Q3 2023 First Solar Inc Earnings Call

Good afternoon, everyone and welcome to first Solaris third quarter 2023 earnings call.

This call is being webcast live on the investors section of first solar is web site at Investor Dot first solar dotcom.

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, and thank you for joining us.

Today, the company issued a press release announcing its third quarter 2023.

As a result.

A copy of the press release and associated presentation are available on <unk> website at Investor <unk> Com.

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 will open the call for questions.

Please note. This call will include forward looking statements that involve risks and uncertainties.

There are many factors that may cause actual results.

To differ materially from management's current expectations.

We encourage you to review the Safe Harbor statement is contained in today's press release and presentation for a more complete description.

Now my pleasure to introduce Barbara Martin Chief Executive Officer.

Alright. Thank you Richard good afternoon, and thank you for joining us today.

At our recent analyst day in September we outlined our goal.

Okay, and a stronger position than we entered it.

We believe the future belongs to Senate Bill.

And we described our long term intent to be positioned to serve all of the addressable markets and commercialize the next generation of television technology.

Balancing and optimizing across efficiency energy cost in an environmentally and socially responsible way.

This long term aspiration aligns with our nearer term growth, which is underpinned by our points of differentiation.

Solid market fundamentals.

<unk> continued strong demand for our products.

The manufacturing excellence are.

Our uniquely advantaged technology platform and crucially.

Unknown Executive: Good afternoon everyone and welcome to First Solar's third quarter, 2023 earnings call. This call is being webcast live on the Investor section of First Solar's website at investor.firstsolar.com. At this time, all participants are in a listen only mode. As a reminder, today's call is being recorded.

<unk> business model focused on delivering value to our customers and our shareholders.

Since our last earnings call. We have continued to make steady progress on this journey.

I will share some key highlights related to continued strong demand.

Asps.

Manufacturing operational excellence and expansion.

Hey, Glenn beginning on slide three we will continue to build on our backlog with 618 Gigawatts of net bookings since our last earnings call.

Richard Romero: I would now like to turn the call over to Richard Romero from First Solar Investor Relations. Richard, you may begin. Good afternoon and thank you for joining us.

30 or what.

Excluding India.

Richard Romero: Today the company issued a press release announced a third quarter, 2023 financial results. A copy of the press release and associated presentations are available on First Solar's website at investor.firstsolar.com. With me today, I'm Mark Widmar, Chief Executive Officer and Alex Bradley, Chief Financial Officer.

This space ASB excludes adjustors.

Wholesale approximately 70% of these bookings.

Which when applied with our aligned with our technology Road map.

May provide potential upside to the base ASP.

These bookings, bringing our year to date net bookings to 27.

Richard Romero: Mark will provide a business update. Alex will discuss our financial results and provide updated guidance.

And our total backlog to any one eight gigawatts.

Our total pipeline of future bookings opportunity stands at $65 nine gigawatts.

<unk> 32, five gigawatts of mid to late stage opportunities.

Richard Romero: Following their remarks, we will open the call for questions. Please note this call will include forward-looking statements that involve risks and uncertainties. There are many factors that may cause actual results to differ materially from management's current expectations.

As it relates to manufacturing we produced two five gigawatts of series six modules.

Third quarter weather.

On average watts per module of $4 69.

Hi, Thank class at $4 75, and.

Richard Romero: We encourage you to review the same part of the statements contained in today's press release and presentation for more complete description.

And manufacturing yield of 98%.

Our third Ohio factory.

Which establishes the template or.

Mark Widmar: It is now my pleasure to introduce Mark Widmar, Chief Executive Officer. All right, thank you Richard. Good afternoon and thank you for joining us today. About our recent analyst day in September, we outlined our goal to exit this decade in a stronger position than we entered it. We believe the future belongs to thin film and we described our long-term intent to be positioned to serve all of the addressable markets and commercialize the next generation of PV technology, balancing and optimizing across efficiency, energy and cost, and environmentally and socially responsible way.

Our high volume series manufacturing continues to ramp.

Demonstrating the manufacturing production capability of up to $15000 per day.

Which is approximately 97% of nameplate throughput.

Factory produced a total of 565 megawatts in Q3.

Total year to date production of series seven modules in the U S. S surpassed one gigawatt.

As noted on our analyst day, the factory recently demonstrated.

Module wattage produced of 550 watts as part of a limited production run.

Mark Widmar: This long-term aspiration aligns with our near-term growth, which is underpin by our points of differentiation and solid market fundamentals, including continued strong demand for our products, proven manufacturing excellence, a uniquely advanced technology platform, and crucially, a balanced business model focused on delivering value to our customers and our shareholders. Since our last earnings call, we have continued to make steady progress on this journey, and I will share some key highlights related to continued strong demand and ASPs, manufacturing, operational excellence, and expansion.

While still undergoing commercial quality patient testing this implies a record catch up production module efficiency of 19, 7%.

Our India plant started production in Q3.

And is continuing to ramp recently, demonstrating our manufacturing production capability of approximately 12000 modules per day.

Which is approximately 77% nameplate throughput.

Back to produce a total of 154 megawatts in Q3.

And recently demonstrated the top module wattage produced 535 watts.

Mark Widmar: We will begin on slide three. We will continue to build on our backlog with 6.8 gigawatts of net bookings since our last earnings call at an ASP at $0.30 per watt excluding India. This base ASP excludes adjusters, applicable to approximately 70% of these bookings, which when applied with our technology roadmap, may provide potential upside to the base ASP. These bookings bring our year-to-date net bookings to 27.8 KW and our total backlog to 81.8 KW.

In terms of technology, our series six plus five.

Modules completed rigorous build and laboratory testing.

We recently converted our first series six plus plants in Perrysburg, Ohio.

To commercially produce the world's first bifacial solar panel utilizes.

And advanced thin film semiconductor.

The technology features an innovative transparent back contact iron by first solar as research and development team, which in addition to enabling bifacial energy game allows infrared wavelengths of light pass through rather than be absorbed as heat on it.

We expect it to lower the operational temperature of the bifacial module and result in higher specific energy yield.

Mark Widmar: Our total pipeline of future bookings opportunities stand at 6.9 KW, including 32.5 KW submit to late-stage opportunities. As it relates to manufacturing, we produce 2.5 KW of Series 6 modules and the third quarter of the average Watts per module of 469, a top main class of 475, and a manufacturing yield of 98%. Our third Ohio factory, which establishes the template for high-go in Series 7 manufacturing, continues to ramp, demonstrating the manufacturing production capability of up to 15,000 nodules per day, which is approximately 97% of nameplate throughput.

Upon successful demonstration of operational metrics in high volume manufacturing, such as yield and throughput.

And as you convert more plants in the future, which will enable us to capture incremental ASP.

Through our existing contractual adjustors.

Turning to slide four.

Our focus on delivering value extends to our manufacturing expansion strategy.

And we are making tangible progress towards achieving our forecasted 25 gigawatts of global nameplate capacity by 2026.

Construction of our India facility is completed.

Production has commenced.

Commercial shipments are expected to begin once the factory receives of Europe, India standards certification.

Mark Widmar: The factory produced a total of 565 megawatts in Q3, total year-to-date production of Series 7 modules and the UFS surpassed one gigawatts. As noted on our analyst day, the factory recently demonstrated a top module of what is produced of 550 Watts as part of a limited production run. While still undergoing commercial qualification testing, this implies a record-cat-tail production module efficiency of 19.7%. Our India plant started production in Q3 and is continuing to ramp, recently demonstrating a manufacturing production capability of approximately 12,000 nodules per day, which is approximately 77% of the nameplate throughput.

In government, which is expected by year end.

In September we mobilized on our new Louisiana manufacturing facility.

Fifth fully vertically integrated and factoring in the United States.

At a ceremony attended by the Governor of Louisiana, We.

We set in motion the work.

Second to deliver three five gigawatts of annual nameplate capacity.

Which is anticipated to commence operations at the end of 2025.

When completed we expect $1 1 billion facility is projected to take us to approximately 14 gigawatts of annual nameplate capacity in the United States.

Further enhancing our ability to serve the market with domestically made modules.

Mark Widmar: The factory produced a total of 154 megawatts in Q3, and recently demonstrated the top module what is produced of 535 Watts. In terms of technology, our Series 6 Plus by Facial Modules completed rigorous, build, and laboratory testing. We recently converted our first Series 6 Plus plants in Parisburg, Ohio to commercially produce the world's first bifacial solar panel, utilizing an advanced thin film semiconductor. The technology features an innovative transparent back content, pioneered by first-seller's research and development team, which in addition to enabling bifacial energy gain, allows infrared wavelengths of light pass through rather than be absorbed as heat, and is expected to lower the operational temperature of the bifacial module and results in higher specific energy yield. Upon successful demonstration of operational metrics and high-volume manufacturing, such as yielded throughput, we plan to convert more plants in the future, which will enable us to capture incremental ASD through our existing contractual adjusters.

Meanwhile, we continue to make steady progress on the construction.

Our new Alabama facility.

It is expected to commence operation in the second half of 2024.

Our Ohio manufacturing expansion, which is projected to commence operation in the first half of 2024.

Additionally, our new R&D innovation Center, and our first prospect development line announced at Analyst Day are also on track.

Representing expected combined investment of $450 million.

The prostate development line and R&D center are expected to commence operation in the first half of 2024 and reflect our determination to lead the industry in developing the next generation of <unk> technology optimizing across efficiency synergy and cost.

Bruce Lee as our manufacturing footprint continues to grow so does our supply chain.

In the U S. We recently expanded our agreement with vitro architectural glass.

Which is investing and upgrading existing facilities in the United States.

To produce glass for our solar panels.

The expanded capacity commitments in vitro to first solar is expected to commence production in the first quarter of 2026.

Mark Widmar: Turning slide 4, our focus on delivering value extends to our manufacturing expansion strategy. And we are making tangible progress towards achieving our forecast in 25GB of global nameplate capacity by 2026. Construction of our India facility is completed, and production have commenced. Commercial shipments are expected to begin once the factory receives the Bureau of India's standard certification from the Indian government, which is expected by UN. In September, we mobilized our new Louisiana manufacturing facility, our fifth fully vertically integrated factory in the United States.

Today first solar is one of the largest consumers of float glass in the United States.

As TV manufacturing continues to scale in the U S and.

And the premium is placed on domestically produced components, including glass.

