FSLR - NASDAQ

Good afternoon, everyone, and welcome to First Solar's Fourth Quarter and Full-Year 2023 Earnings and 2024 Financial Guidance Call. This call is being webcast live on the Investors section of First Solar's Web site at investor.firstsolar.com. At this time, all participants are in a listen-only mode. As a reminder, today's call is being recorded. I would now like to turn the call over to Richard Romero from First Solar Investor Relations. Richard, you may begin.

Hi. Good afternoon and thank you for joining us. Today, the Company issued a press release announcing its fourth quarter and the full-year 2023 financial results, as well as its guidance for 2024. A copy of the press release and associated presentation are available on First Solar's Web site at investor.firstsolar.com. With me today are Mark Widmar, Chief Executive Officer; and Alex Bradley, Chief Financial Officer. Mark will provide a business update and outlook for 2024. Alex will discuss our financial results for the fourth quarter and full-year 2023, as well as our financial guidance for 2024. Following their remarks, we will open the call for questions. Please note this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the safe harbor statements contained in today's press release and presentation for a more complete description. It is now my pleasure to introduce Mark Widmar, Chief Executive Officer.

Thank you, Richard. Good afternoon and thank you for joining us today. I would like to start by noting that this month marks the 25th anniversary of First Solar's founding, making us one of the oldest and most experienced solar module manufacturers in the world. This is a remarkable milestone in a journey that has positioned us as the western hemisphere's leading solar module technology and manufacturing company. While we're not the only American solar manufacturer to come into existence at the end of the last century, we're the only one of scale to remain today. However, this is not simply a story of survival, but one about the value of long-term strategic decision-making underpinned by a differentiated technology and business model, driving value creation for our shareholders and our partners. Ours is a story of innovation, values, competitiveness, and perseverance. And we are proud of our work towards leading the world's sustainable energy future. As our journey continues, few years have been as consequential to our long-term growth strategy as 2023. Over the past year, we expanded manufacturing capacity mobilized at our latest announced facility in Louisiana, produced and shipped a record volume of modules, expanded our contracted backlog to historic levels, and increased R&D investment and continue to evolve our technology and product roadmap. Let's review the key accomplishments in 2023, beginning with slide three. From a commercial perspective, 2023 continued momentum established in 2022, as long-term multiyear procurement continued to drive demand. We added 10 new customers, and secured 28.3 gigawatts of net bookings at a base ASP of over $0.30 per watt. Despite industry macro challenges such as global oversupply and pricing volatility, we continue to see strong mid to long-term demand, especially in the United States, as shown with 2.3 gigawatts of net bookings since the previous earnings call at an ASP of $0.318 per watt excluding adjusters or $0.334 per watt, assuming the realization of our technology adders. Our total contracted backlog now stands at 80.1 gigawatts, with orders stretching to the end of this decade. While Alex will provide a comprehensive overview of our 2023 financial results, our full-year EPS came in at $7.74, which is above the midpoint of our initial and Q3 2023 guidance ranges, and included the impact of the sale of our Section 45X tax credits and the impairment of our investment in CubicPV. These items, neither of which were included in our Q3 2023 guidance ranges, adversely impacted our full-year EPS by approximately $0.48 per watt. From a manufacturing perspective, we produced a record 12.1 gigawatts in 2023, representing a 33% increase in production over 2022. As a result, we have now surpassed 60 gigawatts of cumulative production since we first began commercial manufacturing in 2002. This growth was driven by manufacturing excellence at our Series 6 factories, which produced 9.7 gigawatts in 2023, an increase of 600 megawatts compared to 2022, and the successful ramping of our new Series 7 factories in