First Solar (FSLR) Q3 2026 earnings call transcript

I Would now like to turn the call call over to your host Byron Jeffers head of investor relations Good afternoon, and thank you for joining us with me today our mark with mark chief executive officer and Alex Bradley chief financial Officer mark will begin with an update on the business followed by Alex without financial results and outlook Before we begin today's discussion will include forward-looking statements that are subject to risks and uncertainties 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 dot first solar dot com We undertake no obligation to update any of these forward-looking statements as a result of new information or future events During today's call.

We will also discuss certain non-gap financial measures Reconciliation of these measures to the most directly comparable gap measures are provided in our earnings press release and accompanying presentation We encourage investors to review those Reconciliation as non-gap measures should not be considered in isolation or a Substitute for financial information prepared and affordance with us gap with that.

I'll turn it over to mark Thank you and good afternoon Getting on slide four we continue to execute with discipline this past quarter advancing our u. s. Manufacturing expansion We generated approximately 1.2 billion in net sales Expanded gross margin to approximately 58 percent and delivered adjusted even of 744 million operationally our continued cure deployment across the fleet is being executed through a discipline Learning-based approach that began with our Paris Berg series six conversion in q1 of this year That approach now extends to our first series seven conversion at our india facility I expected to begin in the first quarter 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 u. s. series 7 fleet They're in a subsequent u. s. 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 good production in 2027 is expected to range from 2.2 gigawatt to 2.6 gigawatt the pace and sequencing a subsequent series Seven u. s. conversions will be informed by learnings from the india launch Consistent with the discipline learning-based approach.

We have taken across all periods of technology transition in South Carolina Our series six finishing facility is being brought online in two phases as part of the integrated manufacturing flow from Vietnam The first phase started production in q3 second phase is expected to reach commercial launch in mid 2027 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 gigawatt Beyond cure we continue to advance our next generation technology roadmap our Ohio pilot line designed to produce series six size perovskite modules remains on track to reach operational readiness in the first half of 2027 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 cubic pv 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 Turning to the market environment on slide five the selection 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 low growth and data center expansions We see a long-term opportunity to translate this position into earnings growth Section 232 represents a structural change in how the United States approaches solar manufacturing As the US competes for global leadership and 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 where technologies and supply chains Increasingly central to our long-term economic prosperity and national security As a technology company and the only fully integrated Utility scale solar manufacturer without dependency on a Chinese christen silicon supply chain We believe we are structurally positioned to benefit from this environment Note by 2027 nearly 80 percent 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 low growth 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 medical warranties and supply chain security attributes we have built our business around As relates to bookings, we believe the market is working through a transition following the section 232 announcement With significant influence from other key factors As a reminder The substantial portion of our existing backlog is comprised of multi-year framework agreements That are intended to supply customers with projects in various stages of development Well 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 the inherent delivery timing and certainty Associate 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 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 multi-year contracted backlog At the same time customers are focused on advancing mid and late stage projects where modules Have already been secured while deferring curment on early stage projects requiring delivery later in the decade We see several factors driving this behavior including increased nimbiism among community residents And growing state and local government opposition 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 Lastly An incomplete regulatory picture with regards to the final fiat 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-stocking measures Has generated volatility in the module procurement market And inhibited custard clarity as relates to module pricing discovery The impact of these current dynamics on recent bookings is most pronounced from a 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 We expect the operating decision regarding our malaysia facility be to to be binary Resulting in either operations at full or near full capacity of 120 gigawatt annually Or a shutdown of production with that decision expected in the first half of 2027 Given malaysia's relatively small contribution to our manufacturing footprint Limited series 6 blending opportunity in the u. s. Absent of section 45x credits And freight and tariff burdens.

We do not expect either outcomes materially impact our run rate earnings profile Against this backdrop. We remain deliberate on bookings And we are pleased with the results of this approach Through today in the u. s. Our largest market. We have booked approximately 4.9 gigawatt At approximately 35 36 cents per watt inclusive of adjusters Moreover our 44 gigawatt backlog gives us the ability to focus on contracting approaches on two strategic initiatives First we seek to improve pricing on new module sales Relative to our current backlog asp No pricing will continue to vary by product series 6 and series 7 And by us versus internationally made Second we seek 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 Our objective is to optimize across both Upfront asp as well as long-term earnings profile through discipline pricing Appropriate contractual protections strong counterparties and alignment with our manufacturing and delivery strategy In summary our focus on project specific versus framework agreements Customer focus on near-term project execution versus late data 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 in addition remain focused on our ability To affect our contracting strategic initiatives And our confident in demand for our domestically produced product Particularly for 2020-29 and beyond when we have available supply With that, I turn the call over to Alex to discuss our bookings financial results and outlook Thanks, Mark Thanks for our bookings and backlog on slide six.

