First Solar (FSLR) Q2 2026 earnings call transcript

I would now like to turn the conference over to your host, Byron Jeffers, head of Investor Relations. Good afternoon, and thank you for joining First Solar's 2nd Quarter 2026 Earnings Call. With me today are Mark Whitmar, Chief Executive Officer, and Alex Bradley, Chief Financial Officer. Mark will begin with 2nd Quarter highlights followed by Alex, and then we'll open the line for questions. Today's discussion contains forward-looking statements, actual results may differ materially due to risks and uncertainties as described in our earnings press release, and other SEC filings and the earnings material available at www. investor. firstsolar. com.

We undertake no obligation to update these statements due to new information or future events. We will also reference certain non-gap financial measures, reconciliations to the most directly comparable gap measures are in our earnings press release and presentation. This non-gap financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with the U. S. gap.

With that, I will turn it over to Mark.

Thank you, and good afternoon. Beginning on slide 4, we delivered both record 2nd Quarter and first half sales volume and improved financial performance relative to the prior year. During the quarter, we generated over $1 billion in net sales, expanded gross margin to approximately 57%, and delivered strong adjusted EBITDA performance.

We also surpassed an important milestone for first solar, exceeding 100 gigawatts of cumulative model sales globally. We view this as the reflection of the trust customers at place in first solar over the more than two and a half decades, and the durability of our technology and manufacturing platform.

We entered the quarter with approximately 45.1 gigawatts of contract backlog. We delivered, with deliveries extending through the end of the decade, demonstrating the demand for our demonstrated technology platform, domestic manufacturing footprint, and delivery certainty.

Turning to manufacturing, our U. S. facilities continue to operate at high utilization rate during the quarter. In South Carolina, the first phase of the finishing facility remains on track to begin production in the second half of 2026, with equipment installations progressing as expected.

For the second phase, we now expect inflation in mid-2027, while the revised time reflects a number of factors associated with optimizing the facility's launch. It also enables the earlier incorporation of cure technology.

We are pleased with the performance of CURE, with both high-volume manufacturing at our Paris-Bert facility, and performance data from field deployments across multiple climates exceeding expectations.

We believe incorporating the technology closer to the onset of the facility's commercial launch will simplify execution, accelerate value realization, and enhance customer value and the facility's long-term financial performance.

Once completed, the South Carolina facility is expected to provide up to 3.5 gigawatts of finishing capacity for models initiated at our international manufacturing sites, giving us greater flexibility to optimize our supply chain flexibility, while also optimizing freight tariff domestic content in Section 45x economics.

With respect to our international manufacturing fleet, production planning and utilization levels in Malaysia and Vietnam continue to be influenced by U. S. market demand drivers and economics, including the pending Section 252, polysilicon, and derivative investigation, and tariffs. We expect greater policy clarity will help inform the long-term operating profile for the approximately 1.8 gigawatts of fully-finished international capacity that remains available.

After accounting for capacity being used to produce semi-finished product destined for our new South Carolina finishing line. A note on manufacturing optimization and allocation.

Approximately 41 gigawatts of our 45 gigawatts backlog includes some form of domestic content requirements. These requirements vary significantly and range from requiring exclusive supply from U. S. fully-integrated factories to blending U. S. made supply with both fully-integrated domestic factories as well as product from our upcoming South Carolina finishing line to a domestic content points requirement, which is factory agnostic, allowing blending of product from across our global fleet.

We therefore continually balance and refine our model supply and demand allocation across the fleet to meet customer contractual obligations, optimize factory throughput, and optimize gross margin.

This typically means that over a period of time we will seek to maximize production and sales firstly from our fully-integrated U. S. factories, secondly from our South Carolina finishing line, and thirdly from our international facilities.

As relates to Perovskites, we continue to advance our development program for this potentially significant technology platform. Our previously announced development line continues to progress to process improved efficiency and reliability attributes on smaller form factor modules while our Series 6 form factor pilot line remains on schedule and is expected to reach operational readiness in the first half of 2027.

Our continued progress has given us confidence as we continue to invest in our efforts to realize the commercialization of Perovskites.

Earlier today we published our latest corporate responsibility report reinforcing our conviction that how and where solar technology is made matters. The report details how we create enduring value by developing, sourcing, manufacturing, and recycling solar modules domestically, supporting jobs in communities, strengthening industrial capacity, and help ensure the benefits are realized locally. It also highlights our continued focus on responsible manufacturing, supply chain transparency, workforce development, and resource efficiency.