the U.S. and India, which combined to produce more than 2.4 gigawatts in 2023. Our top production bin for Series 6 was 475 watts, and our top production bin for Series 7 was 545 watts. We remain committed to progressing our technology and product roadmap in 2023, having recently achieved a 22.6% world record CadTel research conversion efficiency based on our CuRe technology, and launched the first bifacial thin film solar panel. In addition, we successfully completed our manufacturing readiness trial under our CuRe program in the fourth quarter of 2023, and expect to begin manufacturing modules powered by this technology at our lead line in Perrysburg in the fourth quarter of 2024. It's vital that our supply chain and logistics operations keep pace with our manufacturing expansion plans, and we made meaningful progress on this front in 2023; key achievements, including entering into agreements with Vitro to supply American-made front and back glass for our manufacturing operations in the U.S. And with OMCO and Ice Industries to supply steel back rails for our facilities in Alabama and Louisiana. We also signed agreements with Saint-Gobain to supply the back glass for our modules in India. Regarding growth, we exited the year with 16.6 gigawatts of nameplate capacity. This marks an increase of 6.8 gigawatts from 2022 driven by the commencement of operations at our Series 6 factories in Ohio and India. In 2023, we announced a $1.1 billion investment in a new manufacturing facility in Louisiana, which is expected to add 3.5 gigawatts to our nameplate capacity in 2026. When combined with our Alabama facility and our Ohio manufacturing footprint expansions, both of which are in progress, we expect 2026 year-end nameplate capacity of approximately 14 gigawatts domestically, with another 11 gigawatts internationally for a global nameplate capacity of approximately 25 gigawatts. We also continue to invest in our technology with our R&D Innovation Center and a perovskite development line, both under construction in Ohio. These facilities are expected to commence operations in the first-half and second-half of 2024, respectively. Additionally, in 2023, we acquired Evolar, a European leader in perovskites technology, and as it transitioned its laboratory in Sweden to become our first R&D facility in Europe. These and other investments in R&D allow us to accelerate the cycles of innovation we believe are necessary to extend our leadership and thin film solar technology. Turning to slide four, as of year-end 2022, our contracted backlog totaled 61.4 gigawatts with an aggregate value of 17.7 billion or approximately $28.8 per watt. Through year-end 2023, we entered into an additional 28.3 gigawatts of contracts and an average ASP of $30.5 per watt. After accounting for sales of 11.4 gigawatts in 2023, we began 2024 with a total contracted backlog of 78.3 gigawatts with an aggregate value 23.3 billion or application $29.8 per watt. Since the end of 2023, we have entered into additional 1.8 gigawatts of contracts, resulting in a total backlog of 80.1 gigawatts. These most recent bookings have an average ASP of $31.9 per watt pre-adjuster, or $33.9 per watt if contract technology adjusters are realized. Additionally, we have received security against 206 megawatts of previously signed contracts in India, which now move these volumes from contracted subject to conditions precedent grouping within our future opportunities pipeline to our bookings backlog. A substantial portion of our overall backlog includes the opportunity to increase base ASPs through the application of adjusters. If we're able to realize achievements within our current technology roadmap as is expected timing for delivery of the product. As of the end of the fourth quarter we had approximately 39.1 gigawatts of contracted volume with these adjusters which if fully utilized, realized, excuse me, could result in additional revenue of approximately $0.5 billion or approximately $0.1 per watt. The majority of which would be realized between 2025 and 2027. This amount does not include potential adjustments, which are generally applicable to total contracted backlog, both related to the ultimate module bin delivered to the customer, which may adjust the ASP under the sales contract upward or downward, or for increases in sales rate or applicable aluminum or steel commodity price changes. I'll now turn the call over to Alex, who will discuss our Q4 and full-year 2023 results.