We ended the quarter with 44 gigawatts on to contract Representing approximately 13.5 billion contractors value Excluses of technology adjusters We schedule deliveries extending through 2030 Since our last earnings call I recorded approximately 1.4 gigawatts of additional us growth bookings and average selling price of approximately 36 cents for what? Inclusive of applicable technology adjusters Importantly substantially all of this volume was contracted or in late-stage negotiations From pricing in terms of largely set ahead of the section 232 announced In addition, there remains approximately four gigawatts of variable volume associated with previously signed contracts Not currently part of the contract's backlog But pricing reflective of the pre-section 232 environment Which our customers have the ability to exercise as of a dates done Approximately half of this volume has a decision day within the next five months We also have 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 time as such election During the quarter we also continued customer notifications related to contractual technology adjusters Aligned with our production plan and intended deployment sequence These notifications represent a meaningful source of incremental backlog value as cure deployment advances across the fleet with the majority of the adjusted value expected to be realized in 2027 and 2028 In respect to adjusted eligible volume, we would note that the ultimate realization of these adjustments is subject to the achievement of the underlying technology milestone Timing a future customer notifications and module delivery schedules and other contractual conditions And therefore the final value and timing may differ from the amounts and periods described Of that potential adjusted value approximately 20 percent is currently associated with 2027 deliveries with the remainder weighted to 2028 beyond As we continue to progress custom notifications associated with existing bookings tied to our cure deployment sequence Together with new bookings removing the adjusted concepts as we sell our cure product with the technology embedded in the base asp The value of the adjusters will roll off over time So in this slide seven Net sales and so close to approximately 1.2 billion the decrease of approximately 23 percent year over year The decrease is primarily driven by lower module volume of salt to third parties compared to the prior year period Gross margin was approximately 58 up roughly 20 percentage points year over year The year of year increases driven primarily by a higher mix of us produced modules Gross margin also benefited from lower sales rates and utilization costs tariffs and duties Partially offset by lower termination related revenue Operating expenses were approximately 167 million Research and development expenses approximately 67 million Perfecting continued investment in our technology roadmaps including for our skide development net income was 571 million up approximately 25 percent year over year Just a bit I was 744 million near the upper end of our previously communicated q3 preview range With an adjusted even dimension approximately 60 percent Diluted earnings for share were five dollars 30 with 424 in the prior year period So to our balance sheet and capital allocation on slide eight We ended the course of the proxane 1.5 billion net cash Remaining within our long-term target net cash range of 1.5 to 2 billion Our balance sheet and projected cash generation continues provides substantial financial flexibility In February, we laid out our approach to capital structure and capital allocation This prioritize maintaining the aforementioned 1.5 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 and J for opportunities We further stated that we would evaluate applying cash generation in excess of the above capital priorities to share Depending clarity around certain factors including policy castlists new booking volume and tax credit monetization In line with this approach and following the section 232 proclamation issued in q3 Our board has authorized to 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 An ability to continuing investing in technology development and growth Turn it slide nine our fully at 2026 guidance is updated to reflect the lower range of india domestic International series six and u. s. Finishing volume sold with an associated reduction in revenue and adjusted eBITDA We stated in our original guidance in february We entered the year assuming our india facility would flex production as needed to match a exceptionally priced india based demand In an inherently short book to build cycle market We've accordingly reduced our fully india domestic volume sold forecast by approximately 0.7 gigawatts We also stated in february that we entered the year assuming limited in-year demand for our series six international product And bookings activities of 2026 deliveries has remained consistent without assumption While the low end of our total us component volume sold forecast reflects the modest reduction based on reduced series six whip share product sold Our forecast range for fully domestic product sold remains unchanged 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 u. s Market to optimize the margin potential from this factory And as mark discussed we expect to make a decision on the long-term operating path from a leisure facility in the first half of 2027 Co-operating expenses primarily increases a function of increased legal spend associated with defending our top con intellectual property position Which we believe has the potential to drive future revenue and earnings upside And increase r and d spend them for us guy development Note our fully and frost guy related spend originally forecasting approximately 100 million is now expected total approximately 120 million This forecast increased in 2027 so you seek to advance this next generation advanced technology Co-op X increases are offset by delay and 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 the reduced cash inflows from volume sold offset by a reduction to forecasted capex In summary, we leave we remain well positioned as we close out 2026 and look forward to 2027 Driven by us policy frameworks supporting true domestic manufacturing Continue low growth as the United States competes the lead in AI And utility scales solar ambition to meet the cost and speed to power requirements of a rapidly modernizing us economy These drivers align well with our four to four gigawatt contracted backlog for mostly nearer term deliveries Great the module supply availability in the 2028 and beyond time frame Which we expect further improvements in pricing and contractual terms relative to our existing backlog We continue to invest in our future including our stage cure technology replication across the fleet And increase broth spice spend is r and d IP partnerships and our periods both pilot line And our strong balance sheet allows us continuing investment in the business what can currently enabling capital return to shell That officer please open the line 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 b&p pariva moses your line is now open Thanks for taking my question and thanks for all the color Um, maybe you could have like elaborate on what seems like literally zero urgency for developers to book 29 volumes I sort of get the point on there's nimby is in this project to condomensers parrots But we also hear from developers they expect to really do a lot of say carpet volume in 20 Um, you know panel prices will structurally go up 50 percent They don't have inventory that extends that far out even if they do for the next two years So sorry for the long question, but you know, would there be a strategy change that's necessary?