The report reflects the effectiveness of a business model where corporate responsibility isn't a construct but the default. Before turning the call over to Alex, I want to briefly address the market and policy environment and how it is informing our commercial approach.

The underlying drivers for utility scale solar remain intact, including low growth, data center development, electrification, aging generation assets, and the need for affordable scalable new capacity.

The policy landscape continues to evolve, particularly as it relates to pending outcome for the section 232, polysilicon, and derivatives investigation, as well as final fee operations. In this environment, we continue to prioritize pricing, contract quality, appropriate risk allocation, and long-term value over short-term booking volume. Relative to the beginning of the year, we are seeing increased customer engagement, and as policy clarity improves, we believe first solar means well positioned to capitalize on these opportunities.

With that, I'll now turn the call over to Alex to discuss our booking financial results and outlook.

Thanks, Mark. Beginning on slide five, as of June 30, 2026, our contracted backlog totals 45.1 gigawatts, the aggregate transaction value of 13.6 billion, ex-loses of technology adjusted, with schedules and deliveries extending through 2030.

Early this month, Cypress Creek Energy broke ground on the Steel River Energy Center in Arkansas, a project utilizing first solar modules, and previously included in our contracted backlog. The initial phase is expected to provide approximately 1.6 gigawatts of solar generation capacity, and 1.9 gigawatt hours of battery storage to support Google's growing energy needs, with the opportunity for future expansion.

Since the last earnings call, we've recorded approximately 1.9 gigawatts' additional U. S. gross bookings at an average selling price of approximately 36 cents per watt, inclusive of applicable technology adjusted.

While the SM customer activity continues to be influenced by the current policy environment discussed by Mark, our fully integrated domestic manufacturing fleet remains substantially committed through 2028, providing a high degree of volume and pricing visibility.

Given the limited amounts of uncommitted domestic capacity available over the next several years, we continue to be disciplined in evaluating incremental contracting opportunities.

We also initiated our first custom notifications related to contractual cure adjusters during the quarter. An important milestone in beginning to translate cures performance benefits from potential ASP adjusters into backlog value and future revenue realisation.

We expect the contribution from these adjusters to increase as cure deployment expands across our contracted portfolio. As a reminder, we expect limited ASPs from cure sales in 2026. Lastly, as a function of contractual notification deadlines, relative to the timing of decision to recommence cure production.

Turn to India, our guidance continues to assume production is largely sold domestically in a short, cycle book and bill market, with the factory operating at a high utilisation rate.

India growth booking during the first half of the year totals approximately 1.1 gigawatts and average selling price approximately 20 cents per watt. Given the shorter contracting cycle of the domestic India market, booking economic generally provide a reasonable indicator of near-term revenue realisation, such as its normal foreign currency book.

Turn to slide six. Net sales in the second quarter were approximately 1.06 billion, a decrease approximately 4% year over year. Decreases per marriage driven by lower revenue associated with customer contract terminations recognised in the prior year period, partially offset by higher module volume sold.

Gross margin was approximately 57% and increased approximately 12% points compared to the second quarter of 2025. The increases per marriage driven by an estimated 89 million, net, i. e. the tariff related benefit, higher mix of modules qualifying for Section 45X tax credits and lower logistics costs.

The net, i. e. the tariff related benefit, reflects our current estimate of expected recoveries related to commercial obligations and other tariff related considerations, and remains subject to refinement as additional information becomes available.

These benefits were partially offset by lower termination related revenue in higher duties and tariffs. While logistics costs improved year over year, the quarter includes a higher over the road freight costs driven by overall capacity tightening and volatility in diesel costs. These impacts were partially offset by higher sales rate recovery.

Operating expenses were approximately 155 million, including 76 million of R&D expects. R&D increased year over year, primarily affecting continued investment in perovskite development in the impairment of certain R&D equipment that is no longer expected to be used as part of our technology roadmap.

Net income was 423 million, approximately 24% year over year. Justly bid R was 644 million, above the high end of our previously communicated Q2 preview range, than adjusted EBITDA margin of 61%.

Moving to slide seven, we ended the quarter of approximately 1.7 billion of net cash, providing substantial balance, eas strength and financial flexibility, while remaining within our targeted long-term cash range for 1.5 to 2 billion.

Operating cash outflows year to date were 360 million, reflecting first-time working capital dynamics, and improved compared to outflows of 458 million during the first half of 2025.