Thanks, Mark. Starting on slide five, I'll cover our financial results for the fourth quarter and full-year 2023. Net sales in the fourth quarter were $1.2 billion, increase of $0.4 billion compared to the prior quarter. The increase in net sales was driven by higher volumes sold, including higher net sales of Series 7 modules as we continue to ramp production at our new facility in Ohio. For the full-year 2023, net sales were $3.3 billion compared to $2.6 billion in the prior year. This increase was driven by $0.9 billion of higher module net sales resulting from increases in both volumes sold and ASPs, which was partially offset by $0.2 billion of lower revenue from our residual business operations, primarily related to the sale of our Luz del Norte project in the prior year. Based on our vertically integrated differentiated manufacturing model, the current form factor of our modules, we expect to qualify for Section 45X tax credits of approximately $0.17 per watt for each module produced in the U.S. and sold to a third-party, which is recognized as a reduction to cost of sales and the period of sale. In December, we entered into an agreement with Pfizer, which resulted in the sale of approximately $687 million of the 2023 Section 45X tax credits, for expected aggregate cash proceeds of $659 million, received an initial $336 million of cash proceeds in January, with the remainder expected by the end of April 2024. In connection with this transaction, we recognize the valuation adjustment of $28 million within cost of sales during the fourth quarter to reduce the carrying value of the credits to the amount expected to be received from the transaction. For the fourth quarter and full-year 2023, we recognize $229 million and $659 million respectively for Section 45X tax credits, including the effects of the aforementioned adjustment. Gross margin was 43% in the fourth quarter compared to 47% in the third quarter. This decrease was primarily attributable to the adjustment associated with the sale of our Section 45X tax credits, a higher mix of modules sold from our non-U.S. factories which do not qualify for Section 45X tax credits, and the write-off of certain legacy production materials, partially offset by continued module cost reductions. For the full-year 2023, gross margin was 39% compared to 3% in the prior year. The increase in gross margin was primarily due to the recognition of Section 45X tax credits, a decrease in sales rates, submerged and detention charges, an increase in module ASPs, continued module cost reductions, and the net impairment in sale of our Luz del Norte project in the prior year, partially offset by increased underutilization costs charged in the period in which they are incurred associated with factory ramp in 2023. The ramp charges were 16 million in the fourth quarter compared to 25 million in the third quarter. Our ramp costs for the full-year 2023 were 89 million compared to 7 million in the prior quarter. Our 2023 ramp costs were primarily attributable to our new Series 7 factories in Ohio and India. SG&A, R&D and production start-up expenses totaled $111 million in the fourth quarter, an increase of approximately $7 million relative to the prior quarter. This increase is primarily driven by fees associated with the sale of our 2023 Section 25X tax credits and an increase in incentive compensation, partially offset by lower than expected credit losses resulting from improved collections of our accounts receivable. For the full-year 2023, SG&A, R&D, and production startup expenses, along with litigation losses, were $450 million compared to $351 million in the prior year. As a reminder, we recorded a litigation loss of $36 million during the second quarter related to our legacy systems business. The remaining operating expense increase of 63 million was primarily attributable to higher employee compensation due to additional headcount, higher professional fees associated with litigation, the implementation of a new enterprise resource planning system, the sale of our 2023 Section 45X tax credits, and higher material and module testing costs for our research and development activities. Our fourth quarter operating income was $398 million, which included depreciation, amortization, and accretion of $90 million, ramp costs of $16 million, costs associated with the sale of our 2023 Section 45X tax credits of $35 million, legacy systems-related income of $7 million, production start-up expense of $10 million, and share base compensation expense of $11 million. Our full-year 2023 operating income was $857 million, which included depreciation, amortization, and accretion of $308 million, ramp costs of $89 million, costs associated with the sale of our 2023 Section 45X tax credits of $35 million, legacy systems business-related costs of $7 million, production startup expense of $65 million, and share-based compensation expense of $34 million. In the fourth quarter, we took a 23 million impairment associated with a strategic investment in cubic PV. Our investment thesis is anchored to their continuing development work on perovskites and tandem technologies. Outside of our investment thesis, they had planned to develop domestic silicon wafer manufacturing capacity. This plan was recently abandoned due to surging construction costs and declining wafer prices, which triggered an impairment. Interest income in the fourth quarter was $24 million, roughly the same as the prior quarter, and interest income for the full-year, 2023, was $98 million, an increase of $64 million compared to the prior year, primarily due to higher interest rates on our cash and marketable securities. We're recording an income tax expense of $27 million in the fourth quarter and $61 million for the full-year. Fourth quarter income for diluted share was $3.25 compared to $2.50 in the prior quarter. For the full-year 2023, income for diluted share was $7.74 compared to a loss for diluted share of $0.41 in 2022. Next on to slide six, discuss select balance sheet items and summary cash flow information. The aggregate balance of our cash, cash equivalents, restricted cash, restricted cash equivalents and marketable securities was $2.1 billion at the end of the year, an increase of $0.3 billion from the prior quarter and a decrease of $0.5 billion from the prior year. Our year end net cash position which includes the aforementioned balance of less debt was $1.6 billion an increase of $0.3 billion from the prior quarter and a decrease of $0.8 billion from the prior year. The increase in our net cash balance in the fourth quarter was primarily driven by module segment operating cash flows including advanced payments received from future module sales, partially offset by capital expenditures associated with our new plants under construction in Alabama, Louisiana and India. Decrease in our net cash balance for the full-year 2023 was primarily due to capital expenditures partially offset by module segment operating cash flow. Cash flows from operations were $602 million in 2023 compared to $873 million in 2022. This decrease was primarily driven by higher operating expenditures in support of our ongoing manufacturing expansion and lower advanced payments received for future module sales partially offset by higher cash receipts from modules sold during the year. Capital expenditures were $347 million in the fourth quarter compared to $286 million in the third quarter. Capital expenditures were $1.4 billion in 2023 versus $0.9 million in 2022. Now I'll turn the call back to Mark to provide a business and strategy update.

