to us and manufacturing model.
Form factor modules, we expect to qualify for a section 45 ex credit approximately 17 cents per watt French module sold.
Which is recognized as a reduction to cost of sales in the period of sale.
During the second quarter, we recognized $155 million of such credits.
At the $70 million in the first quarter.
We encourage you to review the Safe Harbor statements contained in today's press release and presentation. The risks relates to all receiving the full amount of tax benefit I believe we are entitled to under the IRA.
The reduction of sales freight costs during the quarter reflected improved ocean and land rates. That's a significant reduction in non standard charges contain a detention and demurrage as well as a beneficial domestic versus international mix of volume sold.
The lower sales what it costs reduced gross margin by eight percentage points during the second quarter compared to 15 percentage points in the first quarter.
Ramp costs, which include cost associated with operating a new factory below its target utilization and performance levels.
$29 million during the second quarter compared to $19 million in the first quarter.
Ram cost reduced gross margin by four percentage points in each of the first and second quarter.
Yesterday's land costs are fully attributable to our new series seven factory in Ohio, which is expected to reach its initial target operating capacity later this year.
We also begin to expect some kind of ramp costs at our new series seven factory in India in the third quarter.
SG&A and R&D expenses totaled $83 million in the second quarter, an increase of $8 million benefit assessed.
This increase was primarily driven by additional investments in our R&D workforce by R&D testing costs additional share based compensation expense professional fees.
Production staff and expense, which is included in operating expenses was $23 million in the second quarter, an increase of approximately $4 million.
Gotcha.
This increase was attributable to higher pre production costs at our new factory in India.
Has that started production in this quarter.
Our second quarter operating results included approximately $8 million non module revenue associated with project earn out payments from our former systems business.
We also recorded a litigation loss of $36 million associated with the dispute with the southern power company related to legacy EPC Green supply for projects, United States, which we served as the EPC contract.
Evaluating our options in relation to this litigation.
Year to date operating loss impact from legacy systems business related activities is approximately $22 million.
Second quarter operating income was 169 million, which included depreciation amortization and accretion of $72 million.
<unk> costs was $29 million production startup expenses of $23 million.
<unk> systems business related impacts of 28 million share based compensation expense.
We recorded tax expense of $18 million in second quarter compared to a tax benefit of $7 million first quarter.
The increase in tax expenses, driven by higher pretax income and lower tax benefits associated with share based compensation awards with the majority of these worlds best during the first quarter of each year.
Before mentioned items combined led to a second quarter diluted earnings per share of $1 59 to.
The <unk> 40 in the first quarter.
Of note gross related startup and ramp costs that impacted Q1, and Q2 by 38 and $53 million respectively.
Cumulative first half 2023 operating income impact of 91.
Next on to slide nine to discuss select balance sheet items and summary cash flow information.
Our cash cash equivalents restricted cash restricted cash equivalents marketable securities ended the closer of $1 9 billion versus $2 3 billion at the end of the prior quarter.
This decrease was primarily driven by capital expenditures associated with our new facilities in Ohio, Alabama, India and payments for our acquisition of Ebola.
Partially offset by boss payments received for future module sales and additional drawdown.
That facility.
So thanks to advanced payments, so substantially all contracts in our backlog at the time of booking we typically required payment security.
Cash deposit bank guarantees surety bonds less of credit commercial lessor credit guarantee.
Getting up to 20% of the contract value.
Cash deposits, which are reflected on our consolidated balance sheet as deferred revenue totaled approximately $1 5 billion at the end of the quarter.
Providing a meaningful portion of the financial resources required to fund our existing expansion effort.
Total debt at the end of the second goal was $437 million, an increase of $117 million from first quarter. As was also the loan drawdown under our credit facility for our factories in India.
Our net cash position decreased by approximately <unk> 5 billion to $1 5 billion as a result of the aforementioned factors.
Cash flows used in operations was $89 million in the second quarter, primarily due to expansion related activities capital expenditures were 393 million between periods.
During the quarter, we secured a five year revolving credit facility for $1 billion.
