Operator: Good afternoon, and welcome to First Solar's Q3 2026 earnings conference call. This call is being webcast live on the Investors section of First Solar's website at investor.firstsolar.com. All participants are in a listen-only mode, and please note that today's call is being recorded. I would now like to turn the call over to your host, Byron Jeffers, Head of Investor Relations.
Byron Jeffers: Good afternoon, and thank you for joining us. With me today are Mark Widmar, Chief Executive Officer, and Alex Bradley, Chief Financial Officer. Mark will begin with an update on the business, followed by Alex with our financial results and outlook. Before we begin, today's discussion will include forward-looking statements that are subject to risks and uncertainties.
Byron Jeffers: Additional information regarding these risks and uncertainties can be found in our earnings press release, other SEC filings, and the earnings material available on our investor relations website at investor.firstsolar.com. We undertake no obligation to update any of these forward-looking statements as a result of new information or future events.
Byron Jeffers: During today's call, we will also discuss certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP measures are provided in our earnings press release and accompanying presentation.
Byron Jeffers: We encourage investors to review those reconciliations, as non-GAAP measures should not be considered in isolation or a substitute for financial information prepared in accordance with US GAAP. With that, I'll turn it over to Mark.
Mark Widmar: Thank you, and good afternoon. Getting on slide four. We continued to execute with discipline this past quarter, advancing our US manufacturing expansion, CuRe deployment, and perovskite R&D program, while delivering strong financial results. We generated approximately $1.2 billion in net sales, expanded gross margin to approximately 58%, and delivered adjusted EBITDA of $744 million.
Mark Widmar: Operationally, our continued CuRe deployment across the fleet is being executed through a disciplined learnings-based approach that began with our Perrysburg Series 6 conversion in Q1 of this year. That approach now extends to our first Series 7 conversion at our India facility, expected to begin in the Q1 of 2027, which marks the start of Series 7 CuRe replication across the fleet. Beginning in India allows us to first refine the deployment process in a low earnings impact environment before replicating across our US Series 7 fleet.
Mark Widmar: During the subsequent US conversions, assuming a supportive trade environment, India front-end output is planned to be flexed to supply US facilities, supporting US back-end throughput and preserving partial domestic content and Section 45X eligibility production during the transition. Accordingly, India's finished goods production in 2027 is expected to range from 2.2 gigawatts to 2.6 gigawatts.
Mark Widmar: The pace in sequencing subsequent Series 7 US conversions will be informed by learnings from the India launch, consistent with the disciplined learning-based approach we have taken across all periods of technology transition. In South Carolina, our Series 6 finishing facility is being brought online in two phases as part of an integrated manufacturing flow from Vietnam. The first phase started production in Q3. The second phase is expected to reach commercial launch in mid-2027.
Mark Widmar: As we previously shared, we delayed the second phase by approximately one quarter so that the CuRe could be incorporated at commercial launch. Together, these two phases are expected to result in 2027 South Carolina production of 2.2 to 2.5 gigawatts. Beyond CuRe, we continue to advance our next-generation technology roadmap. Our Ohio pilot line, designed to produce Series 6 size perovskite modules, remains on track to reach operational readiness in the H1 of 2027.
Mark Widmar: We expect this line will enable field deployment of modules to further capture learnings and validate the manufacturing, performance, and durability profile of this next-generation thin-film technology before we undertake broader scaling decisions. Our licensing agreement with CubicPV, announced earlier today, together with our previously announced intellectual property agreement with Oxford PV, continues to support the development roadmap, providing access to foundational perovskite IP as we advance our technology roadmap.
Mark Widmar: Turning to the market environment on slide five. The Section 232 proclamation issued in August represents a meaningful shift for US solar manufacturing, and we believe First Solar is well-positioned to benefit as this shift takes effect. Combined with fundamentals such as continued demand strength from load growth and data center expansions, we see a long-term opportunity to translate this position into earnings growth.
Mark Widmar: Section 232 represents a structural change in how the United States approaches solar manufacturing. As the US competes for global leadership in artificial intelligence and the emerging low Earth orbit economy, secure and affordable power will be foundational to both. The country cannot afford to depend on adversarial nations for technologies and supply chains increasingly central to our long-term economic prosperity and national security.
Mark Widmar: As a technology company and the only fully integrated utility-scale solar manufacturer without dependency on a Chinese crystalline silicon supply chain, we believe we are structurally positioned to benefit from this environment. Note, by 2027, nearly 80% of our global module manufacturing footprint will be located in the US. Long-term demand fundamentals also remain strong. AI-related infrastructure, electrification, and the onshoring of US manufacturing are driving significant load growth.
Mark Widmar: These customers need large-scale power quickly, and solar plus storage means one of the fastest and lowest-cost solutions. They are increasingly focused on availability, delivery certainty, bankable warranties, and supply chain security, attributes we have built our business around. As it relates to bookings, we believe the market is working through a transition following the Section 232 announcement with significant influence from other key factors.
Mark Widmar: As a reminder, a substantial portion of our existing backlog is comprised of multiyear framework agreements that are intended to supply customers with projects in various stages of development.
Mark Widmar: While entering into these types of agreements has historically driven significant additions to our backlog, they can also be more challenging for us to plan for and allocate against because of the inherent delivery timing uncertainty associated with projects in early stage of development. Over the course of this year, while not closing the door on framework agreements with appropriate contractual protections,
Mark Widmar: Our customer engagements have shifted more towards project-specific contracting with defined projects and delivery schedules. From our perspective, the enhanced certainty surrounding project-specific contracts allows us to optimize module allocation and delivery with a potential trade-off of slowing the pace of an extended multiyear contracted backlog.