First-life capital expenditures were 280 million, primarily supporting our South Carolina finishing facility and technology investments. We completed the full prepayment of our India DSC loan during the quarter.

So in slide eight, our fully at 2026 guidance remains unchanged. With that said, our guidance now assumes a net tariff impact is 60 to 80 million, with updates including the previously mentioned net IPRA recovery and the assumption of section 301 tariffs in the second half of the year.

We also forecast upsetting updates between production starts at expense and R&D expense, as well as incremental freight costs due to certain non-recoverable domestic trade expenses above our previously assumed forecast, largely driven by changes in module delivery locations.

And note, in some cases, domestic freight costs are now approaching international shipping economics. So the third quarter, we expect volume sold between 3.9 and 4.5 gigawatts, and adjusted EBITDAB between 625 and 775 million.

Summary our first-time performance and reaffirmed outlook reflect the strength of our strategy of reshoring and scaling domestic manufacturing, regressing our technology roadmap, and maintaining a selective approach to new booking in light of key pending trade and policy dissemination.

If we look ahead, our priorities remain unchanged. We remain focused on disciplined execution, serving our customers, advancing our technology roadmap, managing capital prudently and maintaining financial flexibility.

Thank you so much. Yeah. Thanks, John. I think it continues the theme of, you know, our U. S. government trying to ensure that we don't have any over-reliance on adversarial countries and obviously China being one of them in particular. You know, I think the good thing about this is that the industry has started to get ahead of trying to find domestic supply chains, comprehensive domestic supply chains. We obviously were an early industry leader in that regard of re-shoring manufacturing and creating a supply chain here in the U. S. for our U. S. operations.

You see in this now really across all components of equipment suppliers, all the way up even to, you know, try to find localizations for the battery supply chains as much as you can. So I don't see it being a constraint near-term. I think the current models that have been chipping into the U. S. will continue to be allowed to be shipped into the U. S. I do think there is a theme or a message there that that scrutiny may be stepped up as we move forward.

But I think it just sets another great signal to domestic manufacturers if we need to before we need to make a great domestic supply chains resiliency to enable not only the solar industry to thrive, but really all of the industries, you know, as we re-industrialize the U. S. economy. Right. So again, I think it's a good indicator of the continued theme and message that this administration has and we fully support it.

All right, Brian. I'll try to take kind of the first two and Alice talked a little bit about the views of Southeast Asia. So make sure it's clear on the project that we announced with our partner that we've supplied models to for Cypress Creek, that is already in our bookings, okay? So that was just the highlight, the great project, if you actually look at some of the more recent announcements that have been made over the last several weeks, I think you can kind of see a theme there.

You've got a very large project with Cypress, the one that we've referenced that will be phase one of kind of called the 1.6 gigawatts, then it goes to phase two, which we lose about two and a half gigs. So that's a very large project, and I think the battery component of that as well is going to be, you know, north of two gigawatts of megawatt hours from the battery standpoint.

Really important strategic project there to support Google. We have two other projects that have been announced over the last couple of weeks. One with Terrijin, which was about 1.4 gigawatts, and then we then we had another one with Panaman, which was another gig plus. So those three projects that have been announced recently are about five gigawatts of capacity.

The Panaman, part of the Panaman volume was actually announced last quarter. So when we did the announcement last week, the last quarter around booking funds, which I think we had in tolls around 1.4, and it was actually included in that volume. But I think it's a great message that, you know, the demand's there. Half of that volume of that five gigawatts, I referenced is directly communicated and tied to Google as a hyperscale. The other two and a half gigs, they haven't disclosed the counterparties, but if you look at the verbiage around the announcements on that bill, reference a very large corporate account, one of the largest companies in the US, you can kind of get a sense of the likelihood of who that counterpart is going to be for that project.

So strong demand for continued demand for hyperscalers, really strong relationships and partnerships with first solar to support those types of strategic projects that really kind of thrive on the importance of certainty. Those projects are strategic, they're important, they obviously include storage as reflected in the cypress peak project. You know, as I've always said, the first thing you need to do is you're building out your project to be risking is that you need to make sure that you have a reliable partner. You can make sure those photons become electrons. Without that, the whole project's going to be center-press, and we can deliver that certainty in that great technology and that reliability. So we're seeing that in the marketplace and continued strong interest, but driven by, as currently still, somewhat sensational demand from hyperscalers.

As it relates to 232, I think the pricing piece and then Alice will talk to how we thread that into our views around Southeast Asia.