The focus on exiting this decade in a stronger position than we entered it and liquidity is a crucial differentiated we intend to maintain.
This facility provides us with the financial headroom and flexibility we need while also balancing our double digit growth in response to demand.
Yeah.
Continuing on slide 10, I'll discuss full year 2023 guidance.
As noted in our February guidance cool given declining impact of our other segments. We stated we are no longer providing segment specific guidance.
Wouldn't notice any significant impact to our consolidated financials.
As it relates to our legacy systems business year to date, we have seen approximately $20 million of revenue $14 million of gross profit.
So if you get plenty of litigation losses within operating expenses.
So really its a module business, we expect to see approximately $40 million improvement in gross profit relative to our prior guidance.
Given that size. These combined numbers do not impact our forecast of revenue and gross margin guidance ranges, which remain unchanged.
Note affiliates actually fully by next tax benefits forecast $660 to $710 million is also unchanged.
Our operating expenses guidance has increased to $450 million to $475 million reflect the aforementioned litigation losses.
Operating income and earnings per share guidance remains unchanged.
But the highlight and incentive earnings cadence over the second half of the year, we anticipate volume sold revenue.
<unk> 40 by next benefits, we distributed approximately 40% in the third quarter and 60% in the fourth quarter.
With operating expenses approximately evenly split between Q3 and Q4. This implies an expected second half 2023 Etfs split approximately one third in Q3 two thirds in Q4.
Okay.
Incremental capital expenses of approximately $100 million in 2023 associated with our newly announced U S factory.
All set by a push out from the timing of approximately $300 million of Capex associated with equipment upgrades previous assumed in 2023 into early 2024.
Our full year 2023 capital expenditure forecast has therefore reduced the one seven to $1 9 billion.
This reduction forecasted capital expenditure combined with an expected increase in deposits associated with future bookings.
Also as expected <unk> 3 billion increase.
Forecasted year end net cash balance.
Now one five to $1 eight.
So thanks to our longer term outlook beyond 'twenty three we plan to hold an analyst day at our highest campus on September seven this year this room to a live webcast.
Turning to slide 11, and I'll summarize the key messages from today's call.
Demand continues to be robust with 21, one gigawatts of net bookings year to date.
Including $8 nine Gigawatts of net bookings since our last earnings call due.
So a record contracted backlog 77 eight gigawatts.
Our continued focus on manufacturing technology excellence resulted in a record quarterly production of two eight gigawatts.
Our India, Ohio, Alabama expansions remain on schedule.
Expect to invest an additional $1 1 billion of new U S factory, a fifth in the country, which is expected to begin production in the first half of 2026.
Cumulatively in the year since the announcement of the IRA We've committed $2 8 billion of capital spending plus manufacturing and R&D in the United States.
Which we expect will result in the creation of 1700 direct jobs and.
And multiples of this number in your indirect jobs.
From a technology perspective, we can see the limited production volume by first bifacial solar panel utilizing advanced thin film semiconductor.
And acquire Ebola the European leader in thin film growth guidance six technology.
These investments are expected to accelerate our development of next generation PD technology, including high efficiency tandem devices.
But actually $1 59 diluted share inclusive of a legacy systems business related litigation loss.
And we ended the quarter with a gross cash balance of $1 9 billion. One 5 billion net debt with additional debt capacity of 1 billion undrawn revolving credit facility.
We are maintaining our revenue and EPS guidance, including forecasted full year earnings per diluted share of seven to $8.
With that we conclude our prepared remarks and open the call for questions operator.
Perfect. We will now go into the Q&A, if you'd like to ask a question. Please press star one.
Telephone keypad.
That again is star.
Followed by the number one.
All right. Our first question comes from the line of Philip Shen. Please go ahead.
Hi, everyone. Thanks for taking my question.
Two categories. The first one on bookings it looks like your ASP was.
Strong and healthy for bookings ASP at about $32.07 and then you have a mark I think you mentioned.
Another two cents of adders.
Wanted to.
Ask you what do you expect your bookings to look like ahead a.