Our early work to build a resilient domestic supply chain, which began in 2019 gives us a significant head start over the competition.

Similarly, we expect outflows seller to manufacture and supply series seven module back rails through a new facility in Alabama.

This reflects our efforts to de risk our supply chain with strategic localization.

Mark Widmar: At a ceremony intended by the government of Louisiana, we said in motion the work expected to deliver 3.5 gigawatts of annual nameplate capacity, which is anticipated to commence operation at the end of 2025. When completed, we expect 1.1 billion facility is projected to take us to approximately 14 gigawatts of annual nameplate capacity in the United States, further enhancing our ability to serve the market with domestically made models. Meanwhile, we continue to make steady progress on the construction of our new Alabama facility, which is expected to commence operation in the second half of 2024, and our Ohio manufacturing expansion, which is projected to commence operation in the first half of 2024.

<unk> only uses American made steel, which aligns with our gen. Two maximize domestic economic value created by our U S manufacturing footprint that's correct.

Generally our highest facility also served by steel value chain is located within 100 mile radius of our factories.

Before handing the call over to Alex I'd like to discuss our policy admire.

In the United States with regards to the inflation reduction Act, we continue to await guidance from the department of Treasury on the section 45 ex manufacturing tax credits.

We also remain engaged with the administration and continuing to work with our customers to ensure that they are as domestic content bonus guideline reports the acts and Ted.

To sustainably grow U S solar manufacturing supply chains.

Mark Widmar: Additionally, our new R&D Innovation Center and our first perovskite development line announced that annual this day are also on track. Representing the expected combined investment of 450 million. The perovskite development line and R&D Center are expected to commence operation in the first half of 2024, and reflect our determination to believe the industry of developing the next generation of PV technologies, optimizing across efficiency, energy, and cost. Crucially, as our manufacturing footprint continues to grow, so does our supply chain.

As we have previously noted.

We share our commitment to the current guidance with the administration.

And are working with our customers to enable their ability to benefit from the bonus credit for use in U S made content.

We are appreciative of the work done by the by the administration to provide a solid legislative foundation or domestic solar manufacturing.

<unk> has supplied a catalyst for growth and.

And our goal is to leverage it to help create a position of strength for the country. Both now and after the term with et cetera.

Mark Widmar: In the US, we recently expanded our agreement with Retro Architectural Glass, which is investing in upgrading existing facilities in the United States to produce glass for our solar panels. The expanded capacity commitment from Retro to first solar is expected to commence production in the first quarter of 2026. Today, first solar is one of the largest consumers of flow glass in the United States. At PV manufacturing continues to scale in the US, and premium displays on domestically produced components, including glass.

Beyond the IRI.

So we're of new anti dumping and countervailing duty petitions filed against importers of aluminum extrusion from 15 countries.

Consistent with our views on fair trade and the importance of confirming conforming with rules governing trade issues, we will comply with any request for information from the United States Department of Commerce, and the International Trade Commission, while we work to understand the potential indications.

Moving abroad, we remain engaged with policymakers across Europe.

Block attempts to tackle serious challenges.

Mark Widmar: Our early work to build a resilient domestic supply chain, which began in 2019, gives us a significant head start over the competition. Similarly, we expect Amco-Cellar to manufacture and supply Series 7 module back rails through a new facility in Alabama. This reflects our efforts to de-risk our supply chain with strategic localization. Amco only uses American made steel, which aligns with our intent to maximize the domestic economic value created by our US manufacturing footprint. Generally, our high facility also served by steel value chain that is located within a hundred mile radius of our factories.

Solar manufacturing ambitions.

For example.

Chinese module inventory in Europe stored in warehouses across the region and estimated by analysts to reach 100 gigawatts by the end of the year.

Is reportedly being sold at prices below its cost to manufacturer.

This alleged dumping behavior, driven by overcapacity and the Chinese crystalline silicon illustrated.

That has decimated international competition over the past decade represents a serious threat to nine non Chinese manufacturing.

And to your ambitions of diversifying solar supply chains away from the dependency on China.

It also represents a policy threat potentially undermining the political willingness to deliver the comprehensive trade and industrial of legislative solutions necessary to level, the playing field and incentivize domestic manufacturing.

Mark Widmar: Before handing the call to Alex, I would like to discuss our policy bar. In the United States, with regards to the inflation reduction act, we continued to wait guidance from the Department of Treasury on the Section 45X manufacturing tax credit. We also remain engaged with the administration and continue to work with our customers to ensure that the IRA's domestic content bonus guideline reports the acts intent to sustainably grow US solar manufacturing and supply chains.

We continue to advocate for comprehensive legislation to safeguard any domestic manufacturing ambitions.

Our view is that industrial policy related to Capex benefits alone are insufficient.

And that asset sufficient trade policy support to ensure a level playing field Europe will find it challenging to achieve what the U S and India have been able to do in a relatively short period of time.

Mark Widmar: As we previously noted, we share our commitment to the current guidance with the administration and are working with our customers to enable their ability to benefit from the bonus credit. We are appreciative of the work done by the Biden administration to provide a solid legislative foundation for domestic solar manufacturing. The IRA has supplied a catalyst for growth and our goal is to leverage it to help create a position of strength for the country both now and after the term of the attempts.

I'll now turn the call over to Alex who will discuss our bookings pipeline and third quarter results.

Thanks Mark.

On slide five as of December 31, 2022.

Contracted backlog totaled $61 four gigawatts.

With an aggregate value of $17 7 billion.

The September 30 of 2023, we entered into an additional $23 six gigawatts of contracts.

Recognized seven four gigawatts of volume sold resulting in a total contracted backlog at 77 six gigawatts.

Mark Widmar: Beyond the IRA, we are also aware of new antidumping and quantitative duty positions filed against importers of aluminum extrusions from 15 countries. Consisting with our views on fair trade and the importance of conforming with rules governing trade issues, we will comply with any request for information from the United States Department of Commerce and the International Trade Commission while we work to understand the potential limitations.

Aggregate value of 23 billion, which equates to approximately $29.06 per watt.

Because at the end of the third quarter to date, we've entered into an additional four three gigawatts of contracts contribute to a record total backlog of 81 eight gigawatts.

Including our backlog since the previous earnings call our contracts of approximately one gigawatt more with returning customer long road, LNG and new customers, including a new ICP.

Mark Widmar: Moving abroad, we remain engaged with policy makers across Europe as the block attempts to tackle serious challenges to its solar manufacturing ambitions. For example, Chinese module in China Europe stored in warehouses across the region and estimated by analysts to reach 100 gigawatts by the end of the year is reportedly being sold at prices below its cost to manufacture. To select funding behavior driven by our capacity and a Chinese Christmas open industry that has estimated international competition for the past decade represents a serious threat to non-Chinese manufacturing and to ambitions of diversifying solar supply chains away from the dependency on China.

Asset manager with multiple companies in this portfolio.

Additionally, we have received full security against 141 megawatts of previously signed contracts in India.

Let's now move to the volumes from the contracted subject to conditions precedent grouping within a future of changes pipeline to our bookings backlog.

As noted at analyst day, while the AFC is associated with the India bookings are lower than those associated with the six six gigawatts of U S bookings since the prior earnings call.

Gross margin profile exiting the 45 mix benefit.

Comparable to the fleet average given the lower production costs at oxidized.

Since the announcement of the IAA amended certain existing and contracts to provide U S manufactured products as well as the supply domestically produced series seven module parts of series six.

Mark Widmar: It also represents a policy threat, potentially undermining the political willingness to deliver the comprehensive trade and industrial legislative solutions necessary to go level the price bill and incentivize domestic manufacturing. We continue to advocate for comprehensive legislation to safeguard any domestic manufacturing ambitions. Our view is that industrial policy related to catholic benefits alone are insufficient and that assets sufficient trade policy support to ensure a level planning bill Europe will find it challenging to achieve what the US and India have been able to do in a relatively short period of time.

Consequently over the past five quarters to the end of Q3 three plus.

Approximately 11 Gigawatts with.

We've increased our contracted revenue by approximately $354 million, an increase of $42 million from the prior to this call.

As we previously address SaaS portion of our overall backlog it gives the opportunity to increase asps.

Through the application of adjustments.

Realized achievements within our technology roadmap.

The required timing of delivery of the product.

As at the end of the third quarter, we had approximately 43 gigawatts of contracted volume with these adjustments.

Which if fully utilized could result in additional revenue to approximately $1 4 billion approximately one set for us.

Alex Bradley: I'll now turn the call over to Alex who will discuss our bookings pipeline and serve for results. Thanks Mark. The ending on slide five as of December 31, 2022, I've contracted backflow of total 61.4 gigawatts with an aggregate value of 17.7 billion. To September 30, 2023, we entered into an additional 23.6 gigawatts of contracts and recognized 7.4 gigawatts with volume sold, resulting in total contracted backlog of 77.6 gigawatts. The aggregate value of 23 billion, which equates to approximately 29.6 gigawatts.

The majority of which we recognized between 2025 2027.

As previously discussed this amount does not include potential adjustments, which are generally applicable to the total contracted backlog.

The ultimate been produced.

To the customer, which may adjust the ASP of the sales contract upwards or downwards.

That's a slight increase in sales rate, where applicable aluminum steel commodity price changes.

Our contracted backlog extends into 2030 and excluding India. We are sold out through 2036.

Total of approximately one five gigawatts of production for our India facility is expected to be used to support U S deliveries towards 'twenty four 'twenty five.

Alex Bradley: The end of the third course to date, we've entered into the additional 4.3 gigawatts of contracts tribute to our record tonal backlog at 81.8 gigawatts Including our backlog since the previous earnings call our contracts are approximately one gigawatt or more with returning customer long road energy and new customers, including a new IPP and that that manager with multiple companies in its portfolio. Additionally, we have received full security against 141 megawatts and previously signed contracts in India, which now moves to these volumes from the contracted subject to conditions precedent for it being within our future options pipeline, to our booking the backlog.

As reflected on slide six our pipeline of potential bookings remains robust total bookings opportunities of $65 nine gigawatts. The decrease of approximately $12 four gigawatts of previous quarter.

Our mid to late stage opportunities decreased by approximately 16 Gigawatts to 55 Gigawatts.

<unk> $27, one gigawatts in North America, and India, one three gigawatts in the EU local three gigawatts across geographies.

The decrease is not total mid to late stage pipeline in Q2 Q3, a result, both of our converting certain opportunities to bookings.