Mark Widmar: At the same time, customers are focused on advancing mid- and late-stage projects where modules have already been secured while deferring procurement on early-stage projects requiring delivery later in the decade. We see several factors driving this behavior, including increased NIMBYism among community residents and growing state and local government opposition.
Mark Widmar: In addition, the overall inflationary environment, together with the continuously evolving tariff landscape, have challenged near-term project economics and require greater strategic planning on behalf of our development customers to address system cost increases unrelated to module pricing. As one example, in certain cases, surging battery prices is challenging both projects in construction as well as projects at the PPA bid stage.
Mark Widmar: Lastly, an incomplete regulatory picture with regards to the final FEOC guidance, as well as the potential for Section 232 tariffs to continue to evolve, particularly as it relates to minimum import prices and the effectiveness of anti-stockpiling measures, has generated volatility in the module procurement market and inhibited customer clarity as it relates to module pricing discovery.
Mark Widmar: The impact of these current dynamics on recent bookings is most pronounced for our Malaysia facility. While Vietnam is expected to supply the semi-finished product for our South Carolina finishing facility, Malaysia retains the capacity to produce fully finished international modules. We continue to evaluate demand for this product based on core unit economics, tariffs and trade conditions, and customer contracting terms.
Mark Widmar: We expect the operating decision regarding our Malaysia facility to be binary, resulting in either operations at full or near full capacity of 128 gigawatt annually, or a shutdown of production, with that decision expected in H1 2027. Given Malaysia's relatively small contribution to our manufacturing footprint, limited Series 6 blending opportunity in the US, absent of Section 45X credits, and freight and tariff burdens, we do not expect either outcome to materially impact our run rate earnings profile.
Mark Widmar: Against this backdrop, we remain deliberate on bookings, and we are pleased with the results of this approach. Through today in the US, our largest market, we have booked approximately 4.9 gigawatts at approximately $0.35 to $0.36 per watt, inclusive of adjusters. Moreover, our 44-gigawatt backlog gives us the ability to focus on contracting approaches on two strategic initiatives.
Mark Widmar: First, we seek to improve pricing on new module sales relative to our current backlog ASP. Note, pricing will continue to vary by product, Series 6 and Series 7, and by US versus internationally made. Second, we seek to improve contract structures to further mitigate the risk of cost increases beyond our control, strengthening credit support and payment terms, and firm up product delivery schedules.
Mark Widmar: Our objective is to optimize across both upfront ASPs as well as long-term earnings profile through disciplined pricing, appropriate contractual protections, strong counterparties, and alignment with our manufacturing and delivery strategy.
Mark Widmar: In summary, our focus on project-specific versus framework agreements, customer focus on near-term project execution versus late date of procurement, evolving market price discovery, and our contracting discipline have moderated recent bookings on a volume basis. But on an economic basis, has generated improved pricing relative to our overall backlog.
Mark Widmar: In addition, we remain focused on our ability to affect our contracting strategic initiatives and are confident in demand for our domestically produced product, particularly for 2029 and beyond, when we have available supply. With that, I turn the call over to Alex to discuss our bookings, financial results and outlook.
Alex Bradley: Thanks, Mark. Turning to our bookings and backlog on slide 6, we ended the quarter with 44 gigawatts under contract, representing approximately $13.5 billion contracted value, exclusive of technology adjusters, with scheduled deliveries extending through 2030. Since our last earnings call, we recorded approximately 1.4 gigawatts of additional US gross bookings, an average selling price of approximately $0.36 per watt, inclusive of applicable technology adjusters.
Alex Bradley: Importantly, substantially all of this volume was contracted or in late-stage negotiation, and pricing and terms are largely set ahead of the Section 232 announcement. In addition, there remains approximately 4 gigawatts of variable volume associated with previously signed contracts, not currently part of the contracted backlog, but pricing reflective of the pre-Section 232 environment, which our customers have the ability to exercise as of a date certain.
Alex Bradley: Approximately half of this volume has a decision date within the next 5 months, with the other half spread across the remainder of 2027 and 2028. Should our customers elect to receive this volume, it will be recognized as incremental bookings at the time of such election. During the quarter, we also continued customer notifications related to contractual technology adjusters aligned with our production plan and intended deployment sequence.
Alex Bradley: These notifications represent a meaningful source of incremental backlog value as Q-iO deployment advances across the fleet, with the majority of the adjuster value expected to be realized in 2027 and 2028.
Alex Bradley: With respect to adjuster eligible volume, we would note that the ultimate realization of these adjustments is subject to the achievement of the underlying technology milestones, timing of future customer notifications and module delivery schedules, and other contractual conditions.
Alex Bradley: Therefore, the final value and timing may differ from the amounts and periods described. Of that potential adjuster value, approximately 20% is currently associated with 2027 deliveries, with the remainder weighted to 2028 and beyond. As we continue to progress customer notifications associated with existing bookings tied to our QED deployment sequence,
Alex Bradley: together with new bookings removing the adjuster concept as we sell our QED product with the technology embedded in the base ASP, the value of the adjusters will roll off over time. Turning to slide 7. Net sales for the third quarter were approximately $1.2 billion, a decrease of approximately 23% year over year.
Alex Bradley: The decrease was primarily driven by lower module volumes sold to third parties compared to the prior year period. Gross margin was approximately 58%, up roughly 20 percentage points year over year. The year over year increase is driven primarily by a higher mix of US-produced modules.