There's still a lot of views out there, I think everybody has a view of how the construct may be with minimum import price and maybe with a tariff on top of that. There's some views of whether there's quotas or not. You know, as I can say, it's still evolving. And we do believe it will be constructive. You know, I don't want to give kind of our internal read of what we think is potentially could be because there's still a lot of other pieces. I can say that we're still in constant contact with the appropriate parties at USTR and commerce to continue to bring our voice into the conversation.

And we're still optimistic that the outcome will be constructive. And, you know, we've used it as a reason to be disciplined and we'll see what happens once it's finally announced. And, you know, there's the man that's still sitting there on the sidelines. You know, if you look at our cadence and our momentum around our bookings, you know, just here in the month of July, we've worked almost two gigawatts in the US at very good prices. Alex indicated there's about two more gigawatts north of two gigawatts. It sits into a contracted subject to CP.

And then I've got another two gigawatts of active conversations with customers that, you know, there's a high probability we can close through by the end of the year. So, and we'll see how much that gets more further catalyzed by the decision on 232.

Brian's relates to set these days capacity.

We talked on the last couple of calls around looking at this. They're like an option. So we're running somewhere around $30 million quarter of underutilization. So we're running Southeast Asia manufacturing well below. It's theoretical capacity out after that cash, but not cash. Given that we've been holding through the first half of the year, making a decision on the long term future that pending the outcome of 232, it makes sense to continue to do that. So I'd still do this as we're waiting for the outcome of that policy.

And just to frame the amount, if you were to go back and look at the slides, we put out in our favorite call. It shows you nameplate capacity of production. So we originally had about seven gigawatts of total capacity sitting in Malaysia, Vietnam about half of that is going to be dedicated to production that will feed our new finishing line in South Carolina. So there's about three and a half gigawatts left of that. We did take out some tools, bring them over to the US to reuse in our broadskite work. So ultimately leaves us with about 1.8 gigawatts of end-to-end fully finished capacity that we could ramp up in across Malaysia Vietnam. So it's about that 1.8 that we're talking about.

We're holding a decision on pending the outcome of the 232.

Being allowed for certain domestic cell producers that could exempt them from some of these policy changes. I guess I'm just curious, conceptually, you know, from your perspective, if some of these waivers are granted, do you think that could mute some of the price upside from section 232? Or do you still see a constructive supply demand set up just trying to think conceptually, you know, how do you think about that?

I mean, obviously any modifications versus a, you know, 100% restriction will create some potential diluted impact to the strategic intent of the 232.

It also depends on if there is a waiver or some type of quotas, some type, I mean, how big is it that it scaled down over time? I mean, is it something that is implemented initially and then that will walk down to maybe complete elimination of it. So it's hard to give you a great, you know, insight to the impact.

Clearly, we're not, we're advocating to try to minimize any of those impacts. And as well as they should only be a limited duration to the extent that they're enabled or allowed at all. We really want to create a domestic supply chain and any type of workarounds that you get will disincentivize the investments that need to be made here in the U. S. , right, to scale up those capabilities. And I think it's much easier for people to understand the policy and environment with certainty versus creating uncertainty by, you know, waivers of quotas and those types of things that they can create. So we'll have to wait and see where the firm in our positions that we don't believe that they should be allowed.

But we'll have to see how the final outcome is. And the exemption was put in face by facial technology. It's clear that that exemption effectively gutted that provision. So I think the administration has seen how those exemptions can effectively undermine what they're trying to do. If there's a belief that the 232 provides a need around the national security interest, it doesn't make a lot of sense to have a carve out or a quoted piece associated with a national security interest provision.

So I guess on the 232 and all that else takes the other question around how we think through Southeast Asia and whether it comes in as finished or partially finished in order to expand capacity for finishing here in the U. S. I'll let Alex take that one.

They're clearly our customers that are sitting on the sidelines. There is absolutely no doubt about that. And even some of these that will even some of the stuff subject to CP is somewhat tethered to posting of security.

So one of the challenges that especially as you get longer dated in terms of contracting some of this volume, we are really trying to enforce having cash liquid security against new bookings. That's been a priority of ours. In some cases, some of the counterparts can't post the required security now that we're having that available. And they said that the security is posted then and kind of closes out on some of the CP's.

So that's a piece of it. But there's really people sitting on the sidelines waiting to see what happens. You know, we have a couple of counterparts that are, you know, they're hedging their weight. And they know that the risk is the ASP's may go up. But at this point in time, they're trying to wait and see how it plays out and again, conversation last time, are there quotas or not? And, you know, what are the options they have and so forth. So that's all we end up, you know, the, is in the mix right now.