A little bit of a quiet period.
During Q2, but then you ramped it up.
Subsequent to July one.
Do you think that accelerates now that you have new.
<unk> announced.
And then the second category of questions here is.
We thought you were sold out for 2024.
But in that agreement that you announced today.
You highlighted and I think in some of the other agreements over the past few weeks.
You have more.
<unk> booked for 24, how are you guys able to do that did somebody.
The party cancel their order or are you running above 100% utilization.
Is there any more volume left to be sold in 'twenty four.
And how much is left for 2005, so thanks guys.
Yes.
Maybe I'll take the second one first so is that so.
The reason, we're able to still commit to some opportunities in 'twenty four 'twenty five is really twofold first is and we highlighted in my prepared remarks that we are using India.
24% and $25 or U S shipments.
Demand in U S was so strong and we are restructuring some deals with customers that we can meet.
'twenty four 'twenty five volume requirements.
And then pull through outer years, as well, where we had a little bit more supply of those deals penciled out really well. So we view some of the India volume.
We also have requirements under the incentive package that we received in any of that there's some amount of exports that need to be.
Achieved another larger deal with accelerating the timing of those exports into the first couple of years of production in India and using that to support the U S market. So that's a piece of it the other is the.
The ramp of our Perrysburg series seven factory is going very well.
And that is creating some incremental capacity.
That's available in 24 particular, and then we're looking to pull forward some of the Ohio upgrades that we were talking about before whenever we as part of our overall amounts of indicators about <unk> nine gigawatts of volume that we would use to further throughput and drive more output out of our series six factory in Ohio, We are pulling forward some of those.
Initiatives in order to create a world class supplier other than that we had anticipated. So all of that is helping kind of create supply for 'twenty four 'twenty five the biggest social and make sure. It's clear it's really the volumes, we're going to support out of India.
Want to make sure it's clear that India is doing extremely well, it's just that we've got opportunities here in the U S market and Theyre attractive asps.
Opportunistically use that volume to serve the U S market, but at this point in time.
Bookings ASP, Phil just to make sure I'm clear what I said in my script is the.
Bookings average ASP was.
29.3.
And that did not include sales trade towards the back half of the volume.
And if you include the impact of sales rate than you would.
Increased asps to be north of 30 would be in the low 30%. When you include that volume or that ASP impact of the volume that we booked it did not include sales right.
Ooh.
Momentum look I think there was a little bit of activity going on with maybe people trying to understand the domestic content.
Requirements.
That doesn't slow us down on the convergence side, what I would say is that we had a very healthy quarter on conversions as I indicated.
<unk> now has over $300 million of conversions of existing volumes that we already have on the books that we have converted now for.
Incremental ASP for delivering.
Delivering series seven.
As well as domestic content requirements. So good volume good activity going on there.
I think the momentum should accelerate a little bit from.
The announcement of the new facility the new factory. So I do think that will give us incremental supply that will better position, maybe a little bit of acceleration, but I look at the quarter, we excluded about a gigawatt of.
The <unk> deal, which was a framework agreement with and Thats because there is an option effectively associated with that volume.
But if I include that it's another 10 gigawatt quarter, essentially so we put out a pretty solid streak 10, gigawatts each quarter.
Also we can carry that momentum through the balance of the year you know we have an opportunity to.
<unk> positioned ourselves for maybe $35 40 gigawatts for for this year I think thats, a very strong results.
Given where we're going to ship 12 Gigawatts. This year, we're just continuing to build to that contracted backlog and we're getting great asp's.
In order to do that so I think on balance we're pretty happy with what we're seeing from a bookings ISP standpoint.
Great. Thanks, Mark.
Actually just wanted to since I'm on the line. So I just wanted to clarify you were $29 six is the asps.
For the whole backlog, whereas the 30 32.7 I was talking about I think that's the asps for the incremental bookings since the first quarter.
Is that correct just to clarify is temporary.
Total backlog ended at the end of the quarter, which was about 70 Gigawatts that average ASP was 29 six the bookings since the last earnings call, which was $8 nine was 29.3.