You know, it would seem that a little more urgency for 29 than there used to be Maybe to elaborate a little more because we do still expect at least tens of gigawatts of 10 each year in 29 and 30 Yeah, it was look I think um um This I think first thing I think we just need to maybe step back and reflect on is that Everyone I would see is evaluating the execution against their development pipeline and there's near-term Initiatives and areas of focus that that they're concentrated on right now and and disruptions at certain times as we indicated even as it relates to Um, you know, whether it's battery costs or other component costs I mean or the impact of tariffs that that are You know swinging various projects around people are all trying to work through that they're trying to secure their financing They're still interconnection challenges that people are working working through um and then Probably the biggest issue that people are continuing to struggle with right now is just um the challenges that are continuing to happen in local communities even at the At the state level in particular from a government standpoint and trying to push back on deployment of Data centers as we indicated in maybe as a comment that we had in our On our prepared remarks.

So there's a lot that they got going on right now So i'm gated that we are having right now with it with customers and and we are starting to You know book a pipeline of opportunities that are going out into that horizon and some even beyond 29 You know going into 30 and beyond as well But everyone's kind of like I got all this near certain things i'm focused on at this point time I got to work through these get everything addressed. I'm still trying to digest the implications of What happens with the full implementation around 232 people are still trying to think through well, you know, the fiat guidance is going to come out Uh, sometime, you know, either later this year or beginning of next year And so I think there's clarity that everybody's looking for it at that point in time Um So I think it's just a matter of just the timing of letting some of this work its way through Um, and where their near term priorities are to then think through the the balance of the decade and what they still need to do I mean everyone's really concerned now of you know, the meeting their 48 safe harbor requirements Which these projects have to be safe harbor by and completed and commissioned by the end of 2028 Uh, and there's not as much focus going further out into the horizon and that that's largely what we're seeing from customers But it's just a couple of other comments So we we said on the call that we were seeing this year Challenges in near term book to dill on our International volume and if that ties into what we said before we don't want to be in the spot market That's a challenging place for us to be but if you look at our contracted backlog We're still booked out a couple of years in advance.

So when you talk about urgency around booking 2029 Obviously we'd like to see booking momentum or open for business But I don't think we have a desperate urgency to be booking in that horizon right now And we also talked on the call and the prepared remarks around how we're thinking about Contracting and when looking increasingly at individual projects versus large frameworks And we're happy to take framework deals with the right set of structural protections within them Um, but we've seen more and more customers actually looking at individual project deals and we've been looking at that and generally speaking That's going to give you shorter term visibility relative to 2029 So if it's trying to book specific deal specific projects That the amount of clarity you have for 2029 is a lot less than if you're looking at framework horizon So there's that piece to this factor in as well Yeah, and most one thing I should have mentioned too Just I think it's just a really good example make one to highlight kind of the dynamics that are going on right now We were in negotiations with with a customer um For a two gigawatt procurement decision that was largely into final negotiations and Documentation associated around around the agreement and the particular state that this project was being developed um Put a moratorium in place And the whole project stopped Right and this this is this has happened after the announcement of the 232 So You know customers are just uncertain and when that level of certainty does happen Then they're not going to be making commitments until they get better clarity Very helpful.