All right. Thank you, Alex. A word about overall market conditions and the policy environment, as we enter 2024, while we continue to operate from a position of strength, leveraging our point of differentiation and strong contracted backlog, the continuation of Chinese subsidization and dumping practices has caused a significant collapse in cell and module pricing. Last month, Meyer Burger, a European module and cell manufacturer announced that deteriorating market conditions in Europe resulting from such practices as forcing them to prepare for shuttering module assembly in Germany, exemplifying the challenges to the EU stated goal of creating a self-sustaining renewable manufacturing industry. In India, sudden and significant reduction in cell pricing in the non-domestic content market segment has blunted the efficacy of the country's measures to address Chinese supply chain imports, distorting market pricing in the country and disincentivizing the ability of local suppliers to help achieve India's ambition to create broad domestic manufacturing to serve its domestic market. And here in the U. S., notwithstanding the U.S. Department of Commerce's general determination of antidumping and countervailing duty circumvention by four Southeast Asia countries, the continued record level of cell and module imports from these regions poses a threat to the current administration's ambitions of scaling and securing a robust onshore solar manufacturing base. In light of the current and forecasted state of oversupply in these markets and the resulting headwinds to the ability of domestic manufacturers to scale, we call upon governments and policymakers to either reinforce the measures already enacted or move expeditiously to take action. For instance, here in the U.S., we have long taken the position that the Section 201 Safeguard Bifacial Exemption simply opened the door for a multi gigawatt scale crystalline silicon product to have unfettered access to the American solar market, threatening U.S. Solar manufacturing. Indeed a recent report released by the U.S. International Trade Commission noted that a number of commenters cited the bifacial exclusion along with the 2022 executive order temporary blocking the U.S. Department of Commerce for imposing new tariffs on solar imports from Cambodia, Malaysia, Thailand and Vietnam as leading to increased availability of foreign made solar panels. We therefore advocate as the administration undergoes its current evaluation of the 201 tariffs that it closes this market distorting bifacial exemption which has been exploited to eviscerate the intent of these measures to safeguard the domestic industry. In addition with respect to the Uyghur Forced Labor Prevention Act, which address the scourge of utilizing forced labor within the solar supply chain. We similarly advocate for custom and border protection to utilize all of the tools in its toolbox to ensure a comprehensive enforcement strategy of law already on the books and to ensure that regardless of which port product is shipped into, the legal requirements in place are consistently enforced. In India, while the Approved List of Module Manufacturers or ALMM has been effective in incentivizing domestic manufacturing investment passes in the application of this law and the related impact to domestic pricing have put progress at risk. We are heartened that the ALMM waivers currently in place are expected to expire at the end of Q1 and would encourage the federal government of India to not grant such waivers in the future and to also consider expanding the ALMM equivalent requirements to cell manufacturing. These actions we believe will foster India's ambitions of reducing their dependency on the Chinese solar supply chain and in our view incentivize further capital investment in this country. Turning to the EU, while we are pleased with this month's recent development to establish the Net

Thanks, Mark. Before discussing our financial guidance, I'd like to reiterate three themes from our recent Analyst Day related to our growth and investment thesis, our approach to our backlog and bookings and our expansion into India. Firstly, from a growth and investment thesis perspective, we continue to focus on differentiation and our guided line approach to our business model balances growth, profitability and liquidity. This decision-making framework informs our long-term strategic direction. It guided our strategy to exit the systems business at the end of the last decade and significantly expand our module manufacturing business, evidenced in a doubling of nameplate capacity from 2021 to 2023 and the forecasted increase in nameplate capacity of over 50% in 2023 to 2026. This scaling capacity is supported by optionality in our R&D road map across energy attributes including efficiency, degradation, temperature coefficient and bifaciality. We've gone from deploying prototypes of early bifacial CadTel modules at a test facility in 2021 to converting our lead line at the end of 2023 with commercial deployment across a significant portion of our fleet plan for 2024. Additionally, in the fourth quarter of 2024, we expect to be in production of our first commercial pure modules on our lead line in Ohio. As it relates to contracting this volume, we continue to prioritize certainty. Our