But that does not include sales straight path.
Half the volume if you include this.
<unk> sale.
Sales rate normal sales rate of gesture now our sales rate.
Equivalent asps would be in the low <unk>. So those are the numbers.
Okay got it thanks I'll pass it on.
Alright, Thank you and our next question comes from the line of Brian Lee Brian . Please go ahead.
Hey, guys. Good afternoon, thanks for taking the questions and congrats on the new factory announcement.
I had two questions here I guess first off on.
The domestic content rules since they've been out.
From mid May.
You've been articulating or I guess, maybe the customer feedback has been around 40% and 55% threshold is that.
Basically going to be.
Cheap by just buying series seven panels from Alabama, and the new site.
And would you be expecting more pricing potential it sounded like you did on volumes from those sites going forward. If you could maybe help quantify and then the second question was just on that new factory any puts and takes on first half of 2026, maybe it's a little bit of a nitpicking.
Item, but.
Would there be ability to move that up given I think historically, you've talked about like a two year build cycle. So is there room to have this even online a bit earlier into the end of 'twenty five makes sense.
Yes.
On the domestic.
Content.
Rules.
Again, the way it's defined right now is that there are.
So that will determine.
If the module is manufactured in the U S and therefore is a manufactured domestic product.
As we indicated in our remarks is that four series seven, especially for our new factories will be 100% compliant with all of those requirements. So all of those components that have been identified will be manufactured in the U S.
Again, that's a strategy that we embarked upon two years ago to have a local supply chain.
As a result of that then the full entitlement for the module will be captured at the.
Project level.
As you know there is someone else that can be.
Meet those requirements very few other manufacturers, who made announcements in the U S well.
<unk> actually manufacturing cell.
And very few if any will get glass in the U S.
I have yet to see an announcement of anybody indicating availability to our contracting for the glass.
The U S.
We've been unique in our position, there and being able to capture very strategic partnerships around sourcing of our glass.
And so I think we'll be in an advantaged position.
Our customers are clearly still trying to do the math I think there are no questions.
But I think theres, a high level of confidence that first solar.
Best position module to ensure the domestic content bonus which is why we also see such a high volume of conversions that are being done.
As I referenced in my prior response to fill as well.
So that's where you know from a domestic content standpoint, working very closely we are providing we're being very transparent I know there's been some speculation that.
Manufacturers are not willing to provide cost level information. We we are obviously willing to do that.
Prefer to have this.
Basically from a taxpayer perspective their module price I think it's a lot easier to do it that way versus having the difficulty and the complexity that's being embedded in the requirements right now, but we're managing through that and we're more than willing to accommodate our partners to ensure they get.
It qualifies for the bonus to the extent of the module contribution.
And there are still probably working through and understanding the tracker in the Burger in particular and how it all aggregates at the project level, but I think everybody realizes that series seven in particular first solar.
In general, it's going to be meaningfully advantaged relative to anyone else manufacturer in the U S. Today.
It relates to the factory timing.
Look we haven't announced the site yet.
And so we're still working through the site selection the timing of the site selection and the timing of their.
Our ability to get on site finished and the permitting starting to move dirt around and more importantly.
Energizing getting Neal Transformers, and other things too.
Billable. So we can energize all kind of determine that ultimate start of the manufacturing facilities, but I think it's prudent to stick with what we indicated our prepared remarks, if everything does go well is there a potential to accelerate share theres, obviously, a potential to accelerate but there are a lot of work to do before we can interpret that as possible.
Yeah.
Alright, Thank you and our next question comes from the line of Joseph <unk>. Joseph Please go ahead.
Oh, Hi, Thanks, you everybody two questions first.
<unk> seen drops <unk> Biggs talked about I'm wondering if we might get some sense as to when we might see those tuning up and ship products and also whether we're talking about tandem cells or higher efficiency products, whether we might see if see those begin to show up on a rooftop and baidu up one other question. Thank you.
Yeah.
Look I would say on the.
On the <unk> side of the house in particular are very happy with.