Thank you. Yeah, maybe I'll add a little bit of Color around that Since the announcement of 232 we have Revised and increased our our pricing in some cases they were deals that are you know We're still in the early stage of of negotiation. So we have increased pricing in those negotiations with customers It And if it's a new opportunity that's come in our way that wasn't even in any form of The conversation prior to the 232 then those prices have gone up Relative to what you know, we would have been indicating previously We still have to work through all those issues, right? And and I think where anytime you you get through here in an environment of rising price That there's a lot of price discovery that's going to get done You know Everyone's want 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 you know Whether they need the domestic content or how much of the domestic content from a point standpoint do they need?

You know, so they're 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 in most cases go back and you know get approval through their boards And and when you see a price point in the market that was there previously and now that mark 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 the deals that that Some of the deals that we have announced in this quarter were priced before the 232 in cases where we were in earlier negotiations with customers After the 232 we have looked to try to increase that and then clearly any new opportunities So it kind of informed the more comprehensive view of what we think the pricing environments like today But like I said, the price discovery is going to take a while before you'll start to see that volume be executed Your next question come to the line of phillipsian with Roth capital phillip your line is now open Hey, all thanks for taking the questions In terms of price just to continue with the conversation, you know the price discovery may take some time Uh, it sounds like you are you have four gigawatts of which maybe two gigawatts needs to be Decided on in the next five months, and so just curious, you know, where what are we talking about now in terms of where pricing Could go to uh, you know in the crystalline silicon world We've quantified it as you know pricing has gone up 10 to 20 cents a lot depending on the product And uh, maybe timing and so that's a big move and I understand the price discovery Patience or timing that people need because they they have to process Kind of this upside shock to their economics And so it was one if you can get share with us a little bit of you know, where do you think you know What could you book in the next quarter and then what kind of price do you think you might get?

Yeah, if Phil the one thing I'm on price to it Just want to make sure that you know, we've highlighted this before it does vary by an end We have it in our prepared remarks as well I mean the price for us for our series six product is different than our series seven product Our domestic high content domestic Content product is different than a fully, you know, international, you know imported module So there's going to be a distribution of what that pricing could look like And so if i'm selling something that's being imported from Malaysia as an example Um, that's going to be at the low end of that continuum If i'm selling our series seven Product that's, you know, domestically manufactured here in the us and that's going to be at the high end So there's going to be a continuum around around pricing um You know as it relates to You know, we just announced again.

I think another quarter at 36 cents or something like that is is what our Since the last call call to call I think was around 36 cents Um, and you know, we have deals that's an average good deals that are above that Um, and that's a momentum that we'd like to continue to to carry on uh carry forward But you know, I also want to be You know, careful of um, you know, we've got to put a marker out there with so much that still is in Is fluid and still evolving. I don't want to give an indication of what that price You know realization could be we're just going to work to try to see how we can engage the market and capture the highest value Relative to you know competitive alternatives and if christen silicon stays You know in the range that you reference and then that gives us quite a bit of opportunity to you know, improve pricing dynamics For our for our technology, but a lot of work still to go to get there so maybe just two other comments as it relates to the Volume that we already have that may get elected by customers that that's going to range from somewhere close to The current backlog average to somewhere close to where we're pricing now So you're going to see a variety and that but you know, it's going to be between what we see historically and what we've seen currently And then as you think about future pricing with christmas silicon pricing is it's still Most likely for deals in the next 12 to 24 months And I don't think there's a good marker for that price point when you get out into the late 28 2029 20 30 time frame, which is when we have most soluble product to sell So what are the reasons that in customers building price discovery if they don't necessarily have a good benchmark that's far out That's reliable or trustworthy And so we're still working through Our pricing relative to where we think the market is and customers trying to understand our pricing relative where they think that market point will be Yeah, and I think the other point maybe I'll highlight as well Phil is that look we still have a little bit of time before we get to full implementation on on the 232 and and what I will say is I'm very happy To hear the the kind of enforcement focus that the commerce has to you know address stockpiling the problem is There's such a you know aggressive posture and risk taking That people are willing to do in order to get a module into the into the u. s At some, you know pre-32 Mip and so you know we're in a lot of a lot of stories of To what extent people are going to in order to try to get product into into the market You know whether it's at the cell level or whether it's at the module level and just aggressively pushing the envelope and I know commerce is doing a Great job of trying to Enforce that and to prevent that from happening and stopping that but you know the onslaught of this stuff is coming from every every every angle And so I think there's also that piece that people are waiting for let's let's let you know Maybe maybe there'll be a lot more product that does make it into the into the market somehow and a customer may say I'm willing to take some You know waiting by some time because maybe I can get an opportunity to get some You know pre-32 volume that's been imported into the market at some crazy low price and and that's informing You know their decision or at least that creating a willingness to wait And you know we we obviously are there to occur to encourage commerce to do whatever they can't You know to ensure that enforcement of preventing that stockpiling but that's not stopping the the activities You know people are willing to take a lot of risk and it's very aggressive and you'll have to see how effective commerce could be So far, you know, we applaud them for their efforts.