Alex Bradley: As notes of the analyst day, while the AMC associated with the India looking are lower than those associated with the 6.6 gigawatts of US looking prior earnings call, gross margin profile, excluding the 45 next benefit, comparable to the fleet average, given the lower production costs at our Chennai facility. Since the announcement of the IRA with a amended certain existing contracts provide US manufactured products, as well as the supply domestically reduced series 7 module completed series 6.

One is the removal of certain other opportunities given a sold out position diminished available supply.

As we previously stated given this diminished today will supply low day supply for anything to actually announce Sally and aligning customer project visibility with our balanced approach to Asp's fuel security and other key contractual terms.

We would expect to see a reduction of vehicles in the volume in upcoming quarters.

We will continue to for contract customers to prioritize long term relationships.

Alex Bradley: Consequently, over the past 5 quarters to the end of Q3 to 73 approximately 11 gigawatts, we've increased our contracted revenue by approximately 354 million, and increased 42 million from the prior end of the school. As we pre this address, the staff's portion of our overall backlog includes the opportunity to increase the base AP through the application of the justice. If we're able to realize achievements within our technology roadmap, how do they require timing to deliver it to the product?

Our differentiation.

The strength and duration of our contracted backlog, we will be strategic and selective approach to future contract.

And can you get with our mid to late stage pipeline of five one gigawatts of opportunities of a contracted subject to conditions precedent.

Which includes one seven gigawatts in India.

Given the short timeframe between contracting product delivery in India relative to other markets, we would not expect to say multi year contract commitments that we're currently seeing in the U S.

Alex Bradley: At the end of the third quarter, we had approximately 40.3 gigawatts of contracted volume with these adjustments, which is fully realized could result in additional revenue up to approximately 0.4 billion or approximately 1 cent per watt, which we recognized between 2025 and 2027. As previously discussed, this amount does not include potential adjustments, which are generally applicable to the total contracted backlog, both the ultimate bin produced and delivered to the customer, which may adjust the ASPM and the sales contract output or downloads, and for some increase in sales rate or applicable aluminum or steel commodity price changes.

As a reminder, signed contracts in India will not be recognized as bookings until we've received full security.

On slide seven I will cover our financial results for the first quarter.

Net sales in the third quarter were 801 million, a decrease of $10 million compared to the second quarter.

Decrease in net sales was primarily driven by lower non module revenue associated with project announced for the systems business.

As well as within the module segment, a slight reduction in volume sold.

To be offset by an increase in asps.

Continue to see favorable pricing trends.

Gross margin was 47% in the third quarter.

Alex Bradley: Our contracted backlog extends into 2030 and excluding India with a spelled out through 2026. Now, we're talking about approximately 1.5 gigawatts of production for our India facility expected to be used to support U.S deliveries from 2024 to 2025. As a factor on site six, our pipeline potential bookings remains a plus. Total bookings of June is a 65.9 gigawatts, the decrease for approximately 12.4 gigawatts at previous courses. On mid to late stage of June, the decrease by approximately 16 gigawatts to 32.5 gigawatts and it includes 27.1 gigawatts in North America, 3.8 gigawatts in India, 1.3 gigawatts in the EU, and not by 3 gigawatts across all other geographies.

The 8% in the second quarter.

This increase was primarily driven by higher module asps.

Lower sales rate costs.

The module to produce some of the U S, resulting in additional credits and intellectual reduction.

As previously mentioned based on our differentiated vertically integrated manufacturing model card's full text of our modules.

To qualify for iron ore a credit of approximately 17 cents to work for each module produced in the U S are sold to a third party.

Which is recognized as a reduction to cost of sales in the period of sale.

During the third quarter, we recognized $205 million of such credits.

That's a $155 million in the second quarter.

We encourage you to review the Safe Harbor statements contained in today's press release and presentation.

Alex Bradley: The decrease in our total mid to late stage pipeline included two to three adult, both are converting certain opportunities to bookings, as well as the removal of certain other opportunities given our spelled out position diminished available supply, as you previously stated, given the diminished available supply, a long day to timeframe into which we are now selling, and aligning customer project visibility with our bounce approach to A.S.P. 's, field security and other key contract terms, we would expect to see a reduction in the number of volumes in upcoming courtes. We would not expect to say multi-year contract commitments to a currency in the U.S. The reminder, fine contract in India will not be recognized as bookings, but we have received full security.

Risks related to our receiving the full amount of the benefits. We believe we are entitled to under the Iraq.

Continued reduction of sales freight costs during the quarter reflected improved ocean line rates, along with a beneficial domestic versus international mix of volume sold.

Low sales freight costs reduced gross margin by seven percentage points during the third quarter eight percentage points second course.

Brian one of the utilization costs, which include cost associated with operating a new factory below its target utilization and performance levels.

$25 million during the third quarter, that's $29 million second course.

<unk> cost reduced gross margin by three percentage points during the third quarter, that's four percentage points second course.

Our year to date ramp costs, primarily attributed to a series seven factory in Ohio.

To reach our initial target operating capacity later this year.

Unused 37 factory in India, which commenced production during the course.

SG&A and R&D expenses totaled $91 million in the third quarter, an increase of $8 million compared to the second.

This increase was primarily driven by expected credit losses associated with a higher accounts receivable balance.

Alex Bradley: So, I will cover up financial results with third quarter, net sales with third quarter or 801 million, the decrease of 10 million for second quarter. Decreasing net sales with primarily given by lower non-modular revenue, associated with project earnings from our former systems business, as well as with the module segment, the slight reduction in volume sold, must be offset by an increase in A.S.P. 's, if we continue to see stable pricing trends.

Investments in R&D capabilities costs related to the implementation and support of our new global Enterprise resource planning system.

Production startup expense, which is included in operating expenses was $12 million in the third quarter decreased approximately $11 million compared to second quarter.

This decrease is attributable to the stock production at our factory in India.

Firstly offset by certain startup activities for new series seven factories.

Alex Bradley: First margin with 47% of the third quarter, converted to 38% of the second quarter. This increase is primarily given by high module A.S.P. 's, lower sales rate cost, and high volumes of modules produced at the same time of the U.S., resulting in additional credit and inflation reduction. Previous dimensions, based on our differentiators, vertically integrated manufacturing model, current form facts by modules, we expect to qualify for an IRA credit for the approximately 17 cents per watt for each module produced in the U.S, and felt to a third party, which is recognized as a reduction to cost the sales and the period of sale.

Our third quarter operating results did not include any significant non module activity.

However, the year to date operating loss impact from the legacy systems business related activities remains at approximately 22 million.

Our third quarter operating income was $273 million, which includes depreciation and amortization or accretion of $78 million.

<unk> cost of $25 million.

<unk> expense of $12 million.

Share based compensation expense $8 million.

We recorded tax expense of $22 million in the third quarters.

18 million in the second quarter, primarily driven by higher pre tax income.

Alex Bradley: During third quarter, we recognize 205 million such credits, as were 155 million in the second quarter. We encourage you to review the state part of the statements contained in today's press release and presentation. The risks related to our receiving of full amount of the benefits we believe we are entitled to under the IRA. Here, reduction of sales rate cost during the quarter affected improved ocean land rates, along with a beneficial domestic less international mix of volume sold.

Combination of the full base license, that's a third quarter diluted earnings per share of $2 50.

The $1 59 second quarter.

Next on to slide eight to discuss select balance sheet items and summary cash flow estimates.

Our cash cash equivalents restricted cash restricted cash equivalents in marketable securities ended the quarter at $1 8 billion.

$9 billion at the end of the prior quarter.

Alex Bradley: Lower sales rate cost reduced growth in the margin of the seven defense points during the third quarter, and at eight points in the second quarter. Round 1 of the utilization costs, which include cost associated with operating a new factory below its target utilization and performance levels, with 25 million during the third quarter as 29 million in the second quarter. Round cost reduced growth in the margin by three defense points during the third quarter, and then the four defense points during the second quarter.

This decrease was primarily driven by capital expenditures associated with our new facilities in Ohio, Alabama in India, along with a higher accounts receivable balance partially offset by advanced payments received in future module sales.

Total debt at the end of the third quarter was $499 million, an increase of $62 million in the second quarter. As a result of the final loan drawdown on the credit facility for a factory in India.

Our net cash position decreased by <unk> 2 billion to $1 3 billion as a result of the aforementioned factors.

Alex Bradley: A year-to-date round cost for primarily attributable to our series seven factory in Ohio, which is expected to reach the initial target operating capacity length of the year, and our new series seven factory in India, which promotes production during the quarter. As you may already experience this total 91 million in the third quarter, an increase of 8 million compared to the second. The increase is primarily driven by expected credit losses associated with a higher accounts receivable balance, additional investments in R&D capabilities, cost-related implementation and support of our new global enterprise resource practices.

First operations were 165 million.

Global liquidity and the strength of our balance sheet remains one of our key differentiating factors.

However, as discussed at our analyst day, the majority of our cash is offshore but the majority of our forecast of future Capex spend for 2026 is in the United States.

As we invest significantly in the U S manufacturing ahead of any IRR cash proceeds we continue to evaluate options obviously.

This expected temporary jurisdictional cash imbalance.

Which includes cash repatriation.

As far as just an undrawn revolving credit facility or other sources of capital.

Whilst we expect a $1 billion of revolver capacity to provide sufficient liquidity we.

Continue to evaluate other options to optimize cost of capital for any bridge financing.

Alex Bradley: Our third quarter operating results could not include any significant non-module activity. However, the year-to-day operating loss impact for the legacy systems business release activities remains of approximately 22 million. Our third quarter operating income was 273 million, which included appreciation, amalgamation and accretion of 78 million. Ground cost was 25 million, production spent was 12 million, and share base compensation expense of 8 million. We recorded tax expense 22 million in the third quarter, that tax expense made 18 million in the second quarter, primarily driven by higher pre-dacking income. Formation of the aforementioned items led to a third quarter deluded earnings for share of $2.50, that's $1.59 second quarter.

On slide 90 sites about guidance updates our volumes sold and net sales guidance remains unchanged.

Within gross margin, we are reducing the high end of our forecasted ramp underutilization expenses by $10 million.

$110 million to $120 million.

And narrowing the range of our sexual putting buybacks tax credit guidance by $10 million, both the low and high end.

617 700, okay.

Given the size. These combined changes do not impact our guided gross margin rate one two to $1 3 billion.