reported backlog, which includes U.S. and Rest of World bookings with our typical contractual security provisions, but excludes contracts signed in India and less backed by 100% liquid security is made up of two types of contracts. Those relates to a specific asset or project and frameworks, which are typically larger, multi-year, and therefore often have less certainty over delivery timing. Common across these contracts is a fixed price structure, which may include adjusters for technology improvements, and which typically include adjusters for bin class, freight risk, and commodity risks. As of December 31, 2023, approximately 95% of the megawatts in our backlog had some form of freight protection, and approximately 85% had some form of steel and/or aluminium commodity cost protection. As a reminder, a limited number of our contracts contain a termination for convenience provision, often related to customer regulatory requirements, or as a portion of large multi-year framework from this, which generally requires substantial advance notice to be invoked and features a contractually required termination payment to us. This payment is generally set at a substantial percentage of the contract value and backstopped by some form of security. As of today's call, the percentage of megawatts in our contracted backlog that had a termination for convenience closed with an associated termination payment obligation is roughly equivalent to that given on our Analyst Day in September of 2023. Note, given this provision is one of many deal terms that is negotiated with our customers in the process of a module sale, we do not expect to provide updates on this metric. On our earnings call in February of 2022, we stated that as we significantly increased our nameplate capacity, we believe that this anticipated growth would generate significant contribution margin to drive operating margin expansion. In 2023, that thesis was validated as we saw significant year-over-year operating margin expansion. As we continue our capacity growth we expect to continue to see operating margin expansion in 2024 as reflected in our guidance provided today. Secondly, as it relates to our contracted backlog, excluding India we remain cumulatively oversold through 2026. This over-allocation position is deliberate, provides us resilience to the uncertain timing of delivery inherent in some of our larger framework contracts, a natural tendency for delay in the project development process, as well as the potential for incremental supply as we start up and ramp new factories. The further out the delivery timeframe, the more comfortable we are with over allocation. The closer we get to delivery dates, and as we enter any given year and undertake our annual planning process, the more we look to ensure that demand is able to be met with available supply. As of late Q4 2023, we have not seen significant customer requests for schedule changes beyond the typical daily and weekly balancing that occurs in our supply-demand forecasting. As we concluded our planning process of 2024 through the first two months of the year, we have seen some requests from customers to shift delivery volume timing out as a function of project development delays. As we stated previously, including on our Analyst Day, we will work with our customers to optimize their project schedules, including moving delivery dates in the short and medium term where possible, balanced by the constraints of our production and shipment needs, including selling our full production in 2024, which we continue to expect to do. Our contractual provisions underlie and govern these relationships and discussions. In certain situations, our approach to overselling could expose us contractually, should we be unable to manage our over-allocated position. This is where the strength of our long-standing customer relationships is key, providing flexibility not just for our customers, but also often for first-holder delivery timelines. Given our supply-demand balancing so far and our ability in the near term to supply modules from India to the U.S., we do not forecast any damages associated with overallocations in 2024. Contractual provisions also protect us in the event of long-term customer issues or disputes. For example, we were recently notified by a corporate customer where they are experiencing significant delays to their project. And based on this and their current position of financial distress, they do not intend to take delivery of 381 megawatts of modules scheduled for delivery in 2024. We are working with this customer to optimize the outcome for both the customer and First Solar, but in this and other similar circumstances, we will continue to enforce our contractual rights to termination penalties or other damages in the event of their contractual breach. As previously discussed on recent earnings calls and at our Analyst Day, we believe our approach to forward contracting has been validated in the past through multiple pricing and supply demand cycles in the industry. We've also previously stated that we expect the pace of bookings to slow after two record contracting years. Our current backlog cumulatively oversold through 2026, with bookings extending to the end of the decade, provides us optionality in periods of pricing and policy