First Solar, Inc. — 2024 Q1

So I guess, I mean, over the last few quarters, you guys have been highlighting that you expect bookings growth to slow. But I guess I'm just curious now that you've got some headlines around the potential removal of the bifacial exemption, the new AD/CVD petition and Yellen's commentary on China, I mean, shouldn't that be an accelerant for bookings? I get that you guys want to be selective because of your capacity position. But just curious on your updated thoughts on what you're seeing and expecting for bookings for the remainder of the year now that policy seems to be moving in your favor, and you've also got growing demand for clean energy in some of the AI data center markets that you guys had alluded to earlier in the call.

Yes. So what I would say right now just in conversations with our commercial team and our Chief Commercial Officer, clearly, pricing in the market and -- has changed. As soon as there was an indication, really, it's starting to increase $0.03, $0.04 since the beginning of April. And then we continue to see a little bit more momentum now that the petition has been announced and some of the other statements that have been made by the current administration, which are all very, very supportive and constructive. So we are seeing more activity, more engagement. We're encouraged.

First one is related to the termination of convenience clause. Can you talk about how much of a buffer you guys might have to meet your guide, even if all the terminations -- termination for convenience clauses in '24 and '25 are exercised?

Yes. So I'll take the termination for convenience and hand it over to Mark. So we haven't given a specific number related to this year. But if you note in the guide, we're maintaining our volumes sold guide at 15.6 to 16.3 gigawatts. So we're working under the assumption that if this volume were to be terminated, which has not happened yet, we've just been having discussions with a customer who's indicated that given the likely sale of their portfolio and the likely buyer being someone who already has volume from us and given the time frame of those deals pushing out a little bit that they are likely to -- if those all happen, then they would be likely to exercise that termination for convenience right.

Yes. And then on the pricing side, yes, so I somewhat made the statement on one of the earlier questions as well. We clearly are seeing the benefit as the market pricing has clearly firmed up and is moving up. If you look at just what we booked this last quarter before any of the adjusters, it's $0.30. If you look at the graph that's in the presentation slide, you can see that really none of that happened in April. So all that was really bookings that happened in the first quarter, which is really before any of the indications of this case started to get into the marketplace. So none of that really is reflected yet into -- so none of that impacted the Q1 bookings that we just reported.

I guess -- I know a lot of focus around the pricing commentary here, Mark. So I'm just going to ask another one around that, if I could. You said $0.03 to $0.04 roughly. You've been getting that sense or feedback since April, and then that doesn't even include the more up-to-date kind of AD/CVD feedback. So if we look at the bookings, $0.31 this quarter, not reflecting any of that, that's to suggest you're having discussions real time around kind of the mid-$0.30 per watt, maybe even going higher off of that. Is it fair assume that level is in play over the next couple of quarters as you think about booking future volume here, mid- to high 30s? And could we see it that quickly in the next couple of quarters?

On the pricing one, Brian, look, let's not get -- look, I'm happy with what we're seeing right now. I don't want to commit to an ASP in the mid-30s is what we'd expect to be able to realize at this point in time. What I'm trying to indicate is that we have seen a move in the market pricing. And there is a difference between -- just make sure we're clear, a difference between international versus domestic. There's an adder for the domestic product, as we've said before, $0.03, $0.04, $0.05 for that. So that volume will be priced at a higher ASP than not.

Yes. So I don't know if I have a good number for you. I would say if you look at the companies that we talked about on the call, the ones that we're going to be adding to data center demand significantly, Apple, Google, Microsoft, Meta, they value certainty even more than the utility. So if you think about utility, potentially contracting multiple projects, and they can deal with a level of failure or delay in a way that these guys can't if they have commitment to renewable targets at certain times. So they value certainty, and they certainly value the reliability of where the product is coming from and the concerns around slave labor.

What would be the biggest consideration in determining whether you add another factory? I know the pace of bookings, that they're naturally slow considering how far out you booked. But if the industry needs, let's say, 50 to 70 gigawatts per annum by late decade of ground mount in total and considering your market share position is further improving, could at least another factory would be viable in locking interconnection bottlenecks, the poly-based competition unknowns as they ramp up in the U.S. or just waiting on developer visibility to get more confidence here for these out-years?

Look, I think the framework that we use is pretty consistent with what we've done in the past. One is whatever we do, we want it to be demand driven. And if we get confidence, especially as we progress now through the second half of this year, around a strong, enduring demand profile that we would need through the balance of this decade -- and one of the catalysts that we referenced already is what's going on with data centers, and there's a lot of activity going on there right now.

I realized 5-in-1 question is the way to go, so I'm going to try that. Mark, you previously commented that excess panel inventory in the U.S. was nearly 30 to 40 gigawatts at year-end '23. A lot of debate about how that -- how much of that excess inventory is now. I was wondering if you can share some color on where you think that stands. And the reason for debate is the steep price increases as soon as the petition was filed indicates some level of concern that the excess inventory might not be that high.

All right. Please come back with me on some of this because I want to make sure I got some of the questions. I'll start with the last one. The bookings that we reported really were all done from -- what was our -- was it in Feb 20? Feb 20, whatever. Our earnings call was at Feb 27 or 28, whatever the date was, and really through March 31. So that 854 megawatts, there's very little of that, that happened in the month of April. That's probably what I was trying to say before, is that the indication of a potential case for -- against Southeast Asia really wasn't into the market at the time that we were negotiating and closing on that booking volume.

I think just related to spot, I mean we talked before that there isn't a huge immediate spot market in the utility-scale solar in the same way that there is in resi. So when we talk spot, we're still talking for projects that are 2, 3 quarters ahead, maybe just not 8, 10, 12 quarters ahead. So when I think about the opportunity for us, as we have potential [ holdings ] come up in the year, if we have some short-term [ holes ] open up with things like termination of convenience, there's an opportunity, yes, for us to capture what I think you would call spot on a utility-scale basis, which is forward a few quarters.

And then maybe if you could repeat your question on hydrogen or clarification on any of the things we responded to maybe that didn't hit the spot.

You already answered, Mark. I was asking if you have a hydrogen customer who might not take the delivery. If you could feed out those volumes in the spot market and benefit from higher prices. But Alex already answered.

So I'm going to follow Vikram and just ask a bunch at once as well. First one is on AD/CVD. Does your alliance expect to ask for critical circumstances if the Department of Commerce accepts your case? And then as we think about just critical equipment shortages in the market, I'm just curious if you know what proportion of your customers have secured all their critical equipment, hot transformers, high-capacity circuit breakers for their project development needs over the next several years just given how long those lead times are.

Let me just take the credit one, and I'll pass it back to Mark. The credit was higher than that. So we had $194 million in the quarter. I think the guide was $190 million, so a little bit over. If you go back into the Q, there's a few moving pieces in the government grants receivables. So the number for Q1 was $194 million.

In terms of the AD/CVD, which critical circumstances are effectively retroactivity of some of these tariffs, to me that's facts and circumstances that will evolve. It depends on what happens. It's extremely unfortunate, in my mind, that China has chosen to do what it's done so far, right? I think we -- this -- we were in a position, a balanced environment that we believe it was adequate for a domestic industry to grow and scale and create domestic capabilities. China, clearly, not only here in the U.S. but in India, is aggressively trying to prohibit that from happening and -- given the amount of overcapacity and pricing.