We've reduced our production startup expenses guidance to $75 million to $85 million, which implies operating expenses guidance of 440 407.

Combined these changes provide some resilience to July as opposed to the operating income guidance range, which was updated to $770 million to $870 million and the earnings per share guidance range, which is updated to $7 20 to $8.

Alex Bradley: Next, on the slide 8, we've got 2x balance sheet items and summary cash work commission. Our cash equivalent restricted cash, restricted cash equivalent and multiple securities ended the quarter at $1.8 billion, that was $9 billion in the end of the prior quarter. The decrease was primarily driven by capital expenditures associated with our new facilities in the higher outbound in India, along with our higher accounts receivable balance, partially offset by advanced payments received in future months.

Net cash capital expenditures guidance remains unchanged.

So to slide 10, I will summarize the key messages from today's call.

Demand continues to be robust with $27 eight gigawatts of net bookings year to date, including $6 eight gigawatts of net bookings since our last earnings call at an average ASD 34, losing India.

Alex Bradley: The total debt at the end of the third quarter was $499 million and increased 62 million in second quarter, the result of the final loan drawn out of credit facilities for our factory in India. Our net cash position decreased by approximately 0.2 billion to 1.3 billion as a result of the aforementioned factors. Cash loads of operations were 165 million in a third quarter. Global liquidity and the strength of our balance sheet remains what are key differentiated factors.

And before the application with justice, where applicable leading to a record contracted backlog, but 81 eight gigawatts.

Our continued focus on manufacturing technology excellence resulted in a record quarterly production of three two gigawatts.

India manufacturing facility commenced production.

Alabama, Louisiana, and a higher manufacturing expansions remain on schedule.

I would ask you is $2 50 per diluted share and we ended the quarter with a gross violence.

Alex Bradley: However, as discussed in our analyst day, the majority of our cash fit offshore, or the majority of our forecasted future cap expense between 2034 and 2026, is in the United States. As we invest significantly in the U.S, manufacturing ahead of any IRA cash proceeds, we continue to evaluate options on three balance, this expected temporary jurisdictional cash and balance, which includes cash repatriation, use of our existing undrawn revolving credit facility, or other sources of capital. Well, to expect our one billion to revolve the capacity to provide sufficient liquidity, we continue to evaluate other options to optimize cost of capital, pretty fresh financing.

One 8 billion.

$1 $3 billion net debt.

We maintain full year, such 33 revenue guidance and raised the midpoint of our EPS guidance from $7 50 to $7 60.

With that we conclude our prepared remarks and open the call for us operator.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad and please limit to one question.

The first question comes from the line of Philip Shen from Roth M. Kim. Please go ahead.

Philip Your line is open.

Alex Bradley: Well, slide nine points on guidance updates are volume sold and net failed guidance remain unchanged. Within road margin, we are reducing the high end of our forecasted ramp under the utilization expenses by 10 million, between 110 and 120 million, and Narrowing the range of our section of the VRX tax credit guidance by 10 billion both for low ampion between 670 and 700 million. Given their size, these combined changes do not impact our guide across larger range of 1.2 to 1.3 billion.

Hey, guys. Thanks for taking the questions and congrats on the strong bookings that what appears to be strong pricing.

Mark can you talk through the pricing at 30 to watch that.

India and I think the prior quarter.

There was some nuance around our contract with without freight and so have you adjusted that.

Where you typically include fruits was your prior pricing kind of closer to 31.

So you guys are sitting closer to 30 cents. This quarter, so maybe a bit of a drop but really compared to the crystal and silicon.

Alex Bradley: We reduce our production style of expensive guidance to 75 to 85 million, which implies operating expensive guidance of 440 to 470. Combining these changes provided some resilience is allowing both the operating income guidance range, which is updated to 770 to 870 million, and the earnings per share guidance range, which is updated to $7.20 to $8. Net cash and capital expenses done has remained unchanged.

Price collapse, it looks like Youre holding price pretty well and then looking ahead I think you guys said.

You may be selective and strategic with bookings so should we expect.

Thanks.

Slowdown from here and maybe.

Fewer bookings in general.

Coming up in this full quarter here Q4, and maybe in Q1 as well, especially since <unk> module <unk> compliance module pricing has come down so much there. So just curious what you expect to head there as well thanks.

Alex Bradley: So, in a slight turn, I'll summarize the key messages from today's call. The model continues to be robust with 27.8 gigawatts of net bookings used today, including 6.8 gigawatts of net bookings with our last earnings call, and an average ASB 37s for moving India. And before the application adjusts as we're applicable, leading to a record contractor backlog at 81.8 gigawatts. I continue to focus on manufacturing technology efforts results in a record quality production of 3.2 gigawatts.

Yes, so from a branding standpoint, if you look at the bookings for this quarter, if all the way up into.

2029.

Heavily weighted in actually in 2029.

So you booked much further out in the horizon.

Which also kind of creates this dynamic of what is our base price and then what is the impact of the Arris, which as we indicated 30, excluding India does not include the Addison 70% of the bonds that are in there.

Alex Bradley: India manufacturing facility commences production, and our Alabama is a easier and a higher manufacturing expansions remain on schedule. But actually, we're on $2.50 per dollar to share, and we ended the call from their growth balance to 1.8 billion for 1.3 billion net debt. We maintain fully established 33 revenue guidance, and raise the midpoint of our EPS guidance to $7.50 to $7.60.

Fair enough horizon.

Q4.

The benefits of temperature coefficient and long term degradation rates that will be in a much better position to capture those upsides and as we indicated in the call.

We're starting our initial by high production already in Ohio, and so when you look at the impact to the average Asps. If you were to include the benefit of the adders to alright, and marry that up in our lineup to our technology roadmap as I indicated in my prepared remarks, you'd add about two sensor so it <unk>. So.

Unknown Executive: With that, we conclude our fair remarks and other important questions. Pop right now.

Unknown Executive: As a reminder, if you would like to ask a question, please press star one on your telephone keypad, and please limit to one question.

Philip Shen: Your first question comes from the line of Philip Shen from Roth MKM. Please go ahead. Philip, your line is open. Hey guys, thanks for taking the questions and congrats on the strong bookings. That what appears to be strong pricing. Mark, can you talk through the pricing at $0.30 a watt? That's without India. And I think the prior quarter, there was some nuance around a contract with without freight. And so if you adjusted that, where you typically include freight, was your prior pricing kind of closer to $0.31?

When you look when you make that adjustment you compare to last quarter. When you look at the period in which we are booking out into but I would say, it's the pricing is pretty stable quarter to quarter and youre right last quarter, we had a relatively large.

Deal that did not include sales rates. So there was a little bit about it.

Actually the average ASP because of that but what I would say largely it's pretty stable.

Very pleased with our ability to go further items that ryzen and still get very attractive pricing.

In the backdrop of a lot of.

Changes in a very dynamic environment over the last 60 90 days.

As it relates to the comment about being disciplined.

We're going to continue to be disciplined.

We are still supply constrained we have a roadmap that will get us to two five gigawatts.

Philip Shen: Do you guys are sitting close to $0.30 this quarter to maybe a bit of a drop, but really compared to the Christian and Silicon price collapse. It looks like you're holding price pretty well. And then looking ahead, I think you guys said you may be selective and strategic with bookings. So should we expect things to slow down from here? And maybe fewer bookings in general, coming up in this full quarter here, Q4, and maybe Q1 as well, especially since, you know, UFLPA module. UFLPA.com. Thanks, module pricing has come down so much there, so just curious what you expect to have there as well. Thanks.

Turning to see 27 fill up very nicely.

And starting to put more points on the board that go up 29%, we touched 32 of the <unk>.

Higher deals that we've done if.

When it comes to terms with customers on.

What makes sense for us not just on ASP.

Security overall terms of condition.

Revisions to the extent they are applicable to domestic content.

All of that has to balance itself out to a deal that makes sense for us.

No.

How we're going to continue to to engage demand market than theirs.

We will see how the market reacts and especially in the front of the license of the horizon there.

Mark Widmar: Yeah, so for a bright end standpoint, Bill, and if you look at the bookings for this quarter, all the way out into 2029, so this is a totally way to do actually 2029. And so you bookied my further out in the horizon, which also kind of creates this dynamic of what is our base price and then what are the impact of the average numbers, which has been indicated the 30 cents, excluding it is not who the others and 70% of the bond includes that and there are now horizon that, especially for benefits of temperature coefficient and long term degradation rate, that will be in a much better position to capture those upside to this.

Some.

Pause to some of our customers not willing to commit yet to that horizon.

But we will see how it plays out but there is potential we would see bookings to stabilize where they are now and maybe potentially declined slightly as we will cross the next several quarters.

Your next question comes from the line of Julien Dumoulin Smith from Bank of America. Please go ahead.

Hey, guys its Alex on for Julian just a follow up if I can to that Mark.

When you think about where you guys are booking and I'll say this like you guys used to be in the development game as well. So I think you obviously understand the lead times on these projects I mean, how much is that mid to late stage compression.

Mark Widmar: We indicated in the call, you know, we're starting our initial buy production already in Ohio. And so when you look at the impact to the average ASP, which we were to include the benefit of the adders to, all right, and marry that up and align it to our technology roadmap, but they indicated about your remarks. You'd add about two cents or so to the ASP. So, you know, when you look, when you make that adjustment, you compare in the last quarter, you look at the period at which we're looking out into, but I would say it's a pricing is pretty stable quarter quarter and you're right last quarter, we had a little too large deal that did not include sales rate.

Function of just listen there's a lot of uncertainty as far as.

Timing of interconnect permitting et cetera, and looking out in 2028, it's sort of hard to say, which projects will be first versus second versus third or is this more of that the market is kind of getting back to some level of normalcy as far as supply and demand of modules and buyers are just electing to wait I guess.

Just sort of parse that for us relative to it just being really long dated as opposed to a sort of a shift in buyer sentiment.

Mark Widmar: So there was a little bit of an impact to the average ASP. Obviously because of that, but I would say largely it's pretty stable. We're very pleased with our ability to go further out into the horizon and still get very attractive pricing in the backdrop of a lot of, you know, changes in the very dynamic environment over the last 60, 90 days. You know, as it relates to the comment about mean discipline, you know, we are going to continue to be disciplined.

Market conditions, if you will thanks.

Okay.

I don't see it as a huge shift in.

Our customers' sentiment as they think about their realization against their development pipeline.