Capabilities that <unk> brings to the table there I think it's very complementary to the capabilities that our own internal team has.
On a continuing maybe slightly different approaches, but both showing demonstrating very good results and again, there's a combination of challenges, but one first and foremost everyone is working through its stability of the device Fisher.
Patiency is obviously important but you also need something that's stable and prospects in general.
Historically, it had issues and challenges we're trying to demonstrate long term durable.
Table devices.
So abbvie there on <unk>.
You've always got some very deep capabilities, there and our record cell, but they demonstrated I think north of 23%.
Yes, we are.
We think that there is a potential for a tandem technology thin films that film that can get to market sooner.
David Frost guys can at least at this point in time and that would be a catch hell top sell with a deposit.
<unk> bought himself.
And if we were able to do something like that then that would clearly give you a higher efficiency.
Product that could expand our addressable market and thats largely why we're investing in the technology. The way. We are we are a module manufacturing technology company, we want to be a technology leader.
Our World Class leader when it comes to thin film devices. Both of these are thin film semiconductors.
We will continue to evolve the capabilities there.
As it relates to when we can get to market.
Probably too early to determine there's a lot that needs to be done yet.
The address a number of you know.
Hurdles and the issues that have to be resolved, but I am encouraged with at least the platform that we have.
Very complementary.
Our World Class leadership that we've taken in CAD tell.
These are two alternatives that sounds it could be very complementary and I think further our technology leadership overtime.
Thank you and my quick follow up Brian alluded to this a little bit.
Stepping back from the just announced back room thinking more out towards the end of the decade.
Should we kind of think about 18 months to two years is a reasonable cadence for your ability to add manufacturing given.
To watch them tools, all of those kind of stuff.
Or could it be slower faster.
And then market to that two year cycle I think that's probably right.
<unk> timeline I mean, there's other issues that were running into it also varies where we're going to go.
Go to India.
I would argue potentially indeed can be a little bit faster.
U S is running a number of challenges, especially around construction.
Timeline.
That availability of work workers.
Access to.
<unk> of the <unk>.
Factory.
We're still looking at Europe , and you know.
Depends on the pathway in Europe that could also maybe a slightly shorter timeline.
But in the U S is right now, but I think the best way to look at it is is a kind of a two year time frame.
Understood. Thank you.
Alright, perfect and our next question comes from the line of Julien Dumoulin Smith Julien. Please go ahead.
Hey, guys its Alex very bill on for Julian just a quick question on the domestic content one more time I mean, you alluded there mark.
The sort of missing base that has to be clarified here.
Just curious given you guys have already sort of books.
I guess ASP uplift in 'twenty four relative to offering domestic content if theres any.
Sort of I guess clawback potential from the developer if theyre actually not able to get it given some of the clarification that depth that we're waiting on and I'll throw my second in here as well.
When you think about the longer term I guess expansion opportunity in the U S. You guys have sort of historically been about a third of the U S market.
Upwards of 70, Gigawatts of announced as far as module.
In the U S. Currently how do you think about sort of your broader market share in the U S and what that could become over time as we get into the latter half of the decade. Thanks.
Okay.
As it relates to most of those.
Just as a reminder, most of the conversions that would then when.
<unk> put in place.
<unk> to 'twenty three 'twenty four 'twenty five thats really what the years et cetera.
Those were all somewhat thought through I envision that as a potential opportunity through the.
Contracts that we restructured at that point in time in which we implied domestic.
Domestic contest and.
Circles would come through that there would be and to the extent, we provided them with a domestically manufactured product.
We would be entitled to incremental ASP.
And the other case, we'd love to have opened and it was really up to the customer.
And if you want domestic supply that firewall, providing we have the option to provided internationally as well. If you want domestic then we'll negotiate and incremental ASP from our standpoint so.
As it relates to any clawback provisions in those in those.
Oh.
Adjustments that modification of amendments that we did really there's there's nothing embedded in those agreements that would result of that now I will say on new volumes that we're booking now there are provisions in there that would require.