And as we've always said, the best thing for this industry is we just have clarity and certainty. It's 232. We just really need decision on that because we can all understand how it works. As it relates to what we could do with the healthy facilities, you know, we could bring fully finished product in subject to demand and pricing in the US. It's not only a function of where the 232 sits, it's also a function of where other tariff provisions sit.

So right now we have a section 301 that's just got into effect replacing a section 122 tariffs that were in effect to the first half of this year. Those relate to forced labor. There is still risk around a 301 relating to excess capacity. So that investigation is ongoing, pending the outcome of that. Obviously we'll determine what the total tariff impact could be then to product coming in from Malaysia, Vietnam.

We could bring some of it in as semi finished web share product and finish in our existing US facility. There's a limited amount, probably in the couple hundred megawatt range of incremental projects. So that's a little bit of that. But it's not effective to run Malaysia, low throughput, as you're seeing with the utilization cost of having this year. So really what we're looking for is an ability to run that factory at close to full capacity.

So then either it's selling fully finished international product, subject to where tariffs end up or there is the potential to build another finishing line in the US that subject again to finding available site with power and the time it would take to build that out. So I think that's less likely, but it is still an option.

Maybe I'll just take that one. On the Southeast Asia, we're really waiting for the outcome of the 232. We would expect to evaluate that and have a view shortly thereafter. It doesn't necessarily mean that we will have an immediate action plan that relates to say a shutdown or a full capacity. But once we have a sense of where the policy is, it allows to evaluate it. It will take a little bit of time though. We want to make sure whatever policy comes through, we understand it and our customers also have a chance to evaluate it. And we can have discussions around whether there's a view of long-term off-take potential from those facilities.

Yeah. And then I just want to make sure a couple of things. The booking that we're reporting, most of the booking said that we reported 1.9 US. Well, I think almost all of that was outside of the quarter of close. So most of that happened in July, which would also have been outside of the safe harbor date. And most everyone has safe harbor with, you know, transformers.

You know, there's really no safe harboring. You know, I know there was a, you know, I don't know. It was like maybe 10 days left in the quarter where there was a ruling. They was made that the decision, you know, that came out in August, you know, the prior year where it said that, you know, you eliminated the ability to use module or 5% capex rule to safe harbor. There was a ruling by one of the courts that came out, I think, or somewhere like June 20th, at least hardly any time left in the quarter.

And that theory you could use, you know, assuming that that wasn't challenged. There you could use, you know, modules to potentially safe harbor projects. But, I mean, that was really not an opportunity. It just happened way too late. And most of you let already safe harbor with, with the, you know, transformers, excuse me, anyways. But, you know, as you go forward, it is an important component, especially for anything that was safe harbor. If you safe harbor the first half of this year, you know, with ability to see it even out in the 2030, you know, there are stricter requirements from a Theok standpoint at the project level that have to be met, that I think positions us well to serve that demand as you get out into 29 and 30 for when those projects most likely could be commissioned.

But the other thing I would say is we are seeing, there's a lot of, kind of rigid interpretations a little bit. And there are some people that are interpreting that even if something was safe harbor, you know, let's say in the second half of 25, that if you do anything with a change order or assuming there was something from a MSA to a PAPO or a tele-PAPO, a first source, excuse me, is actually generated, you have to always be mindful of, is there a restriction that you could have to comply with from a primitive or an entity perspective.

So there's a lot of, like, very conservative, which is right. So people want to be, you know, airtight and not taking any risk to jeopardize their either ITC or BTC. And I think there's a view towards maybe an overly conservative, you know, advice they're getting from tax counsel and others. And I think that's, if I was in their situation, I clearly would do that as well. I don't want to put anything at risk.

So there's that, you know, safe harbor and those requirements under 48E as it relates to, you know, the restrictions or requirements. I think we'll continue to play well for us as we look to book out through the end of this decade.

Look. We're, you know, we shared look, there's, I know there's a lot that's in the mix and what the administration is trying to evaluate. When this is implemented and we also want to make sure they do. And what is implemented is achieve the strategic intent and the spirit of what it was set out to do. So we are patients.

We, we continue to be engaged. We are anxious as well as you are and others. And as indicated, the industry really needs the certainty of understanding.