Alex Bradley: Gross margin also benefited from lower sales freight, underutilization costs, tariffs and duties, partially offset by lower termination-related revenue. Operating expenses were approximately $167 million. Research and development expenses approximately $67 million, reflecting continued investment in our technology roadmap, including perovskite development. Net income was $571 million, up approximately 25% year over year.
Alex Bradley: Adjusted EBITDA was $744 million, near the upper end of our previously communicated Q3 preview range, with an adjusted EBITDA margin of approximately 60%. Diluted earnings per share were $5.30, compared with $4.24 in the prior year period. Turn to our balance sheet and capital allocation on slide 8.
Alex Bradley: We ended the quarter with approximately $1.5 billion in net cash, remaining within our long-term target net cash range of $1.5 billion to $2 billion. Our balance sheet and projected cash generation continues to provide substantial financial flexibility. In February, we laid out our approach to capital structure and capital allocation.
Alex Bradley: This prioritized maintaining the aforementioned $1.5 billion to $2 billion of net cash to provide resiliency to cyclicality and industry volatility, and to use additional cash to focus on growth, technology deployment, innovation, R&D, technology roadmap advancements, and M&A, especially related to complementary technology adjacent opportunities.
Alex Bradley: We further stated that we would evaluate applying cash generation in excessively above capital priorities to share repurchases, pending clarity around certain factors, including policy catalysts, new bookings volume, and tax credit monetization.
Alex Bradley: In line with this approach, and following the Section 232 proclamation issued in Q3, our board has authorized a share repurchase program of up to $500 million, effective immediately, with no expiration date. This authorization reflects confidence in the long-term value of the business while preserving our disciplined approach to capital allocation and ability to continue investing in technology development and growth.
Alex Bradley: Turning to slide 9. Our full year 2026 guidance is updated to reflect the lower range of India domestic, international Series 6, and US finishing volume sold with an associated reduction in revenue and adjusted EBITDA.
Alex Bradley: As we stated in our original guidance in February, we entered the year assuming our India facility would flex production as needed to match acceptably priced India-based demand in an inherently short book-to-bill cycle market. We have accordingly reduced our full year India domestic volume sold forecast by approximately 0.7 gigawatts.
Alex Bradley: We also stated in February that we entered the year assuming limited in-year demand for our Series 6 international product, and bookings activity for 2026 deliveries has remained consistent with that assumption. While the low end of our total US component volume sold forecast reflects a modest reduction based on reduced Series 6 WIP share products sold, our forecast range for fully domestic products sold remains unchanged.
Alex Bradley: As we look forward to next year, subject to a supportive policy and trade environment, we expect to increase exports from our India facility to the US market to optimize the margin potential from this factory. As Mark discussed, we expect to make a decision on the long-term operating path for our Malaysia facility in the first half of 2027.
Alex Bradley: Core operating expenses primarily increased as a function of increased legal spend associated with defending our TOPCon intellectual property position, which we believe has the potential to drive future revenue and earnings upside, and increased R&D spend on perovskite development.
Alex Bradley: Note, our full-year perovskite-related spend, originally forecasting approximately $100 million, is now expected to total approximately $120 million and is forecast to increase in 2027 as we seek to advance this next-generation advanced technology.
Alex Bradley: Core OPEX increases were offset by a delay in certain startup expenses of our South Carolina facility, now expected in mid-2027, leaving our total 2026 operating expense guidance unchanged. Net cash guidance remains unchanged, with reduced cash inflows from volumes sold offset by a reduction to forecasted CapEx.
Alex Bradley: In summary, we believe we remain well positioned as we close out 2026 and look forward to 2027, driven by a US policy framework supporting true domestic manufacturing, continued load growth as the United States competes to lead in AI, and utility scale solar's ambition to meet the cost and speed to power requirements of a rapidly modernizing US economy.
Alex Bradley: These drivers align well with our 44 gigawatts contracted backlog for mostly nearer-term deliveries and greater module supply availability in the 2028 and beyond timeframe, for which we expect further improvements in pricing and contractual terms relative to our existing backlog.
Alex Bradley: We continue to invest in our future, including our staged CuRe technology replication across the fleet and increased perovskite spend in R&D, IP partnerships, and our Perrysburg pilot line. Our strong balance sheet allows us continued investment in the business while concurrently enabling capital return to shareholders.
Alex Bradley: With that, operator, please open the line for questions.
Operator: We will now begin the question and answer session. Please limit yourself to one question. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Moses Sutton with BNP Paribas. Moses, your line is now open.
Moses Sutton: Thanks for taking my question, and thanks for all the color. Maybe you could elaborate on what seems like literally zero urgency for developers to book 2029 volumes. I sort of get the point on there's NIMBYism, there's project economics, there's tariffs. But we also hear from developers they expect to really do a lot of safe harbor volume in 2029. Panel prices will structurally go up 50%.
Moses Sutton: They don't have inventory that extends that far out, even if they do for the next two years. Sorry for the long question, but would there be a strategy change that's necessary? Would you cut price to $0.34, $0.35 and book the rest of the decade? It would seem there's a little more urgency for 2029 than there used to be.
Moses Sutton: Maybe you could elaborate a little more, because we do still expect at least tens of gigawatts of TAM each year in 2029 and 2030.