No theres there are challenges as you indicated permitting and interconnection and what have you, but I think they all still are very bullish about our ability to realize their contract pipeline sure.

Mark Widmar: You know, we are still supply constrained. We have a roadmap that will get us to 25 gauge lots. We're starting to see, you know, 27 fill up very nicely. And you know, starting to put more points on the board that go out 2029 and you know, we touched 30 to the prior deals that we've done. If we come to terms with customers on what makes sense for us, not just on ASP, but security, although terms of condition, provisions that they're applicable to the best of content.

Ill take agreements.

The issue I think.

When do you actually.

If we're if we're contracting for module deliveries in 2008, 2009, and we're asking for security.

Clearly the projects not in the condition at that point in time, where they would be able to get financing put in place so youre talking about corporate.

Mark Widmar: You know, all that has to bounce itself out into a deal that makes sense for us. And so that's that's how we're going to continue to to engage the market and there's, you know, we'll see how the market reacts. And especially before you go into the horizon, you know, there'll probably be some, you know, pause or some of our customers not wanting to commit yet to that horizon. But we'll see how it plays out, but there's, you know, potential. We would see, you know, bookings to stabilize where they are now. Maybe potentially decline slightly as we'll cross next level of course.

Liquidity capacity thats going to have to be used in order to provide the security whether its parent guarantee LLC.

Or.

Fuel cash.

As you know that the project has to be much further along as it relates to financing.

Debt and tax equity for that liquidity is brought into the mix at the project level. So I think part of it is wanting to have the certainty of delivery, but balancing that with capacity.

Two from a security standpoint that we're requiring all of our contracts and it's just a matter of finding.

Mark Widmar: Your next question comes from the line of Julian Dumolin Smith from Think of America. Please go ahead. Hey guys, it's Alex on for Julian. Just to follow up if I can to that mark, you know, when you think about where you guys are booking and I'll say this, like, you guys used to be in the development game as well. So I think, you know, you obviously understand the lead times on these projects.

Good balance that can work.

Gay our cheez it for certain entities can work, but we want to make sure the credit worthy character guarantees of <unk>.

Guarantees are.

Issued against and Thats, sometimes for some of our customers depend a little bit more challenged so you kind of got this balance of wanting certainty wanting to engage clearly when a partner with first solar and they also know that and we are loyal supplier to especially our partners have been with us for extended periods of time, but then also balancing their near term liquidity constraints.

Mark Widmar: I mean, how much is that mid to late stage compression, you know, a function of just listen. There's a lot of uncertainty as far as, you know, timing of interconnects, permitting, et cetera. And looking out in 2028, it's sort of hard to say which projects will, you know, will be first versus second versus third or is this more that the market is kind of getting back to some level of. Normalcy as far as supplying demand of modules and buyers are just electing to it.

Except that they have in the.

When do they want to and should we contract. So I don't see it so much of a sentiment to realizations thats developed pipeline that just I guess youre going out to horizon right now.

People are maybe not as.

Read it yet.

Commit.

Capital or commit the liquidity, we need to get comfortable with around security for a module agreement.

Mark Widmar: I guess, you know, sort of parse that for us relative to it just being really long dated as opposed to a, you know, a sort of a shift in buyer sentiment or market conditions, if you will. Same. You know what, I don't see it as a huge shift in, you know, our customers, sentiment as they think about their realization against their development pipeline. But there's our challenges, you know, in the case of permitting the interconnection in what have you, but I think they all still are very bullish about some of those realized they're contracted pipeline and secure, you know, optic agreements.

Thanks.

At the analyst day, we talked around the fact that we actually over <unk> and the <unk>. When we do that deliberately because we tend to see projects move out to the right that gives us some comfort. The other reason we do that in a lot of our recent bookings athene framework agreements with customers whereby they don't necessarily have a specific project allocate.

The modules that are buying from us I, just know that going to need that total volume over a period of time and those frameworks can be more challenging plans fall because there is often some flexibility in timing, but it also shows that customers are very long dated bookings are willing to buy without necessarily lines is actually where the products go in because they valued at 70 and in those items.

Mark Widmar: It was the issue, I think, is this around when you actually first off, if we're contracting poor module deliveries in 2829 and we're asking for security. You know, clearly the project's not in a condition at that point time where they would be able to get financing put in place, so you're talking about corporate liquidity capacity that's going to have to be meet you use in order to provide the security, whether it's parent guarantee and LC or actual cash.

They'll find out upfront so we've been seeing a lot more of that behavior.

To your question, but we're seeing people booking at a time, so they don't necessarily know exactly where it's going.

That's still going to make that commitment because of the value to them doing so but as mark said the further we get out the fact that when they're booking out into 2028 2009.

Tom Caudle people put meaningful deposits down and Thats, just less that of those email the framework side, that's why we talked about potentially seeing bookings slowed.

Mark Widmar: As you know that the project has to be much further along as it relates to financing, you know, debt and tax equity before that liquidity is brought into the mix at the project level. So I think part of it is, you know, wanting to have the certainty of the delivery, but in balancing that with capacity to, you know, from security standpoint that we're requiring on our contract. And it's just a matter of finding a good balance that can work.

Okay.

Your next question comes from the line of Brian Lee from Goldman Sachs. Please go ahead.

Hi, Thanks for taking the question. This is Chris on for Brian I guess.

My question on competition. So one of your peer Crystal lines compares it recently announced five gigawatt cell expansions.

As the first line of.

Mark Widmar: We have parent guarantees that for certain entities can work, but, you know, we want to make sure they're credibility parent guarantees and the entities that those guarantees are issued against. And that's sometimes where some of our customers becomes a bit more challenging. So you kind of got this balance of wanting certainty, wanting to engage clearly, want to partner with for solar and also know that we are loyal, prior to especially our partners that have been with us for an extended period of time.

Although integration from China, and the U S. I think the Capex looks like about 1 billion for that five gigawatt.

So the Capex is lower but can you speak to your understanding of the cost structure for overseas Pier building in building manufacturing in the U S and how your series seven compare.

Sure.

Sure.

So there is a lot there.

Mark Widmar: But then also balancing their near term liquidity constraints to accept that they have them and, you know, when did they want to enter to the contract. So I don't see it so much in the sentiment to realization against that on my point. I just think it's you're going out to the horizon right now that, you know, people are maybe not is, you know, ready yet to commit capital and commit the liquidity that we need to get comfortable with around security for the modular agreement.

There is an.

The announcement that was.

It was made recently this week.

One of our competitors that would be put itself in the U S.

Others that are doing sales and use my burgers made a commitment to do sales in the U S. Panama T cells doing sales in the U S.

Now from that standpoint, but one thing I want to make sure is clear and you said vertically integrate it's not vertically integrated all the way through to.

The polysilicon.

So yes, it's a module assembly with cell.

Mark Widmar: I still think that I know one is that the analyst thing we talked around the fact that we actually over how it takes in the near term when we do that deliberately because we tend to see projects move out to the right that gives us some comfort. The other reason we do that is a lot of our recent bookings have been framework agreements with customers whereby they don't necessarily have a specific project allocating those modules that bind from us.

Manufacturing the wafer is still are not manufactured in the U S. It's obviously not in the U S at North Sea.

Uncertainty, where exactly where the polysilicon is coming from it could be troubled U S manufacturer or potentially Europe or Permian I guess.

It's not an apples to apples comparison.

What I'll say is that if you if you look at the announcements that they've made it was about $800 million Lasalle.

Mark Widmar: They just know they're going to need that total volume over a pair of time. And the framework can be more challenging to plan for because there is often some flexibility in timing there. They're also showing that customers and very long dated booking are willing to buy without necessarily knowing exactly where the products go in because they value that certainty. And they know that every time they'll find a hundred. But we've been seeing a lot more of that behavior, which was a little counter to your question.

The sell in and a few hundred million to $300 million core up for the module, which is pretty comparable to our fully vertically integrated so they are about $1 1 billion, but the.

Mark Widmar: But we're seeing people booking out at times when they don't necessarily know exactly where it's going. But they're still wanting to make that commitment because there's a value for them doing so. But as Mark said, the further we get out, the fact that we're now booking out into 2028-29, it becomes part of people putting meaningful deposits down. And there's just less that it is even on the framework side. That's why we talked about potentially seeing booking slow.

What I think is maybe the most telling number to look at from a competitiveness standpoint is the head count I think it's four five gigawatts is 2700 <unk> cell and module.

On a roadmap that will be 14 gigawatts of fully vertically integrated so think about that from the production of the poly silicon all the way forward.

And our entire head count from 14 Gigawatts in the U S will be comparable to that 'twenty 700.

On a head count basis, we're about there are about two five times higher on a head count basis.

Unknown Executive: Your next question comes from the line of Brian Lee from Goldman Sachs. Please go ahead. Hi, thanks for taking a question.

<unk>.

That adds about 225 cents on a cost per watt basis, using kind of U S exports.

Grace: This is Grace on for Brian. I guess my question on competition. So one of your crystal lines that computers recently announced is five gigawatt cell expansions. I think it's the first sign of where to go integration from China in the U.S. I think the CapEx was like about one billion for that five gigawatt or so. So the CapEx is lower, but can you speak to your understanding of the cost structure for overseas peer building and building manufacturing in the U.S, and how your series seven compare.

I think Thats one thing for sure that will create a much higher cost profile for that manufacturers.

The other is they don't have a local supply chain as we indicated in our call.

We have localized our supply chain, we have been in front of that game. So our glasses here in the U S. As we indicated our bath rails on series seven are here in U S.

The 10 components are so they are identified to the domestic content.

From the R&D CRA all of our components of our series a product will be based in the U S.

Grace: Thanks. Sure. So there's a lot there. Yes, there's an announcement that that was made recently this week. More of our competitors that would be putting cells in the U.S, and look, our others that are doing cells in the U.S. My burger is made equipment to do cells in the U.S, panel two cells doing cells in the U.S. But one thing I want to make sure is clearly, and you said we're going to integrate this, it's not very integrated all the way through to, you know, the policy look at it.

That factory.

We'll most likely have one at least one major component glass is not going to be available in the U S. There are no higher than glass manufacturers today in the U S. It could happen.

But it would be much more expensive than it would be to source shrunk from southeast Asia or China.

But then they have to pay the freight and it's expensive to ship glass, which is heavy in southeast Asia or China to the U S. But we're also going to have some attention to deal with.