There's no doubt about that Yeah, so far they've blocked I think we've Learned about 60 importers blocked That up until about two weeks ago and and that's out of an importer Count of I think 400 pre-232 we learned that it was 200 and then post-232 that jumped up to 400 They've blocked at least close to 60 So it looks like they're working Enforcement is pretty aggressive and he thoughts on that and then How much higher mip could go up and what kind of timing that could be thanks Yeah, I think on the enforcement, I mean, I don't some of you may know that we you know we did our ribbon cutting for our new factory in South Carolina and Secretary let Nick was there and a number of his key members of his team were there so it gives a good opportunity to Talk with them and to sort of continue emphasize the importance of this enforcement and they're a hundred percent committed on the enforcement side and to do everything they can to prevent those types of things from happening and Where we can, you know, we are sharing insights with them and things we think could could be helpful from from that standpoint It's just to your point.

I mean The the risk tolerance and the people are willing to take knowing that there's going to be that level of enforcement is not slowing Slowing things down very much. I mean, yes, you can get 60, you know out of the You know if the number of importers of record went up, you know from 200 to 400 and it's great that we caught 60 of them, but there means there's another 140 that, you know, potentially are still, you know getting around the current enforcement levels, right, so And then it's related to the MIP and look, I think It's very clear if you haven't, you know, seeing what that's Remarks that are ribbon cutting that I think you just ought to Watch it.

There's a couple of videos that are out there and he's a hundred percent clear The strategic intent of what we're trying to do here, which is to create US manufacturing, US jobs, US supply chain, US technology and things that can help enable, you know, energy independence and national security And so they're going to enforce this and they're 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 Your next question comes from the line of Brian Lee with Goldman Sachs Brian your line is now open Hey guys, thanks for taking the questions.

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 2930 and I said we have some customers that are even wanting to start having some conversations that go beyond 2030 Um So it relates to the sales force I somewhat alluded to that first up from a capacity standpoint I don't I don't think it's an issue with our capabilities of our sales team to To handle that pivot right to more project specific versus framework structures, but um Is I somewhat alluded to is we have gone and we've repriced Um deals that were in the early Negotiation phase and any deals that have come to us now are obviously reflected of what we believe the current market pricing should be Um, so you know, I'm not going to give you an indication of what that what that looks like, but um, you know, we have Recalibrated and I think the market fully understands that but I also want to continue to go back I mean there is a continuum of what those prices are going to be a near term And I think i've even alluded to this Um in prior calls what we have right now available the book is more You know, um malaysia Finish good module coming in the us or Uh in india product coming into the us, you know, and so so that Profile, you know in terms of asp entitlement is going to be on the lower end of that a continuum as I indicated the lowest Price point we would have for for a module will be For that international product coming fully finished international product coming into the us And then the highest will be kind of a hundred percent domestic manufactured series seven So so it can move around you know that average is reflected in the numbers that we've been giving you But at any particular quarter if i'm heavy on on maybe international modules coming into the us That that would drive that average asp down and clearly will provide color around that but but yeah I mean pricing is is re-establishing itself at a higher point than it has been historically and you know, we'll continue to see how You know price discovery works through Brian just one follow-on point to that framework discussion and one of the challenges that we've talked about over the last couple of years now is The period cost that we've been incurring around the amount of inventory we have to keep The storage cost out of entry overall sales rate if you think about When there's an ability to move Volume around or when customers need to do that because the timing of their project shift I have to keep inventory to make sure I can service all the available contracts for the app That generally means my a opposite my overall imagery position is worse my working capital position is worse At the same time then if that 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 so generally speaking It's become harder for us to plan around that and we're seeing a significant financial impact from that If we move to more of a project based model where there's a certainty around an individual project the timing that project and delivery schedule That allows me to plan on the operational side much more efficiency reduce working capital or reduce Reduce storage costs as well.