Mark Widmar: Well, Moses, look, the first thing I think we just need to maybe step back and reflect on is that everyone obviously is evaluating the execution against their development pipeline. And there's near-term initiatives and areas of focus that they're concentrating on right now, and disruptions at certain times,
Mark Widmar: as we indicated, even as it relates to whether it's battery costs or other component costs, or the impact of tariffs that are swinging various projects around. People are all trying to work through that. They're trying to secure their financing. There's still interconnection challenges that people are working through.
Mark Widmar: Then probably the biggest issue that people are continuing to struggle with right now is just the challenges that are continuing to happen in local communities, even at the state level, in particular from a government standpoint and trying to push back on deployment of data centers, as we indicated in NIMBYism comments that we had in our prepared remarks. So there is a lot that they got going on right now.
Mark Widmar: Some engagements that we are having right now with customers, and we are starting to book a pipeline of opportunities that are going out into that horizon and some even beyond 2029 and going into 2030 and beyond as well. But everyone is kind of like, "I got all this near-term things I am focused on at this point in time. I got to work through these, get everything addressed.
Mark Widmar: I am still trying to digest the implications of what happens with the full implementation around 232." People are still trying to think through, well, the FEOC guidance is going to come out sometime either later this year or beginning of next year. So I think there is clarity that everybody is looking for at that point in time. So I think it is just a matter of just the timing of letting some of this work its way through, and where their near-term priorities are to then think through the balance of the decade and what they still need to do.
Mark Widmar: Everyone is really concerned now of meeting their 48E safe harbor requirements, which these projects have to be safe harbored by and completed and commissioned by the end of 2028. And there is not as much focus going further out into the horizon. And that is largely what we are seeing from customers.
Alex Bradley: Moses, just a couple of other comments. So we said on the call that we were seeing this year challenges in near-term book to bill on our international volume. And that ties into what we said before. We do not want to be in the spot market. That is a challenging place for us to be. But if you look at our contracted backlog, we are still booked out a couple of years in advance.
Alex Bradley: So when you talk about urgency around booking 2029, obviously, we would like to see booking momentum. We are open for business. But I do not think we have a desperate urgency to be booking in that horizon right now. And we also talked on the call in the prepared remarks around how we are thinking about contracting, and we are looking increasingly at individual projects versus large frameworks.
Alex Bradley: And we are happy to take framework deals with the right set of structural protections within them. But we have seen more and more customers actually looking at individual project deals, and we have been looking at that.
Alex Bradley: And generally speaking, that is going to give you shorter term visibility relative to 2029. So if it is trying to book specific deals, specific projects, the amount of clarity you have for 2029 is a lot less than if you are looking at framework horizon. So there is that piece to factor in as well.
Mark Widmar: Yeah. Moses, one thing I should have mentioned, too, I think it is just a really good example, maybe, to highlight the dynamics that are going on right now. We were in negotiations with a customer for a 2 gigawatt procurement decision that was largely into final negotiations and documentation associated around the agreement.
Mark Widmar: The particular state that this project was being developed put a moratorium in place, and the whole project stopped, right? This has happened after the announcement of the 232. So customers are just uncertain, and when that level of uncertainty does happen, then they are not going to be making commitments until they get better clarity.
Moses Sutton: Very helpful. Thank you.
Operator: Your next question comes from the line of Joseph Osha with Guggenheim. Joseph, your line is now open.
Joseph Osha: Well, thanks very much. Following a little bit on Moses' question, Alex, you mentioned that bookings we are seeing now reflect conversations that were undertaken prior to 232. Can you maybe give us a little bit of a preview on where conversations are landing for conversations that commenced post 232? Thank you.
Mark Widmar: Yeah. Maybe I will add a little bit of color around that. Since the announcement of 232, we have revised and increased our pricing. In some cases, they were deals that were still in the early stage of negotiations. So we have increased pricing in those negotiations with customers.
Mark Widmar: If it is a new opportunity that has come in our way that was not even in any form of conversation prior to the 232, then those prices have gone up relative to what we would have been indicating previously. We still have to work through all those issues, right? I think anytime you get through here in an environment of rising prices, there is a lot of price discovery that is going to get done.
Mark Widmar: Everyone is going to go out, and they want to evaluate all of their options and sort of discover where they think the pricing can be for different dynamics and whether they need the domestic content or how much of the domestic content from a point standpoint do they need. So they are going to do a lot of heavy lifting to sort of figure out and triangulate what makes the most sense, partly because they also have to,
Mark Widmar: in most cases, go back and get approval through their boards. When you see a price point in the market that was there previously and now that price point has increased significantly, then everybody has to then sort of do their due diligence around that. So what I would say is some of the deals that we have announced in this quarter were priced before the 232.
Mark Widmar: In cases where we were in earlier negotiations with customers after the 232, we have looked to try to increase that. Then clearly any new opportunities have kind of informed the more comprehensive view of what we think the pricing environment is like today. But like I said, the price discovery is going to take a while before you will start to see that volume being executed.
Operator: Your next question comes from the line of Philip Shen with Roth Capital. Philip, your line is now open.
Philip Shen: Hey, all. Thanks for taking the questions. In terms of price, just to continue with the conversation, the price discovery may take some time. It sounds like you have 4 gigawatts, of which maybe 2 gigawatts needs to be decided on in the next 5 months. Just curious, what are we talking about now in terms of where pricing could go to?
Philip Shen: In the crystalline silicon world, we have quantified it as pricing has gone up $0.10 to $0.20 a watt, depending on the product and maybe timing. That is a big move, and I understand the price discovery kind of patience or timing that people need because they have to process this upside shock to their economics.