Grace: So yes, it's a module assembly with cell manufacturing. The wafers still are not manufacturing the U.S, and it's obviously not in the U.S, but it ignores the certainty where exactly what the policy look is coming from. It could be from the U.S, manufacturer or potentially Europe or Korean, I guess. So it's not an apples apples comparison. What I'll say is that if you look at the announcement that they've made about 800 million dollars for the cell and a few hundred million to 300 million for the module, which is pretty comparable to our fully vertically integrated.

Given that the comment that we made on our remarks that our duties now that are being considered for extruded aluminum.

There is potential that it could be applicable to Frank.

Series seven product as an example does not use less steel in it domestically sourced.

Yes.

<unk>.

So I am very confident and this is one of the things that we said before is that obviously one is a level playing field as we all compete on the same basis and under the same policy environment as long as we have that I have no doubt that we.

Grace: So they're about 1.1 billion. But the, what I think is maybe the most telling numbers it looked at from a competitors standpoint is the head count. I think it's for five gigawatts is 2700 head for just cell and module. We are on a roadmap that will be 14 gigawatts of fully vertically integrated. So think about that from the production of the polysilicate all the way forward. And our entire head count for 14 gigawatts in the U.S, will be comparable to that 2700.

Grace: So on a head count basis, we're about, there's about two and a half times higher on a head count basis than we are. That adds about two, two and a half cents on a cost for a lot of bases using kind of U.S, labor rates. So I think that's one thing for sure that will create a much higher cost profile for that manufacturer. The other is they don't have a local supply chain as we indicated in our call.

We are materially cost advantage too.

Any other U S manufactured.

For the various reasons that I've mentioned.

We are we feel like we're in a position of strength, we believe that we have a key point of depreciation.

Brian our manufacturing excellence.

We're more than happy to compete with anyone who choose manufactured in U S and we welcome. It we believe the IRA in order to be successful is to create a diversified.

Supply chain with many different types of technology crystalline silicon cells, whether it's cat Taylor, eventually prost guidance or others.

We need that we want to ensure long term energy independence and security and for the U S to become a technology leader.

We need more manufacturing would be more innovation different types of technologies to continue this fall.

Your next question comes from the line of Joseph Osha from Guggenheim Partners. Please go ahead.

Grace: If we have localized our supply chain, we have been in front of that game. So our blast is here in the U.S, as we indicated our back rails on series seven are here in the U.S. The 10 components or so, they are identified through the domestic content from the underneath the IRA. All of our components for a series seven product will be U.S. That factory will most likely have one, at least one major component.

Thank you and Hello, everyone happy Halloween following on the previous question assuming that most of what we see in the U S is going to be module sourced with domestic sale, but almost certainly overseas wafer and poly.

Based on what you see right now can you see those suppliers managing to meet domestic content requirements under the IRA.

Grace: Glass is not going to be available in the U.S. There are no higher glass manufacturers today in the U.S, it could happen, but it will be much more expensive than it would be to source from. For I'm Southeast Asia or China. But then they have to pay the freight and it's expensive to ship the last which is heavy for Southeast Asia or China into the U.S. They're all going to have some tension deal with with duties.

So just why we're not I'm curious as to what Youre thinking is on that.

So.

As we currently understand the supply chain and the availability of the domestically source components that were identified.

The IRA.

Domestic content guidance that was provided.

The only.

Grace: No different than the comments that we made on our very remarks. There are duties now that are being considered for extruded aluminum. And there's potential that it could be applicable to the frame. Our series seven product, as an example, does not use aluminum. It's steel and it's domestically sour, so it doesn't have that type of exposure. So I am very confident. And this is one of the things that we've said before.

And readily identifiable component that we believe.

Some small stuff like adhesives and stuff like that that's not going to move the needle.

But most likely the only really.

The component that will move the needle.

Drive some meaningful amount of domestic content will be the cell.

If you look at this most recent announcement I think Dave said there'll be up and running by the end of 'twenty five.

Grace: Is that all of the ones the level playing field that we all compete on the same basis. And under the same policy environment. As long as we have that, I have no doubt that we are materially cost advantage to any other U.S, manufactured. For the various reasons that I mentioned. We feel like we're in a position of strength, we believe that we have a key point of appreciation for our manufacturing excellence and we're more happy to compete with anyone who chooses manufacturing in the U.S, and we welcome it.

Which means largely that those cells would be available for production and shipment.

Actually installation.

Yes.

The modules.

The installation of your projects in 'twenty six.

And I believe the requirements under IRA and 26 as close to it I think its 60%. So they have to so you are starting off at 40% domestic content and steps to weigh up all the way to 55% so they've got a window now.

They can actually realize the benefit of domestic content requirements will be at a higher threshold than it is right now.

At least the math that we run just looking at the cell and understanding the direct material direct labor costs of crystalline silicon module will be very difficult for.

Grace: We believe the IRA in order to be successful is to create a diversified supply chain with many different types of technology. First and foremost, we want to ensure a long-term energy and the kind of security for the U.S, to become a technology leader. We need more manufacturing with more innovation and different types of technologies to continue with this forward.

The sell only domestically sourced module to meet the project level requirements to achieve the domestic content.

It helped us.

<unk> as I indicated which is the vast majority of our 14 gigawatts of demand.

Domestic production is 100% domestically sourced therefore, it qualifies as a domestic product.

Mark Widmar: Your next question comes from the line of Joseph Osha from Guggenheim Partners, please go ahead. Thank you and hello everyone, happy Halloween following on the previous question, assuming that most of what we see in U.S, is going to be module sourced with domestic cell but almost certainly overseas wafer and poly. Based on what you see right now, can you see those suppliers managing to meet domestic content requirements under the IRA and if so, just why we're not, I'm curious as to what you're thinking is on that.

It will be materially advantaged.

<unk> of domestic content bonus at the project level versus just a crystalline silicon.

Module with domestically source out.

Your next question comes from the line of Vikram <unk>.

From Citi. Please go ahead.

Yeah.

Vikram Your line is live.

Sorry about that good evening everyone.

I wanted to ask about capital allocation.

Mark Widmar: So, as we currently understand the supply chain and the availability of the domestically sourced components that were identified under the IRA, domestic content guidance that was provided, the only and really identifiable component that we believe. I mean, there could be some small stuff like adhesive and stuff like that, that's not going to move the needle. But most likely the only really eligible component that will move the needle and that will drive some meaningful amount of domestic content will be the cell.

At the analyst day, we understood that there is some downside to that capex by implementing some processes at the supplier level and.

Any updates to share there also Alex you mentioned that.

Three batteries and cash it sounds like it's not the most efficient path to fund capex in the U S. I was wondering what the cost of feedback creation is.

And staying on the same topic.

That funding buybacks with IV cash is not on the table yet I was wondering if <unk>, creating the cash longer confirmed for the buybacks.

Mark Widmar: If you look at this most recent announcement, I think that you said that we have been running by the end of 25, which means largely that those cells would be available for production and shipment and eventually installation. To solve or assembled in the model that eventually installations your project in 26 and I believe the requirements under IRA and 26 is close to I think it's 50% so they have to so you're starting off at 40% domestic content and it steps way up all the way to 55% so that got a window now that the time they can actually realize the benefit of domestic content that requirements will be at a higher threshold than it is right now.

And then finally I was wondering if common equity is still off the table completely thank you.

Okay.

I'll take the first one and I'll take all the restaurants. So yes, we are still working through.

With our supplier.

To enable various coding capability set with <unk>.

And us not having to make substantial.

Capital investments.

Related to our upgrades for pure technology Archie.

Testing is ongoing.

What I'll say is the early indications a long way still to go we want to make sure. It's very clear, it's a long way still to go but early indications on what we've seen so far is very promising.

Mark Widmar: At least the math that we run, just looking at the cell and understanding the direct material, direct labor costs of Christensville and module will be very difficult for the cell only domestically sourced module to meet the project level requirements to achieve the domestic content.

We will be able to find a way to.

To have supplier provides.

<unk> to the glass without us having to do it on our own.

Look there are some trade offs of that such as the Capex dollars. It's also the opportunity to further optimize the buffer layer, which is what they're putting on to capture better performance at the semiconductor level. So we'll have to continue to assess respected tradeoffs, but I would say at least as it right now early early innings.

Mark Widmar: Series 7 is indicated, which is the vast majority of our 14 good lots of domestic production is 100% domestically sourced therefore it qualified as domestic product. It will be materially advantaged and enabling of domestic content about the project level versus just a Christensen Silicon module with the domestic resource shelf.

Can you discuss that.

Yes.

Three positive indication of their capabilities in that regard.

So you think about Capex, we analyst day, we showed your Capex plans for 2004, five and six of those.

What are the range of three and a half that $4 billion.

As Mark just said that early indications that there's an opportunity potentially to some of the <unk>.

Technology related Capex come down a little bit. However, you think about the near term. The majority of the spend for 2024 was not related to that is capacity expansion R&D facility answers maintenance sustaining capex. So the guide that we've talked about in the analyst day of one six to $1 nine next year. It doesn't have a lot related to that technology.

Vikram Bagri: Your next question comes from the line of Vikram Bagri from City. Please go ahead. Vikram, your line is live. Sorry about that. Good evening, everyone.

Mark Widmar: What do you ask about capital allocation? At the end of the day, we understood that there is some downside to tech capex by implementing some processes at the supplier level. Any updates to share there. Also, Alex, you mentioned that you know, repatriating cash. It sounds like it's not the most efficient part to fund capex in the US. It's only what the cost of repatriation is. And staying on the same topic, I understand that funding buybacks with ira cash is not on the table yet. I was wondering if G patrioting the cash longer term can fund fund buybacks longer term. And then finally, I was wondering if common equity is still off the table completely.

Little bit as you get into the outer years as more technology related. So there is an opportunity to bring that down it's going to be more in back end of 'twenty five 'twenty six so as we look through next year's capital spend program.

Still a significant capex.

Yes.

Program that we're looking at as I think through how to fund that if you go back to the tax reform in 2017, what that effectively does what you paid a onetime transition tax which is the equivalent of paying federal taxes repatriating.

Repatriating the money so the federal expenses is basically done however that.

Would be state local tax implications of bringing money back so today, we serve.

We plan to reassess our capital offshore if we were to change that assertion to bring capital back it wouldn't necessarily be a tax impact to look at the capital pullback that you would see.