I can't give you a level of conviction, maybe more than what you have right now. We are still getting to signal that, you know, decisions will be made. There are meetings that are being had that indicate. They're close to making a decision. But, you know, we also want to make sure that it is done right. And so to give you some sense of, you know, my level of confidence and. In August or whether waste to September, you know, I can't really give you a strong view on that. I can just tell you we want this to be implemented with the achieving strategic intent and spirit of what it was set out to do. And that's, you know, that's the most important thing.

And we're going to continue to be engaged with the administration to ensure that that out.

Colin, I mean, it's a challenging. You know, we're still in this. And especially in the US, as you see more.

Reshoring, you know, pressure on commodities. You know, the data centers being built out. I mean, things I was using would expect still a little bit of copper.

You know, we don't use silver, but, but obviously I can better just do. I mean, there's just a lot of pressure.

You know, those, but you can look at fuel costs, you can then look at what's happening in the Middle East and I see that as more.

Transonary in nature and then, and three, once that's resolved. And I think we'll see much more competitive fuel prices and what have you.

The electricity prices, you know, in some of the locations which we operate. We're dealing with some of those same adverse impacts that others are. So we're pretty challenging rising commodity costs environment. Now, are we able to do things like drive more throughput through our operations? Absolutely. We'll focus on continuing to do that. Are we finding ways to create further automation and capabilities that can reduce labor costs?

You know, so there's there's levers that we're focused on and there's some redesign of the product that we're looking at and trying to take costs out of the. The back rails of the frame, you know, we continue to look at. Glass and thickness and other things that we could do from, from that standpoint. But it's a pretty challenging environment, but commodity cost standpoint and. And, you know, our ability to get a lot of a loss that I think is probably one of the most challenging times that we've been in. Now, I will say that. When you look at a cost per watt, not necessarily a cost per module.

The great thing about cure is that we have the opportunity to drive the efficiency up. So as we, you know, drive the efficiency, you know, as we go from kind of where we are right now and add another, you know, 10, 15, 20, 30 watts. That'll help the CPW numbers right cost per watt numbers, which is important. We didn't need to drive that number down. And then the ASP is the value uplift because of the energy attributes of the higher efficiency of cure that tries to entitlement for higher ASPs and the like. So that's what we're focused on. And we're never going to give up on the input costs. We got it. We got to do the best we can to get cost out, but it is pretty challenging environment.

I'd also say that the potential to use the balance sheet to work with suppliers who are looking at expansion or needing funding. There's an option there. We could try and leverage our position of financial strength to get forward pricing and makes more sense that has to be done at the right risk premium risk profile. And then the other thing I'd say is outside of just bill material costs. Let's see, we're having a challenging time around period costs going from cost what produced over the cost for what sold. So again, we're seeing freight challenges as related to cost of trucking. I think I mentioned in the prepare remarks that we're seeing costs now to deliver product from.

Perry's over to the West Coast US, the equivalent of delivering product from Asia, the West Coast US. So continue to look how we can optimize our domestic transport routes freight. Try and optimize between factories so that we can reduce those costs the growth extent possible.

What are you targeting with the current balance that you have and kind of felt like you were mentioning that you could use M&A to maybe help manage the input costs? But where has to use the maybe an option or an opportunity for solar?

So when we talk about use of the cash, M&A is something that's been on the list for us for a long time. Generally, we focus more on the working capital, reserve piece, and then growing capacity and replicating technology. That's what the company's been if you look over the last decade or so.

We've also put more money into R&D. And I think when you think about M&A, the obvious area for us to expand into would be do we spend more on technology and technology adjacent things, which could either be companies, it could be buying teams, it could be buying intellectual property, anything that could accelerate the technology transition we see going forward as we invest a lot into potential profit development. So I think there's options there.

We're also taking a look at things that are adjacent to technology, but we want to do it with a disciplined focus around where do we see opportunities where we have a skill set that we can bring. That's something where we look at our strengths in high volumes and film manufacturing a very high throughput efficiency. How can we leverage that set of skills and take it into an adjacent product, but also look at the overall market in buying what we'll be playing. And we compete in a challenging industry where the vast majority of our competitors are Chinese and tend to play by different set of rules. As we think about how we could move into adjacent areas across M&A, what does the competitive landscape look like?

What does the market that we would be accessing look like? What does the policy environment look like? So we are starting to look through that clearly given our position in the industry. A lot of stuff comes across our desk and has done over the last 10 years or so. We haven't done a lot on the M&A side. So we are more willing to do that. We're more open to it, but we want to make sure we do it with a disciplined focus.