Philip Shen: I was wondering if you can share with us a little bit of what could you book in the next quarter, and then what kind of price do you think you might get? Thanks.
Mark Widmar: Yeah. Phil, the one thing on price, too, I just want to make sure that we have highlighted this before. It does vary by an end. We have it in our prepared remarks as well. The price for us for our Series 6 product is different than our Series 7 product. Our high domestic content product is different than a fully international imported module. So there is going to be a distribution of what that pricing could look like.
Mark Widmar: If I am selling something that is being imported from Malaysia, as an example, that is going to be at the low end of that continuum. If I am selling our Series 7 product that is domestically manufactured here in the US, then that is going to be at the high end. So there is going to be a continuum around pricing.
Mark Widmar: As it relates to, we just announced, again, I think another quarter at $0.36 or something like that, is what our, since the last call to call, I think, was around $0.36. That is an average. We have deals that are above that. That is a momentum that we would like to continue to carry forward. But, I also want to be careful to put a marker out there with so much that still is in fluid and still evolving,
Mark Widmar: I do not want to give an indication of what that price realization could be. We are just going to work to try to see how we can engage the market and capture the highest value relative to competitive alternatives. If crystalline silicon stays in the range that you referenced, then that gives us quite a bit of opportunity to improve pricing dynamics for our technology.
Mark Widmar: But a lot of work still to go to get there.
Alex Bradley: Maybe just two other comments. As it relates to the volume that we already have that may get elected by customers, that is going to range from somewhere close to the current backlog average to somewhere close to where we are pricing now. So you are going to see a variety in that.
Alex Bradley: But it is going to be between what we see historically and what we are seeing currently. Then as you think about future pricing, crystalline silicon pricing is still most likely for deals in the next 12 to 24 months. I do not think there is a good marker for that price point when you get out into the late 2028, 2029, 2030 timeframe, which is when we have most of our available product to sell.
Alex Bradley: One of the reasons I think customers are still doing price discovery is they do not necessarily have a good benchmark that far out that is reliable or trustworthy. So we are still working through our pricing relative to where we think the market is, and customers trying to understand our pricing relative to where they think that market point will be.
Mark Widmar: Yeah, I think the other point maybe I will highlight as well, Phil, is that, look, we still have a little bit of time before we get to full implementation on the 232. What I will say is I have been very happy to hear the kind of enforcement focus that the Commerce has to address anti-stockpiling.
Mark Widmar: The problem is there is such an aggressive posture and risk-taking that people are willing to do in order to get a module into the US at some pre-232 MIP. So we are in a lot of stories of to what extent people are going to in order to try to get product into the market, whether it is the cell level or whether it is at the module level and just aggressively pushing the envelope.
Mark Widmar: I know Commerce is doing a great job of trying to enforce that and to prevent that from happening and stopping that. But the onslaught of this stuff is coming from every angle. I think there is also that piece that people are waiting for. Maybe there will be a lot more product that does make it into the market somehow, and a customer may say, "I am willing to take some,
Mark Widmar: wait and buy some time because maybe I can get an opportunity to get some pre-232 volume that has been imported into the market at some crazily low price." That is informing their decision or at least creating a willingness to wait. We obviously are there to encourage Commerce to do whatever they can to ensure that enforcement of preventing that stockpiling. But that is not stopping the activities.
Mark Widmar: People are willing to take a lot of risk, and it is very aggressive, and we will have to see how effective Commerce could be. So far, we applaud them for their efforts, there is no doubt about that.
Philip Shen: Yeah, so far they have blocked, I think we have learned about 60 importers blocked up until about two weeks ago, and that is out of an importer count of, I think, 400. Pre-232, we learned that it was
Mark Widmar: Yeah
Philip Shen: 200, and then post-232, that jumped up to 400. They have blocked at least close to 60. So looks like they are working, enforcement is pretty aggressive. Any thoughts on that, and then how much higher MIPs could go up and what kind of timing that could be? Thanks.
Mark Widmar: Yeah, look, on the enforcement, some of you may know that we did our ribbon cutting for our new factory in South Carolina, and Secretary Lutnick was there, and a number of his key members of his team were there, so it gave us a great opportunity to talk with them and to sort of continue to emphasize the importance of this enforcement.
Mark Widmar: They are 100% committed on the enforcement side and to do everything they can to prevent those types of things from happening. Where we can, we are sharing insights with them and things we think could be helpful from that standpoint. It is just to your point, the risk tolerance that people are willing to take, knowing that there is going to be that level of enforcement, is not slowing things down very much.
Mark Widmar: Yes, you can get 60 out of the, if the number of importers of record went up from 200 to 400, it is great that we caught 60 of them, but that means there is another 140 that potentially are still getting around current enforcement levels, right? As it relates to the MIPs, look, I think it is very clear if you have not seen Lutnick's remarks at our ribbon cutting, I think you just ought to watch it.
Mark Widmar: There are a couple of videos that are out there, and he is 100% clear of the strategic intent of what we are trying to do here, which is to create US manufacturing, US jobs, US supply chain, US technology, and things that can help enable energy independence and national security.
Mark Widmar: They are going to enforce this, and they are going to put the right requirements in place of ensuring the domestic manufacturing can thrive and then put as many incentives as possible to encourage people to manufacture more here in the US, which I think is great.
Operator: Your next question comes from the line of Brian Lee with Goldman Sachs. Brian, your line is now open.