Alex Bradley: Thank you. I'll take the first one and I'll take all the rest of them. So yes, we are still working through with our supplier to enable various coding capabilities that would result in us not having to make substantial capital investments related to our upgrades for our pure technology. Testing is ongoing. What I'll say is the early indications a long way still ago, want to make sure it's very clear. It's a long way still to go, but early indications on what we've seen so far is very promising that we will be able to find a way to provide or to have some fire provide book.

Tax expense on the P&L as Tommy change that assertion so haven't given a number what that will be but there will be some potentially significant state and local tax implications of doing that at the time.

In terms of thinking about the way the funding what.

What we said right now is what we need is transition capital temporary capital I don't see any frankly.

So what we're looking at is things that will help us bridge through the gap between the significant investments, we're making now upfronts and the timing of receipt of the cash associated with section four of our next credit as I said at the analyst day, if we have that cash on hand at the same time, we recognize the tax benefit on the P&L that we wouldn't have this potential challenges.

Alex Bradley: The code is to the last without us having to do it on our own. Now that there's some trade offs with that such as the capital is also the opportunity to further optimize the buffer layer, which is what they've been putting on to capture better performance at the semiconductor level. So we'll have to continue to assess respect the trade offs. But I would say at least as of right now early early innings.

Fictional mix and temporary transition timing.

The need for equity I don't see today.

And then to your question around buybacks look we haven't looked at that I think we're a long way from being in a position where we need to think about that going into pretty significant capex spend over the next few years such as the iras.

Alex Bradley: I want to continue to stress that there's a repositive indication of their capabilities in that regard. But if you think about catbacks, we the analyst they we showed you come back to land for 24 or five weeks. Somewhere the range of three and a half is $4 billion spend as much as that the early indications that the opportunity potentially some of the technology ready to come down a little bit. However, things about the near term.

Not coming in yet so we'll think about that when the time comes but that's not where we're at right now okay. So investment cycle.

Your next question comes from the line of Colin Rusch from Oppenheimer <unk> Company. Please go ahead.

Thanks, So much guys can you talk about how much.

Thats, good inventory because of the quarter with and where you're at right now in terms of.

Alex Bradley: The majority of the spend for 2024 is not related to that capacity expansion R&D facility is a maintenance and same catapet. So the guys that we've talked about in the last day of 1.6 1.9 the next year doesn't have a lot related to that technology and then a little bit. As you get into the early years there's more technology related. So if there is an opportunity to bring that down it's going to be more in back end of 25 in the 2026.

The nameplate run rate.

Sure.

So.

So you wanted to.

Enterprise lines finished good inventory.

Quick question, not just India right.

Yes.

Yes.

For the whole company, and then understanding where you're at in terms of production run rate right.

Alex Bradley: So we look through next year's capital standard program. Bill is in miscontabrics. Program that we're looking at. And I think to have fun that if you go back to the tax reform in 2017, what that effectively did was you paid a one-time transition tax, which is the equivalent of paying federal taxes though you are repatriating the money. So the federal expense is basically done. However, there would be state and local tax implications of bringing money back.

Right now.

Yes, so for the total for the company.

We ended up with north of three Gigawatts of inventory.

But right now as we indicated we produced about 150 <unk>.

Seven.

India.

All of that is actually an inventory we have we don't have the certifications yet to allow us to start.

So whatever the spike in inventory, partly because of that because of that.

But it lines up to our if you look at our solid volume in the fourth quarter I think I got a.

Alex Bradley: So today we serve that we come to re-advert our capital offshore. If we were to change that, there wouldn't necessarily be a tax impact till it gets the capital back, but you would see an impact tax expense on the K&L at the time you change that assertion. So I haven't given a number of what that would be, but there would be some potentially significant same local tax implications of doing that at the time.

Second one was all of the four gigawatts or something like that so that inventory is lining up to our anticipated shipments here in the fourth quarter.

But India as I indicated.

Demonstrated capability, they've demonstrated almost 80% of nameplate.

We're actually running at right now about.

Alex Bradley: In terms of thinking, by the way, the funding, look, what we said right now is what we need is the condition capital temporary capital. I don't see any differences there. But what we're looking at is things that will help us bridge through the gap between the significant investments we're making now upfront and the timing of receipt that the cash assertion is the section for your ex-credit. As I said at the analyst days, we had that cash in hand at the same time that we recognized the tax benefit on the P&L, then we wouldn't have this potential challenges, jurisdictional mix and temporary transition timing. But that's the need for equity I don't see today.

<unk>.

Although less than 7%.

Nameplate and look that's a tremendous result, when I look at it because we just started the integrated rather that factory.

In July.

Three months or so out and were making 10000 modules a day.

That was obviously.

I'll step function improvements, but it's great to see where its EBIT. It demonstrated that ability to make finished 10000 finished modest on a given day not just demonstrated capability that we can do that.

And we did that from a standpoint of.

As I referred to that startup was largely.

Alex Bradley: Thank you. Your question around buyback. Look, we haven't looked at that. I think we're a long way from being in position. We need to think about that. We're going into pretty significant capital spend over the next few years, both at the IRA capital not coming in yet. So we'll think about that with the time comes, but that's not where we're at right now.

Cold start we didn't we weren't able to because of various permitting restrictions.

We couldnt really start running season than any of the tools until we got to the point of actually starting the integrator it very quick.

We moved into <unk>.

Thanks, Paul process so.

Mark Widmar: We're going to invest in time.

Really good results hopefully that's a forward looking indicator of success that we will see as we move forward into our Alabama factory in our Louisiana factory and again, our goal is always to start these factories up sooner and faster.

Colin Rush: Your next question comes from the line of Colin Rush from Oppenheimer and company. Please go ahead. Thanks so much, guys. Can you talk about how much finished goods inventory you have to go to the quarter with? And where you're at right now in terms of the nameplate run rate in India. So the measure coming so that you want to know the enterprise wise finish good inventory amounts that are quite not just in here, right?

We had the previous one and I would say at least indications from Ohio to India.

The successful so far long way still to go and a lot of we're still trying to have us, but pretty happy with all of that factors performance right now.

Your next question comes from the line of Ben Carlo from Baird. Please go ahead.

Colin Rush: Yeah, that's the that's the the whole company and then understanding where you're at in terms of the production run rate in India right now. So yeah, so yeah, so for the total for the company, we ended up with north of freaking watching inventory. But right now, you know, we indicated we produced about 150. I watched or so in India. All that is actually an inventory. We don't have the certifications yet to allow us to start shipping.

Okay.

Good.

Uh huh.

Right.

On that note.

Sure.

I guess the question is.

Twofold.

Yes.

What do we do it well.

Your your customers like breaking contracts.

Doug you have this because.

Sorry.

Yes.

Or something like that.

How do we build that's a risk.

Risks and number two.

Colin Rush: So, you know, there was a spike in inventory part because because of that, but it lines up to our, you know, we look at our sole diamond in the fourth quarter. I think if I had a second word or the word you go on through something like that. So that inventory is lining up to our anticipation is here in the fourth quarter. But India and they indicated, you know, from a demonstrated capability, you know, they demonstrated almost 80% of nameplate who are actually running that right now about 70% or less than 70% of the nameplate.

What you said there.

Okay.

The speed the time of your.

Your factories.

I think it's getting better.

Sure.

How does that factor into your.

<unk>.

Okay.

Thank you.

Okay.

Thanks.

Ben I think.

Yes.

One of the deals that we just.

Did this quarter I think there may be a press release this week.

We added another 500 megawatts onto a deal with partnering patch for a while.

Colin Rush: And look, that's a tremendous result when I look at it because we just started the integrated run that factory in July or three months or so out and we're making 10,000 models a day. You know, that was obviously that function improvement. So it's great to see where it demonstrated that ability to make a finished, you know, 10,000 finished models on a given day. Not just demonstrating capability, but we can do that.

It brings the total of north of three Gigawatts that we've done with this.

Particular partner.

There is just this relationship and understanding of.

Value propositions that first solar is able to bring in our ability to deliver certainty against commitments that people look to one is.

De risked their their projects I mean, that's their primary focus.

Colin Rush: And we did that from a standpoint of, as I referred to that startup was largely, you know, a cold start. We didn't, we weren't able to because there's permanent restrictions and things that need to happen. We couldn't really start running in season and the tools until we got to the point of actually starting the integrated run that very quickly moved into our process. So a really good result. Hopefully that's a forward looking indicator of success that we'll see as we move forward into, you know, our Alabama factory and our Louisiana factory and again, our goal is always to start these factories out sooner and faster.

These projects are.

Meaningful multiyear investments with meaningful amount of capital and that they are starting to evolve now with higher capex dollars for integration of storage eventually integration of for hydrogen.

At the front end of what you need in order to make that project successfully something has to take both tons and to make electronic but otherwise nothing happens.

And what our partners want from US is certainty they want us to get them.

Additive technology.

Colin Rush: You know, that we had the previous one and you know, I would say at least indications from Ohio going to India is pretty successful so far. Long way still to go, a lot of work still in front of us, but it's pretty happy with how that factory is performing, right? Yeah.

And a great price that DRAM missed their projects and allows them a higher level of confidence of delivering against their commitments to their board and so there are shareholders, whereas in others.

First solar is able to do that we're uniquely positioned we're also uniquely positioned to provide.

Mark Widmar: Your next question comes from the line of Ben Kallo from Baird. Please go ahead. Hey, Mark. It's just on on on that note. I guess the question is twofold. What do we think about your customers, like breaking contracts? Is that going to happen? Because someone's going to open up a factory in India or something like that. And how do we know that's our risk? And number two, what you said there is, you know, the speed to time of your factories. I think this game better as they get more automated. And how does that factor into your whatever ROIC or however you look at making sense?

We believe with series seven, particularly the highest domestic concept qualifying module in the industry.

To take risk to try to.

Find ways to look at alternative path.

Degrees of certain uncertainty associated with that.

It's not even clear that that factory that youre, referencing will actually be up and running and the timeline of which.

It's been committed.

The other thing is a portion of that after Dave is going to be for self consumption for their development are no different than the factory.

No.

Which is.

Investor that is looking to take a meaningful amount of that volume for their own development pipeline.

That creates a different perception to some of our partners around why do I want to buy a technology or modules from the competitor alright, somebody thats going to be competing with English write primary business model is to be a developer primary business model is to be the IBP the utility to own the generation assets to get the return on investment against that against.