uncertainty. Put simply, if we did not book any more deals by the end of this year, we would remain sold out two years forward through 2025 and 2026. We do not expect this to be the case, and we will continue to contract with customers who prioritize long-term relationships and value our differentiation, as reflected in our 2.3 gigawatts of booking since the previous earnings call. But given the significant variables in the policy environment that Mark discussed earlier, as well as the uncertainty around the 2024 U.S. presidential and congressional elections and their potential impact on the renewable sector, we expect to take advantage of this position of strength and be highly selected in our contracting in 2024. Finally, as it relates to India, from a contracting perspective, as of our Q3 earnings call in October, we had 1.7 gigawatts of signed contracts within our mid-to-late-stage pipeline. As a reminder, signed contracts in India will not be recognized as bookings until we have received full security against the offtake. As of today's call, that number is 1.1 gigawatts, following a 600-megawatt default by a customer who was recently delisted from the New York Stock Exchange. We are seeking to enforce our contractual rights under this contract and are currently seeking to recover the contractual termination payments owed to us. From an ASP perspective, the temporary suspension of the ALMM policy that Mark discussed earlier is having a short-term negative impact on domestic market ASPs and gross margin, which is reflected in our 2024 guidance. We believe the expected reinstatement of the ALMM at the end of Q1, together with the ability to serve the domestic content market segment, which we are uniquely positioned to address given our vertical integration, provides a market opportunity with a gross margin profile excluding the Section 45X tax credit benefit comparable to the fleet average given the lower production costs in our Chennai facility. With this context in mind, I'll next discuss the assumptions included in our 2024 financial guidance. Please turn to slide nine. As referenced in 2023, we have effectively completed the transition back to a module-only company. We continue to have certain remaining risks, liabilities, indemnities, warranty obligations, accounts payable, accounts receivable, earn-outs, cash collection, dispute resolution, and other legacy involvement related to our former systems business. Consistent with 2023 reporting, we no longer provide segment-specific guidance, but shall in the future note any significant impact from the other segment to our consolidated financials. As it relates to growth, our factory expansions and upgrades remain on schedule to increase our expected global nameplate capacity to 25 gigawatts by year-end 2026. In 2024, growth-related costs are expected to impact operating income by approximately 125 million to 155 million. This comprises startup expenses of 85 million to 95 million, primarily incurred in connection with our new factory in Alabama, and estimated ramp costs of 40 million to 60 million at our factories in India, Ohio, and Alabama. We anticipate these expansions and upgrades will contribute meaningfully plans in 2025 and beyond. Operationally, in 2024, we're expected to produce 15.6 to 16 gigawatts of modules. From a sold perspective, we expect to sell 15.6 to 16.3 gigawatts, of which 5.8 to 6.1 gigawatts is produced in the U.S. And 2 to 2.2 gigawatts is assumed to be domestic sales in India. For the full-year, we expect to recognize a fleet ASP sold of approximately 28.2 cents per watt. This includes India domestic sold volume, a non-India base ASP, roughly in line with our expectations from our September Analyst Day, and the benefit of certain technology, commodity, and freight adders. From a cost perspective, full-year 2024 cost bought produced is forecast to be in the range of 18.7 to 18.9 cents per watt, an approximately 2% to 3% improvement versus 2023. This is driven by expected improvements in throughput, yield, and reduced inbound freight and variable costs, as well as the benefit of an increased mix of lower cost India production, partially offset by increased costs related to the rollout of our bifacial products. As it relates to cost per watt sold, we are forecasting fleet average sales rate, warehousing, ramp, and other period costs of approximately 3 cents per watt, resulting in a full-year 2024 cost per watt sold reduction of approximately 7% versus the prior year. As mentioned on our Analyst Day, approximately three-quarters of the cost of our module is de-risked, given approximately one-third of the cost is fixed, and approximately two-thirds of the variable costs are subject to forward contracting, long-term agreements, or have contractual mechanisms to pass costs through to our customers in the event that these costs change materially. Additionally, over 95% of our backlog has some form of sales rate protection, leading to significant gross margin visibility. From a capital structure perspective, our strong balance sheet has been and remains a strategic differentiator, enabling us to both weather periods of volatility, as well as providing flexibility to pursue growth opportunities, including funding our Series 6 and Series 7 growth. We ended 2023 in a strong liquidity