Brian Lee: Hey, guys. Thanks for taking the questions. I know we're kind of all dancing around the same topic, so I'll try my best as well. It sounds like you guys are moving from being a contract-to-go-to-market strategy to more of a spot market go-to-market strategy, which I think most of your peers do, and that was the case even for First Solar a few cycles ago. So maybe as you said, Mark,
Brian Lee: the bookings cadence moderates here with all the uncertainties, but the bookings cadence can potentially be more fluid on a quarter-to-quarter basis. I guess, is that fair, and are you equipped, I guess, from a sales force perspective to be able to manage through that? Then, again, on the pricing entitlement side of things, you keep referring to developers and all the uncertainties that they're having to grapple with.
Brian Lee: I guess, what are you tasking your sales force with in terms of this price discovery process post 232? I would imagine they're not going to go anywhere lower than what you've been booking at recently, which is $0.36. But is it a range of $0.36 to $0.40, $0.40 plus? What are the puts and takes around kind of what they're going out to market with? Thank you.
Mark Widmar: Well, I think what we were trying to say, Brian, just as it relates to a lot of the deals that we announced going back three or four years ago, we built our contract backlog. A lot of these were multi-year framework agreements that had indicative delivery schedules associated with them. Then, as we said before, they had certain rights, annual ship rights or quarterly ship rights.
Mark Widmar: Things could move around from that contracted schedule. But it wasn't tied to a specific project. What's happened when we do that is the volatility of our customers' development pipeline for various reasons, it just whipsaws stuff all over the place, right? In terms of, hey, this is what the contract was, and now this is what the current requirements are given the state of their development portfolio and projects and what have you.
Mark Widmar: What we're trying to do now a little bit, and not that we won't get back to that. Again, we've got a couple of very large deals where there'd be more of that legacy kind of framework agreement, strategic partnerships, and we'll clearly do those. But near term, what we're seeing more is that everybody's like, "I got a particular project, and I want to negotiate this particular project."
Mark Widmar: That gives us better clarity and certainty of, A, the project, where it sits in its permitting process, where it sits in its interconnection process, where it is in its financing, if it's approaching that or at least we know what the timeline and the profile looks like and gives us better clarity of the timing of when the shipments need to occur. So, that's where the near-term focus is on that.
Mark Widmar: But what I would say is that after this price discovery kind of gets better understood, I think we may see some customers moving in that other direction to say, "I really want to lock in and secure my project pipeline going out into 2029 and 2030." And like I said, we have some customers that are even wanting to start having some conversations that go beyond 2030.
Mark Widmar: As it relates to the sales force, I somewhat alluded to that. First off, from a capacity standpoint, I do not think it is an issue with our capabilities of our sales team to handle that pivot, to more project specific versus framework structures.
Mark Widmar: But as I somewhat alluded to, we have gone and we have repriced deals that were in their early negotiation phase, and any new deals that have come to us now are obviously reflective of what we believe the current market pricing should be. I am not going to give you an indication of what that looks like.
Mark Widmar: But we have recalibrated, and I think the market fully understands that. But I also want to continue to go back. There is a continuum of what those prices are going to be, and near term, and I think I have even alluded to this in prior calls, what we have right now available to book is more Malaysia finished good module coming into the US or an India product coming into the US.
Mark Widmar: That profile, in terms of ASP entitlement, is going to be on the lower end of that continuum, as I indicated. The lowest price point we would have for a module will be for that international product coming, fully finished international product coming into the US, and then the highest will be 100% domestically manufactured Series 7. So it can move around. That average is reflected in the numbers that we have been giving you.
Mark Widmar: But at any particular quarter, if I am heavy on maybe international modules coming into the US, that would drive that average ASP down, and clearly, we will provide color around that. But yeah, pricing is reestablishing itself at a higher point than it has been historically, and we will continue to see how price discovery works through.
Alex Bradley: Brian, just one follow-on point to that framework discussion. One of the challenges that we have talked about over the last couple of years now is the period cost that we have been incurring around the amount of inventory we have to keep, the storage cost of inventory, overall sales rate. If you think about when there is an ability to move volume around or when customers need to do that because the timing of their projects shift,
Alex Bradley: I have to keep inventory to make sure I can service all the available contracts that I have. So that generally means my overall inventory position is worse, my working capital position is worse. At the same time, if that product all does move to the right from a schedule perspective, now I end up having to warehouse materially more volume than I expected.
Alex Bradley: Generally speaking, it has become harder for us to plan around that, and we are seeing a significant financial impact from that. If we move to more of a project-based model where there is a certainty around an individual project, the timing of that project, the delivery schedule, that allows me to plan on the operational side much more efficiently, reduce working capital or reduce storage costs as well. So it provides that operational financial efficiency that we are looking for.
Operator: Your next question comes from the line of Jon Windham with UBS. Jon, your line is now open.
Jon Windham: Hey, perfect. Mark and Alex, I appreciate you taking the questions, and we will get onto the exciting topic of filing your taxes. So in the presentation, you note there is $1.9 billion of government grant receivables. My understanding is that is payable 2 to 3 months after you file your annual returns.
Jon Windham: Can you just give us an indication of how your planning is for that cash actually going to your balance sheet, and then into your bank account, and then any comments around the liquidity in the secondhand market if you were to decide to try to monetize those early? Thanks again.
Alex Bradley: Well, you are right on the balance sheet. There is about $1.9 billion. About 100 of that is related to India. So you have about 1.8 in the US. And then part of that 1.8 relates to credits that were generated last year, and we have just filed our tax return, but yet to receive refundability for those. But if you look at this year's credit generation, the forecast is about 2.1 billion of credits to be generated this year.