Yeah, so you're right on the balance sheet There's you know about 1.9 billion about a hundred that's related to india So you got about 1.8 in the u. s And then part of that 1.8 relates to credits that were generated last year and we we've yet to file yet 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 be generated this year If you look at the 2024 credits we sold most of those we did keep a portion of them would file our 2025 tax return in October of 2025 and we received a refund for what was about 120 million in about three months time and Importantly even within that three months the government was actually shut down for about a month to that So the turnaround time from filing to receiving the cash relatively short As it relates to this year, we haven't Made a decision yet We have not made any assumption around the reduction the carrying value of those credits if we were to sell them We've seen that the market through the first half of this year I think was a little softer for credit cell values that's picked up pretty significantly towards the back end of the year is Large corporates have better position and understanding of their tax position coming into year ended looking for tax planning So actually so we're seeing a lot more of outreach and interest around those credits.

We're in some discussions around potential sales there But we'll look to balance How much we would like to sell to pull some liquidity forward versus how much we'll come more filing for a fundability for because then you're not taking a discount on that sale So it's about thing asking we're in discussions around those as well Your next question comes from the line of David our carot with Morgan Stanley David your line is now open toward individual project booking Typically, you know, what's the time frame for how far in advance you would end up getting that Order into your backlog, you know relative to I guess the the timing of the project and I think you had suggested that you the decision On Malaysia could be made in the first half of 2027 Are you thinking that we'll get enough kind of visibility by that time that you'll be able to make that call on what to do with that capacity?

Yeah, I'll take the first one.

I'll let Alex take the Malaysia comment.

Um, so, uh, yeah, so so basically what happens on a on a Forbidden specific to it to a project again, um, modules using the forefront of your procurement led decision. You want to secure that Uh, that technology because it also drives your design of the of the factory or I are the sign of the project. Excuse me. So, um, you know, christmas silicon and cattelle is it'll design your factory in your plant. Excuse me differently. Um, there's different string count different voltage and other parameters in which you would want to optimize for Generally, we don't have the same constraint as it relates to Um, the tracking, you know, backtracking requirements because we don't deal with the same adverse impact of Shade or diffuse light and those types of things.

So there's a lot that has to be done early on. And so you don't 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. Um, so it could be, you know, 18 months, two years before the, you know, the first delivery Uh, would start to happen or at least for sure until the project would be commissioned So it doesn't really it shortens your timeline a little bit from a visibility standpoint, but it doesn't really significantly shorten it Um, but it gives you a better certainty and there's there's no doubt about that. Um, you know, people would be willing to go out Into 2030, uh, in a framework kind of construct and projects normally would be, you know, commitments that would go out into, you know, 28 or into early 29 is probably about as far out as they would want to go but still more than enough visibility to properly Understand the project and price it appropriately And david is a related to malaise.

Yeah, I do believe we'll have enough visibility going to the first off next year We've effectively been carrying that and then asset running a very low throughput for the whole of this year And we've done that deliberately because thought the Underutilization costs associated with that Was worth the option value of having the abilities around what would be up to about 1.8 gigawatts of international volume as we look through The 232 announcement and as mark said the customer base still in transition Fully understanding what that looks like and trying to work through what their need is going to be And we want to make sure we have the optionality in Malaysia and the event that that significant demand doesn't materialize Correct.

We've also said that We have an order of how we want to make sure our factory sells so First, we look to make sure our us content is sold Secondly, we'll look to make sure we'll be selling our finishing line production as our new silty in South Carolina And then after that the full international product. We're also going to be bringing More volume from india over into the us next year subject to a trade and care environment makes sense So I think we'll have the understanding of the marketplace that we'll need by the by the first of the next year We're still looking at that as an option value and seeing how the effect the 232 plays out Your next question comes in the line of vikram vagary with city vikram your line is now open Good evening, everyone For another question on pricing that this is important on this call itself before pricing Either go down by a couple of cents or go up by creating sense Mark fully appreciate the lack of clarity about the environment But for CD7, is there a construct you can provide for Pricing that we should keep in mind.

