FIRST SOLAR, INC. Q2 FY2025 earnings call

• Q2 earnings per diluted share came in at $3.18 per share, above the high end of guidance range. - Manufactured 4.2 gigawatts in Q2, with progress in domestic capacity expansion at Alabama and Louisiana facilities. - Technology progress: CuRe technology platform showed improved performance and manufacturability, and perovskite development line at Perrysburg campus made progress. - Published annual corporate responsibility report highlighting efforts in resource efficiency and responsible stewardship. - Discussed U.S. policy and trade environment, including reconciliation legislation, AD/CVD cases, Section 232 investigation, and intellectual property enforcement against TOPCon patent infringements.

During Q2 2025, First Solar recorded 3.6 gigawatts of module sales. It produced 4.2 gigawatts in Q2, with 2.4 gigawatts from U.S. facilities and 1.8 gigawatts from international facilities. The company progressed domestic capacity expansion, with equipment installation and commissioning at the Louisiana site complete, expecting to boost U.S. nameplate manufacturing capacity to over 14 gigawatts by 2026. In terms of revenue contribution, module sales and production details are key performance indicators for the segment.

• Net sales guidance: $4.9 billion to $5.7 billion. - Gross margin expected to be between $2.05 billion and $2.35 billion (approximately 42%), including Section 45X tax credits, ramp and underutilization costs, tariffs on finished goods and bill of material imports. - Full year 2025 earnings per diluted share guidance range: $13.5 to $16.5. - Q3 module sales forecast: 5 to 6 gigawatts, with $390 million to $425 million in Section 45X credits, resulting in EPS between $3.30 and $4.70. - Capital expenditures for 2025 expected to range between $1 billion and $1.5 billion. - Year-end 2025 net cash balance anticipated to be between $1.3 billion and $2 billion.

• Trade policy uncertainty, including ongoing AD/CVD cases, Section 232 investigation into polysilicon and its derivatives, and potential tariff impacts on international module sales. - Supply chain risks from Chinese competitors circumventing trade laws and over-concentrated supply chains. - Uncertainty around executive order and FEOC provisions affecting U.S. solar manufacturing and supply chain.

Q: Kudos on the nice execution. I think obviously, there's going to be a lot of focus here on what seems to be incremental improvement in the bookings environment as well as some expansion in kind of your pricing power based on some of the numbers you rattled off. So maybe just digging into that a bit, so 2-plus gigawatts bookings just in the month of July, presumably pent-up demand waiting for OBBBA to get through to the finish line. What kind of run rate bookings kind of are you seeing real time? Like, what can we read into the 2-plus gigawatts of bookings just in the month of July? And then maybe as a follow-up, just on the pricing side, the $0.32 to $0.33 per watt, depending on which portion of the bookings you're talking about, a couple of pennies higher, several pennies higher, than what you had been run-rating at. What does that reflect? Is that AD/CVD? Is it FEOC? Is it domestic content entitlement? Like, how much of that is actually being captured already? And what do you think could still be part of that pricing picture as you move through the next couple of quarters and into '26?

A: All right. Thanks, Brian. I'll take that. First off, I would say that we're still learning. We're kind of filling our way around in terms of what's happening in the market and what are the implications around pricing. Clearly, after July 4, when the bill was signed, we had a lot of inbounds, a lot of questions, a lot of inquiries, a lot of people trying to think through their safe harbor strategy. And what's really nice when you think about -- well, we already had safe harbor, largely, it was through '28, okay, and really robust demand for that period of window. Now kind of where we are right now, you've got a window now that will take that activity all the way out through 2030, right? So another 2 more years of safe harbor. Contingent -- depending on what ultimately happens through the executive order, it's given us a nice -- the industry a nice runway to move forward to the end of this decade, which is what we all love to have in terms of long-term visibility and certainty. When we look at the individual drivers and trying to translate that into what sort of created the ongoing engagement, I would argue, in the bookings we saw in July, it's a little bit of everything. Some of it is not wanting the safe harbor for projects that would then be completed in 2029. Some of it is, you call it FEOC or you could call it AD/CVD related, and a large volume of the bookings was related to a customer who had already committed volume or believe they had committed volume from a Chinese supplier. And that Chinese supplier reneged on that volume. And that volume was actually needed in kind of the '26 time frame. And so they needed to react very quickly in order to recover and get a certainty of the supply chain available, and we were able to leverage kind of the opportunistic debooking that we saw in the quarter plus some inventory position we had on international volumes in order to fulfill that requirement for that particular customer. So I would say there's still good momentum. I was talking with our Chief Commercial Officer today, and we got a number of deals near term that we would expect to close that could add up to another gigawatt here near term. So we're encouraged. We're going to continue to sort of fill our way through it, and we'll do a little price discovery and kind of see where everything settles in. But as we said, we've done a lot here to try to best position in this market and to address a level playing field. And we think we're finally getting into that position, and we think there's opportunity for additional price in terms of our average ASPs. We'll have to sort of discover where that ultimately lands, but we're encouraged with what we're seeing right now.

Q: Just going back to the last point, Mark, on some of your customers that are contracted out through year-end '28. To the extent that there is a negative change in the -- sorry, in the safe harbor language from the executive order. Can you just talk about kind of the percentage of that backlog that could potentially be at risk that's contractually open for them to cancel?

A: So first off, I just want to make sure we're clear on one thing. The executive order was not intended to address the Section 48 and 45 ITC and PTC that was safe harbor at the end of '24. And from that point in time, you have 4 calendar years in order to complete and build your project and place them in service. So that executive order shouldn't have any impact relative to the legacy Section 48 and Section 45. The intent of the executive order was to focus on the tech-neutral ITC, PTC and to focus on a couple of different things. One is to ensure there's true substance and appropriate guidance as it relates to what determines commenced construction, and there's a couple of different ways to do that. One is through committing 5% or so of the CapEx of a project or implementing physical activities at the project or at the site, physical work. So those are being looked at to provide definition and guidance. The reconciliation bill alluded to that, a need for guidance. I think the guidance was originally to be placed out no later than end of 2026. Executive order came out after the bill was signed saying, "Hey, we want that closer dated." So it has effectively a 45-day window, which I think goes out to August 18, where that guidance is to be provided or notice of guidance. It also has some FEOC provisions in there as well. So it's not just to address the commenced construction. It's also to address some of the FEOC provisions and to effectively ensure that the investments that we're making were not tethering back into nations that could be adversaries such as Russia and China and others. So the 48 legacy as it relates then to our project contracted backlog that carries through '28 should be unaffected by whatever comes out through the executive order. But the opportunity is what are the catalysts going beyond that, and that is the new tech-neutral guidance, which will have some clarity around definition for commenced construction in FEOC. But assuming that those are all amenable and manageable by the market, then now we have a new window that we can continue to book out and see strong demand through 2029 into 2030, which we think is highly encouraging from that standpoint.