Alex Bradley: If you look at the 2024 credits, we sold most of those. We did keep a portion of them. We filed our 2025 tax return in October of 2025, and we received a refund for what was about 120 million in about 3 months' time. And importantly, even within that 3 months, the government was actually shut down for about a month of that.
Alex Bradley: The turnaround time from filing to receiving the cash was relatively short. As it relates to this year, we have not made a decision yet. We have not made any assumption around a reduction in the carrying value of those credits if we were to sell them. We have seen that the market through the H1 of this year, I think, was a little softer for the credit sale values.
Alex Bradley: That has picked up pretty significantly towards the back end of the year as large corporates just have better position and understanding of their tax position coming into year-end and looking for tax planning strategies. So we are seeing a lot more outreach and interest around those credits. We are in some discussions around potential sales there.
Alex Bradley: We will look to balance how much we would like to sell to pull some liquidity forward, versus how much we are comfortable filing for refundability for, because then you are not taking a discount on that sale. So it is a balancing act, and we are in discussions around those as well.
Operator: Your next question comes from the line of David Arcaro with Morgan Stanley. David, your line is now open.
David Arcaro: Well, hey, thanks so much for taking my questions. I was wondering, with the shift toward individual project booking, typically, what is the timeframe for how far in advance you would end up getting that order into your backlog relative to, I guess, the timing of the project?
David Arcaro: I think you had suggested that the decision on Malaysia could be made in the H1 of 2027. Are you thinking that we will get enough kind of visibility by that time that you will be able to make that call on what to do with that capacity?
Mark Widmar: Yeah, I will take the first one. I will let Alex take the Malaysia comment. Basically what happens if you are bidding specific to a project, again, modules usually are at the forefront of your procurement-led decision. You want to secure that technology because it also drives your design of the factory, or design of the project, excuse me. Crystalline silicon and CdTe, it will design your factory, or your plant, excuse me, differently.
Mark Widmar: There is different string count, different voltage, and other parameters in which you would want to optimize for. Generally, we do not have the same constraints as it relates to the backtracking requirements, because we do not deal with the same adverse impact of shade or diffused light and those types of things.
Mark Widmar: So there is a lot that has to be done early on, and so you are going to want to source that module and lock that up so you can be unencumbered now to figure out how do you want to design and optimize at the project level. So it could be 18 months, 2 years before the first delivery would start to happen, or at least for sure until the project would be commissioned.
Mark Widmar: So it shortens your timeline a little bit from a visibility standpoint, but it does not really significantly shorten it. But it gives you better certainty, there is no doubt about that. People would be willing to go out into 2030 in a framework kind of construct, and projects normally would be commitments that would go out into 2028 or into early 2029, is probably about as far out as they would want to go.
Mark Widmar: Still more than enough visibility to properly understand the project and price it appropriately.
Alex Bradley: David, as it relates to Malaysia, I do believe we will have enough visibility going into the first half of next year. We have effectively been carrying that asset, running a very low throughput for the whole of this year. We have done that deliberately because we thought the underutilization cost associated with that was worth the option value of having the ability to run what will be up to about 1.8 gigawatts of international volume.
Alex Bradley: As we look through the 232 announcement, as Mark said, the customer base, similar to transition, fully understanding what that looks like and trying to work through what their need is going to be. We want to make sure we have the optionality in Malaysia in the event that that significant demand does materialize. We have also said that we have an order of how we want to make sure our factory sells.
Alex Bradley: First, we look to make sure our US content is sold. Secondly, we look to make sure we are selling our finishing line production out of our new facility in South Carolina. After that, the full international product.
Alex Bradley: We are also going to be bringing more volume from India over into the US next year, subject to a trade and tariff environment that makes sense. I think we will have the understanding of the marketplace that we will need by H1 of next year, and we are still looking at that as an option value and seeing how the effect of the 232 plays out.
Operator: Your next question comes from the line of Vikram Bagri with Citi. Vikram, your line is now open.
Vikram Bagri: Good evening, everyone. Apologies for another question on pricing, but this is important. On this call itself, we have heard pricing either go down by a couple of cents or go up by $0.20. Mark, fully appreciate the lack of clarity about the environment we are in. For CdTe, is there a construct you can provide for pricing that we should keep in mind?
Vikram Bagri: If pricing for silicon-based panels moves higher, we should assume a certain discount to that, which some people will characterize as quality discount. I imagine pricing also depends on several other factors, project and contractors. All else being equal, is there a construct where if pricing for silicon-based panels moves higher than $0.40 or $0.45, we should assume a certain fixed discount, for US CdTe?
Vikram Bagri: Related to that, Mark, you talked about a number of items limiting ability of developers to make long-term plans. If competition in panel manufacturing is also one of the factors which is prohibiting them from committing to supply of panels, do you think the lack of urgency to book 2029 is also a function of new capacity coming online potentially in the US from other suppliers of panels? How do you see the competition evolve over the next couple of years in the sector? Thank you.
Mark Widmar: Yeah. I will talk on the. If you take S7 as an example, and just one thing to make clear, you made a comment about a quality discount. I do not know if you are familiar with how energy predictions are done. For crystalline silicon technology, they actually have a quality factor that they use, which basically reduces the energy profile of the technology as part of the energy prediction, of which that does not apply at all to First Solar's technology.