Mark Widmar: But, you know, Ben, I think, you know, we'll, one of the deals that we just did this quarter. I think there may be a press release this week. You know, we added another 500 megawatts onto a deal with a partner we had for a while. I think it brings us a total of North of three gigawatts that we've done with this particular partner. And there's just this relationship. And understanding of value propositions that first solar is able to bring and our ability to deliver certainty against commitments that people look to and want to, you know, de-risk their project.

Project.

To feed my my competitor to better position them to take market share from me is not.

In a position of strength that a lot of our partners choose to be it.

And there is still uncertainty I mean, there's a lot of things that are changing as it relates to I mentioned already the potential duties imposed on.

But it's really a woman who is coming in from China and Southeast Asia.

Mark Widmar: I mean, that's their primary focus. You know, these projects are meaningful, multi-year investments with meaningful amount of capital and that are starting to evolve now with, you know, higher cap ex dollars for integration of stories and eventually integration of for hydrogen that at the front end of what you need in order to make that project successful. If something has to take both times in to make a backdrop. Otherwise, nothing happens. And, you know, what our partners want from us is certainty.

That's another risk profile that somebody has to be we want to expect it could be glass specs, I mean, who knows who knows what the next step in the journey is going to be.

And all our partners know is that with first solar.

Are they completely derisked those dimensions and they've got a great partner, who is going to deliver great products, great technology at a great price on time, so that's a sense of where our customers I think view us.

Our contracts, yes, we have penalties in there is ways to potentially pay those penalties.

Mark Widmar: They want us to give them a competitive technology and a great price that de-risk their project and allows them a higher level of confidence of delivering against their commitments to their board and to their shareholders and others. You know, first solar is able to do that in a uniquely position. We're also uniquely positioned to provide. We believe what's here is that in particular the highest domestic content qualifying module in the industry.

And customers potentially could break a contract and we will take those penalties and will look to sell that technology on it.

For the marketplace to somebody else, but when they step back and reflect that.

Sure significant amount of risk that they would be taking for a small nominal impact.

It's uncertain, whether it's even meaningful impact it could even be worse opposition for them, especially if they are jeopardizing the domestic content on your ITC.

Why would you want to elaborate damage for potentially little if any benefit or make yourself pushed it up in a worse position.

Mark Widmar: You know, to take risk to try to find ways to look at alternative paths that would have degrees of certain uncertainty associated with them. You know, it's not even clear that that factory that you're referencing will actually be up and running in the timeline of which it's been committed. The other thing is, you know, a portion of that off the tape is going to be for self-consumption for their development art. No different than the factory in Ohio, which, you know, is an equity investor that is looking to take a meaningful amount of that volume for their own development pipeline.

As it relates to the factories and the startups.

ROIC every one of these factories that we startup sooner it just accelerates the ROIC, especially for our U S manufacturing.

That means we get or I or $8 faster.

So anything we can do to get product into the market faster just enhances the return on invested capital and as we see that ability then as we think about alternatives for another factory yes.

After that.

Hey that our ability from it.

The announcement to high volume manufacturing is if it's a shorter time, London and potentially creates a lens that says that the payback neuro share would be more attractive for the factory.

Mark Widmar: You know, that creates a different perception to some of our partners around why do I want to buy a technology or modules from a competitor, right? Somebody that's going to be competing within which our primary business model is to be a developer. A primary business model is to be the IPP, the utility to own the generating assets to get the return on investment against the project. You know, to feed my competitor to better position than to take market share from me is not a position of strength that a lot of our partners choose to be in.

Just to put a couple of numbers around the termination fee as we said at our analyst day that about 14%.

Megawatts at our backlog at that point was subject to a termination for convenience closed.

You look at that 86% of our backlog at that point and had no ability to terminate a contract short to default now we can never stop people trying to also have contracted in a default scenario.

Development that put themselves in a very difficult position because they have I'm going to see a trash a breach which would make it very hard for them to seek financing and tax equity for any project going forward.

Mark Widmar: And there's still uncertainty. I mean, there's a lot of things that are changing, you know, as it relates to. I mentioned already that potential beauty set posed on, you know, through the world of coming in from China is about these days. That's another risk profile that somebody has to be willing to expect. It could be glass next. I mean, who knows who knows what the next step in the journey is going to be.

But for the vast majority of our backlog there is no ability to 70 <unk> the.

So those contracts that we do have that clause, which typically is when we have larger long dated contracts and we have a small portion of that contract and the way. We are subject some of the megawatts termination for convenience. We then have an agreed fee typically up to 20%, which we look to collect in the idea of that being the weaker that resell those modules will be at least made whole on that transaction.

Mark Widmar: And all our partners know is that with first solar, they completely de-rest those dimensions. And they've got a great partner who's going to deliver a great product or a technology and a great price on top. So that's the sense of where our customers, I think you us within our contracts. Yes, we have penalties and there's ways of potentially, you know, pay those penalties and and customers potentially could break a contract. And we'll take those penalties and we'll look to sell that technology on into the marketplace to somebody else.

So.

Just to give you some color around the numbers.

Our final question comes from Andrew <unk> from Morgan Stanley. Please go ahead.

Thanks, So much for taking my question Mark.

You sort of answered my question already but I just wanted to dive into the cost of capital environment.

It's obviously, having an impact on the market or the perceived economics of renewables. So I'm just wondering if youre seeing any developers or customers that maybe haven't.

Mark Widmar: But when they step back and reflect that the significant amount of risk that they would be taking for small nominal impact, that is uncertain whether it's even a meaningful impact. It could even be a worse off position for them, especially if they're jeopardizing the domestic content under ITC. You know, why would you want to do all that for you to have a strong potential if any benefit or make yourself push stuff in a worse position.

In.

Big first solar customers historically that are maybe turning to your technology, because maybe they see your technology and your supply chain as more bankable than than someone else.

<unk> combined with a more expensive cost of capital environment I'm, just wondering if that's becoming a bigger competitive advantage than it maybe was a year or two ago. Thank you.

Mark Widmar: You know, as it relates to the factories and the startups, I mean, you know, the ROIC, everyone in these factories that we start up sooner just accelerates the ROIC, especially for a U.S, manufacturer. That means we get or IRA dollars faster, you know. And so anything we can do to get product into the market faster just enhances the return on investment capital.

Yes, I think I think Alex actually referenced it in his section, but if you look at our bookings this last quarter.

We had.

We highlighted three large contracts that were over a gigawatt total bookings side.

Mark Widmar: Well, as we see that ability, then, you know, as we think about alternatives for another factory, yeah, we'll talk to that in and say that our ability from, announcement to High Value Manufacturing, is it different to shorter timeline than it potentially creates a lens that says that the payback near OSC would be more attractive forwarding banking. So those contracts that we do have that clause, which typically is when we have larger long day big contracts, and we have a small portion of that contract where we have such as some of the megawattination for convenience, we then have an agreed fee typically up to 20% which we look to collect and the idea of that being that we could then resell those modules and be at least made hold on that transaction. So just to give you some color around the numbers.

One of them is a is a returning customer that we mentioned announcement on with moderate energy I think we made that.

But around the plus September around that time frame.

But then we announced there is there was two other new customers.

One is an IPP.

And another is effectively.

Asset management entity with a portfolio company of multiple developers, both new customers right.

And we're very happy with those in the first step of our journey of developing a deeper partnership with those with that.

Those counterparties.

And look.

The first solar for.

Understanding of the unique value proposition and what we can provide.

One of them, but in particular I know us.

We would have liked to have gotten for soldiers books earlier.

We just didnt have capacity and so now with a look forward and they see there is some supply as you get out in 2007 to 2029.

They want to they want to secure some of that supply.

They would have loved to that on the books in 'twenty four 'twenty five 'twenty six particular areas, we did announced supply.

I do think that the environment that we're in right now.

First of all those capabilities value proposition I think are more compelling.

It's driving new customers to our portfolio and our overall contracted backlog, which is now north of 80, Gigawatts I mean, just.

Can reflect on that number I mean that that's a huge multi year contracted backlog.

Andrew Percoco: Our final question comes from Andrew Perkoko from Morgan Stanley, please go ahead.

Commitments with dozens of different <unk>.

Mark Widmar: Thank you so much for taking my question. Mark, you sort of answered my question, but I kind of just want to dive into the cost of capital environment. You know, obviously having an impact on the market or the perceived economics of renewables. So I'm just wondering if you're seeing any developers or customers that maybe haven't been big for solar customers historically that are maybe turning to your technology because maybe they see your technology and your supply chain is as more bankable than someone else. You know, you have LPA ADCED, you know, combined with a more expensive cost of capital environment. I'm just wondering if that's becoming a bigger competitive advantage than it maybe was a year or two ago.

<unk>.

Uniquely understand for solar and understand the value proposition that we can trade that enabled the success of their business model.

And this concludes today's conference call. Thank you for your participation.

Now disconnect.

Okay.

Today's conference call. Thank you for your participation.

Mark Widmar: Thank you. Yeah, I think Alex actually referenced it in his section, but you know, if you look at our bookings this last quarter, we had the highlighted three large contracts that were over in the last 12 bookings line. One of them is a return customer that we made an announcement on with Walnut Energy. I think we made that right around RAPLUS in September around September time. But then we announced there was two other new customers.

Mark Widmar: One is an IPP and another is effectively an asset management entity with a portfolio company and multiple developers, both new customers. And we're very happy with those in the first step of our journey of developing a deeper partnership with those kind of parties. And look, they've come to first solar for understanding of the unique value proposition in what we can provide. One of them in particular I know is whose would have liked to have gotten on first solar books earlier.

Mark Widmar: We just didn't have capacity and so now when they look forward and they see, you know, there is some supplies get out in 27, 20, 29. You know, they want to secure some of that supply. You know, they would have loved to that on the books and you know, on 24, 25 and 26 in particular, we didn't have supply. So yeah, I do think that the environment that we're in right now in first solar capabilities and I proposition, I think, or more compelling.

Mark Widmar: And it's driving new customers into our portfolio and overall, you know, contracted backlog, which is, you know, now knows of 80 years. I mean, just that I can reflect on that number, I mean, that's a huge multi year contract is backlog. And commitments with, you know, dozens of different partners that uniquely understand the first solar and understand the value proposition that we can create that enable the success of their business model.

Unknown Executive: In this concludes today's conference call, thank you for your participation and we now disconnect.