And adjustments to the extent.
We did not need.
The representation that we gave the customer right. So for example, I said that for our series seven product would be.
Domestically manufactured product and therefore, the list of 10 or <unk> components. There I would all be manufactured in the U S and therefore, the product would be domestically manufactured.
We've given ourselves some buffer relative to that and to the extent we don't.
The manufacturer of the product is currently envisioned to ensure that all of those components are domestically manufactured yes, but there would be a potential impact.
Impact L D for that lack of performing effectively right.
But that's all within our own control.
It qualifies or doesn't qualify.
We're held harmless so long as we meet our requirements, whether the project level hits, its 40% or 55% or whatever it may be so there's no there's no recovery or clawback from first so the only thing we have which you would expect under any contract we have an obligation to comply and data representation around it being a domestic manufacturer.
Product.
And therefore, those components, which have been identified halfway manufactured in the U S.
They really see that it's not a lot of risk because that's what we're doing already.
All of that is being sourced here in the U S.
Yeah.
Got it.
Sorry, I think I cut you off there a little bit.
Our next question comes from the line.
Vikram factory.
Please go ahead.
Hi, there I was hoping that you could give a little bit more color on.
The expected increase in module gross profit relative to.
Your prior expectations, just kind of what's driving that what are the puts and takes there.
How much of that benefit is coming from sales freight versus manufacturing efficiencies.
Yeah.
Yeah, So it's a little bit of both you're definitely seeing a drop in sales rate, we did forecast to drop throughout the year, perhaps dropped a little bit earlier in Q2 than we had expected.
So I would say more than half of what we added in terms of module gross profit to the guide is associated with better sales rates, but there is a little bit of an improvement in the coal relative to our previous guide as well and importantly, just to make sure. It's clear and we said that we're not changing our forecast is actually putting a lot of that benefit. So it's not an increase.
In the cost of goods line.
Gross profit line associated with reduction of cost of goods from Fireeye benefits, all sitting across core cost of production and sales ramp.
Got it thank you.
And just one follow up in terms of the mix of good live reads.
And some recent contracts, which have projects in Europe as well as in the U S. How are you thinking about supplying nodes can we expect any supply.
Coming from from the U S. And then just how do you think about.
The pricing dynamics in those markets, where ASP is a bit lower.
And we see domestically.
Thanks.
Yeah. So.
We currently are not envisioning sourcing anything from the U S to Europe now.
Now could there be a particular deal that we contracted that void.
Because of a particular fan that we needed for that project.
Or a particular product that we needed.
Could it come from the U S potentially but that's not the intent would be to support your.
Europe out of our international factories.
And Malaysia Vietnam.
Obviously, Malaysia Vietnam are also our two lowest cost factories before India gets up and running when India is up and running.
It will be kind of our lowest cost factoring in the <unk>.
Fleet, but right now there are two lowest cost factories and yes, we are and we have global customers right very large utilities.
Or.
Oil and gas majors that.
<unk> global supply.
<unk> in the U S and they have projects.
They may have projects in Europe , and they want to have.
To have product and we entered into an agreement with first solar that we can source not just a particular region, but multiple regions.
Different than with the <unk> deal that we announced I mean that was volumes from the U S. It included volume in Israel and included volume in Poland at least potentially identified which is where their development.
We will have but we do have two different shape pricing in some regards.
It would be competitive in those and those opportunities relative to where other global pricing has gone.
But we still will get a premium we're not in a position where we're having to price liquidation type of fire sale asps like others do it right now because.
There is a long term relationship that.
But we have with strategic partners and I think using the energetics.
As an example to the best of my knowledge, there are 100% sourced the first solar regardless of where their projects.
But I have to make sure that they can be competitive in the markets in which they compete in and I can't.
Establish a market price that's meaningfully up.
<unk>.
So we price accordingly.
Okay.
Okay perfect. Thank you so much and that is all of the questions. We have time for today, we would like to thank everyone for taking the time for Diamond Sir you.
You may now disconnect.
Yeah.
Hum.
[noise].
Yeah.