Mark Widmar: So we do not have any quality factors that are assumed in the energy predictions that are underwritten by and supported by the IEs and the banks. So I am not sure what your point is around that, but crystalline silicon clearly does. They have a meaningful quality factor that is being used when they do the energy prediction for that technology.
Mark Widmar: What I would say, if you take a Series 7 CuRe product and you compare it from an energy profile, because again, energy is what our customers pay for, and what the value of that product would be relative to a PERC technology, it would be advantage to PERC, so there would be no discount to PERC. It would also vary with where it is, because obviously our technology does not have what CuRe will have better bifaciality than our QED product is.
Mark Widmar: Our bifaciality is lower than crystalline silicon. So if you were to go further northeast, where you get a better impact of bifaciality, then you will see a different outcome. If you go to the desert southwest or to the southeast and more hot climates or hot and humid climates, you are going to see a better outcome for our technology.
Mark Widmar: And then if you compare us to TOPCon, which again, the vast majority of anyone producing or selling any TOPCon product in the US is infringing on our IP, which we will stand by and completely enforce that, then you will have a slightly different outcome. We would actually be, on average, slightly disadvantaged to TOPCon of a few pennies. So it depends.
Mark Widmar: You have got different situations, different geographies, different terrains. A lot of different things factor into that and determine the relative competitiveness of the technology. But I would say general rule of thumb, Series 7 CuRe is going to be advantaged against PERC and disadvantaged by a few pennies relative to TOPCon.
Mark Widmar: As it relates to the competition and how that all plays out, you have to think through how much are you willing. First off, is the competition and the manufacturing that is coming in the US truly FEOC free? Truly unencumbered by any dependency from the Chinese, whether it is the supply chain, whether it is the tools and the manufacturing equipment, whether it is the IP, right?
Mark Widmar: A lot of our customers do their own subjective analysis and have concluded that there is a substantial risk still that these entities are not FEOC free, and they do not want to take on that risk. That puts us in a much better position. There is no doubt about that, and that is also why I think you are going to find customers leaning into developing partnerships with First Solar that go longer dated.
Mark Widmar: I believe I remember reading one of the filings recently for one of the US manufacturers, and I believe almost 100% of the sales that they are generating this year is to a related party. I understand that related party to be a Chinese counterparty. So, it tells you just looking at that as an example, that in certain situations, customers are not willing to take on that risk. We still don't have full clarity around FEOC yet, and I think that's why people are being a little gun shy.
Operator: Our final question comes from the line of Dimple Gosai with Piper Sandler. Dimple, your line is now open.
Dimple Gosai: Thank you very much. Good evening, everyone. My question is regarding just 4 December in terms of outcomes and what you are hearing. There has been a lot of news recently. T1 recently filed for a waiver around cell imports. We are hearing a lot about lobbying for exclusions.
Dimple Gosai: We also know utilities are pretty price sensitive here. So, in your view, is there risk to the upside or downside, just in terms of the outcome there? Separately, just talking about some of the news that we are hearing about. There is also news on Swift Current lawsuit that has been in the news. Is there anything you can speak about here? Is any merit to that? Is there a size associated with it, and any merit, really? Thank you.
Mark Widmar: As it relates to the exclusions, look, I do believe because, again, the program's incentive and motivation is to try to ensure manufacturing here, reshoring of manufacturing, true manufacturing, truly unencumbered by Chinese or adversarial countries' dependencies. Each one of those will be determined on a fact and circumstances basis and worked through with Commerce to say, is there true substance to this?
Mark Widmar: Then in general, the focus with Commerce is to limit the period of time which that exclusion would be provided. I don't stay on top of it. I don't know. My team may have better insights than I do in terms of have any exclusions been granted at this point in time. It is not clear to me that there have been any granted exclusions.
Mark Widmar: I know there's been some representation of statements that have been made, but I don't believe there's any actual exclusions that have been communicated publicly at this point in time. That's something that we're going to have to stay close to and understand. I'm perfectly fine, though, competing.
Mark Widmar: We've always said, US manufacturing on a level playing field, First Solar is more than happy to compete on our own merits and our technology and the competitiveness of our manufacturing process and our supply chain. If some of that does happen, then it'll evolve and that'll create the domestic industry that I do believe still is a strategic thread that's important for us as a country.
Mark Widmar: Assuming we do it right? Assuming it truly is US technology, US manufacturing, US supply chains, right? Creating American, US jobs and supporting American families. There's no doubt about that.
Mark Widmar: That's absolutely critical from that standpoint. As it relates to the lawsuit, I really can't comment much of anything around that. We actually will be filing our response here shortly for the required timeline, and I think there'll be better clarity around the issues in the allegations that have been raised during that part of that lawsuit. What I will say is that we have always, and even with engagement with Swift, as we've always said,
Mark Widmar: we will stand by and we will support under the parameters of our limited liability warranty, the obligations that we have. Again, that largely is reflective and relates to the Series 7 initial product launch that we had indicated that there was a couple of issues that came out as part of that launch that resulted in an initial stabilization of that technology to be below expectations.
Mark Widmar: Underneath that program we put in place, we said we would remedy those issues with customers, and we engaged even with Swift to have that conversation. I think where the challenge comes in is where people are asking for remedies that are outside the parameters of the warranty. That's not something that we will do.
Mark Widmar: But we'll stand behind the technology, and we had that conversation with Swift in this case, and they chose to try to pursue a different approach where they think they could be successful. Again, you should see our response and our filing coming out here in the next several weeks.
Operator: We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.