Thank you Yeah, so i'll talk on so if you take s7 as an example and Just just meant one thing to make clear you made a comment about equality. Just got i don't i don't know if you're familiar with how energy predictions are done For christmas silicon technology, they actually have a quality factor that they use Which would be basically that reduces the energy profile of the technology as part of the energy prediction of which that does not apply at all to first solar technology So we don't have any quality factors that are assumed in the energy predictions that are underwritten by By and supported by the iEs and the banks. So i'm not sure what your point is around that But christmas silicon clearly does Um, they have a meaningful quality factor that is being used when they do the energy prediction for that technology.

The um, um What i would say if you take a series of and cure Product and you compare it from an energy profile because again energy is what our customers pay for Uh, and what the value of that product would be relative to a perk technology You know it it would be Advantage to perk so there'd be no discount to perk. Um, it would also vary with where it is Because uh, obviously our technology does not have what cure a lot better by facialities than our qqqd product is our bifaciality is lower than Than christmas silicon. So if you were to go further north east Or you get a better impact of bifaciality then you'll see a different outcome if you go to Um, the desert southwest or to the southeast and more hot and human hot climates or hot and human climates You're going to see a better outcome for our technology.

Um, and then if you compare us to to, um Uh, to top con, you know, which again The vast majority of anyone producing or selling a top con product in the u. s With the pension on our IP, um, which we will stand by and completely enforce that Um, then then you'll have a slightly different outcome. We would actually be On average, uh slightly disadvantaged to top kind of a few pennies. So it depends I mean you got different situations different geographies different terrains A lot of different things factor into that and determine the relative competitiveness of of the technology so Um, but I would say general rule of thumb series seven cure is going to be advantaged against Perp and disadvantaged by pennies Relative to top cup As relates to the competition and you know how that all plays out Um, you know You have to think through How much are you willing if you choose first up?

Is the competition in the manufacturing that's coming in the u. s truly fiat free truly unencumbered by any dependency Um from the chinese whether it's the supply chain Whether it's the tools and the manufacturing equipment whether it's the IP Right a lot of our customers do their own subjective analysis and have concluded that there's a substantial risk still That these entities are not fiat free and they don't want to take on that risk That puts us in a much better position. There's no doubt about that. And that's also why I think you're going to find um Customers leaning into developing partnerships with first solar that go longer data I believe I remember reading one of the filings recently for For one of the u. s. Manufacturers and I believe almost 100 percent of the sales that they're generating this year is to a related party And I understand that related party to be a chinese counterpart So, I mean it tells you just looking at that as an example that you know in certain situations Um customers are not willing to take on that risk and we still don't have full clarity around the fiat yet And I think that's why people are being a little gunshot Our final question comes from the line of dimple goes by with pipe first handler Dimple your line is now open Thank you very much.

I don't know It my team may have better insights than I do in terms of have any exclusions been granted at this point in time It's not clear to me that there have been any granted exclusions. 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 one time But that's something that we're going to have to to stay close to and understand Um I'm perfectly fine though competing, you know, we've always said Uh, you know, us manufacturing Um 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 in our supply chain So, um, if some of that does happen then then, um, you know It'll evolve and that'll create the domestic industry that I do believe still is is the strategic thread that's important for us as a country Assuming we do it right right assuming it truly is US technology, US manufacturing, US supply chains, right, creating american US jobs and supporting american families.

There's there's no doubt about that. That's that's absolutely critical from that standpoint Um as it relates to the lawsuit. I really can't comment much of anything around that Um, we actually will be filing our our response, um here shortly Um further required timeline and I think there'll be better clarity around, um the issues and in the allegations that have been raised during during that um During that are part of that lawsuit. What I will say is that we have always and even with engagement with Swift as we've always said we will stand by and we will support under the parameters of our limited liability warranty the obligations that we have Um, again that largely is reflective and relates to the series seven initial product launch that we had indicated that there was um a couple of issues that came out as part of that launch that resulted in um uh an initial stabilization of that technology to be below expectations, um and then and then um Underneath the underneath that program we put it in place.

We said we would remedy those issues with customers And we engage 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 And that's just you know, that's not something that we will we will do Um, but we will be more than you know, we'll stand behind the technology and and we have that conversation with with uh swift in this case And they chose to try to pursue a different approach where they think they could be successful and again, you should see Uh our response and our filing coming out here in the next several weeks We have reached the end of a Q&A session.