position, and coupled with forecasted operating cash flows from module sales, cash from the sale of our 2023 Section 45X tax credits and anticipated module order prepayments, we expect to be able to finance our currently announced capital programs without requiring external financing. As it relates to our 2024 Section 45X credits, we are forecasting to elect direct payments and are therefore assuming no discount to the value of these credits for a sale to a third-party, but will continue to evaluate options and valuations for earlier monetization. I'll now cover the full-year 2024 guidance ranges on slide 10. Our net sales guidance is between 4.4 billion and 4.6 billion. Gross margin is expected to be between 2 billion and 2.1 billion, or approximately 46%, which includes 1 billion to 1.05 billion of Section 45X tax credits and 40 million to 60 million of ramp costs. SG&A expenses are expected to total $170 million to $180 million versus $197 million in 2023, demonstrating our ability to leverage our largely fixed operating cost structure while expanding production. R&D expenses are expected to total $200 million to $210 million, versus $152 million in 2023. R&D expenses are increasing primarily due to commencing operations at our R&D Innovation Center and perovskite development line, and the expectation of adding headcount to our R&D team to further invest in advanced research initiatives. SG&A and R&D expense combined is expected to total $370 million to $390 million. Total operating expenses, which include $85 million to $95 million of production start-up expense, are expected to be between $455 million to $485 million. Operating income is expected to be between $1.5 billion and $1.6 billion, applying an operating to 35%, and is inclusive of 125 million to 155 million of combined ramp costs and plant startup expenses, and 1 billion to 1.05 billion of Section 45X tax credits. Compared to an operating margin of 26% in 2023, this year-over-year increase demonstrates how we expect to leverage our business model against a largely fixed SG&A cost structure, which shows the value of growth in driving incremental contribution margin and operating margin expansion. Turning to non-operating items, we expect interest income, interest expense, and other income to net the $35 million to $50 million. Fully taxed expenses forecast to be $135 million to $150 million. This results in a full-year 2024 earnings to the business share guidance range of $13 to $14. Note, from an earnings cadence perspective, we expect a net sales and cost of sales profile excluding the benefit of Section 45X tax credits of approximately 15% in Q1, 25% in Q2, and 60% in the second-half of the year. We forecast Section 45X tax credits of approximately $190 million in Q1, $230 million in Q2, and $600 million in the second-half of the year. With an operating expenses profile roughly evenly split across the year, this results in a forecasted operating income and earnings-to-share profile of approximately 15% in the first quarter, 25% in the second quarter, and 60% in the second-half of the year. Capital expenditures in 2024 are expected to range from $1.7 billion to $1.9 billion as we progress the construction of our Alabama and Louisiana Series 7 factories, implement throughput upgrades to the fleet, and invest in other R&D-related programs. Approximately two-thirds of our CapEx is associated with capacity expansion, and one-quarter relates to our R&D center and technology replication, with the remainder mostly related to maintenance and logistics. Our year-end 2024 net cash balance is anticipated to be between $0.9 billion and $1.2 billion. Turning to slide 11, I'll summarize the key messages from today's call. Demand has been solid with 2.3 gigawatts of net bookings since the previous earnings call, leading to a contracted backlog of 80.1 gigawatts. Our opportunity pipeline remained strong, with global opportunity set at 66.5 gigawatts, including mid to late-stage opportunities of 32 gigawatts. We continue to expand our manufacturing capacity, exiting 2023 with 16.6 gigawatts of nameplate capacity, and expect to exit 2026 with approximately 25 gigawatts of nameplate capacity, including approximately 14 gigawatts of nameplate capacity in the U.S. We are, as previously announced, adding a new dedicated R&D facility in Ohio, projected to be operational in the first-half of 2024, which we believe will allow us to optimize technology improvements with significantly less disruption to our commercial manufacturing offerings. Earnings per diluted share was $7.74 in 2023, including the impact of selling our 2023 Section 45X tax credits, and the impairment of our investment in CubicPV above the midpoint of our initial and Q3 updated guidance. We're forecasting full-year 2024 earnings per diluted share of $13 to $14. Finally, we ended the year with a cash balance of $1.6 billion net of debt, and expect to end 2024 with a cash balance of $900 million to $1.2 billion net of debt. This net cash position together with optionality around monetizing our 2024 Section 45X tax credits places us in a position of strength from which to expand our capacity to invest research, development and technology improvements, pursue other strategic opportunities as we march forward on our journey to lead the world's sustainable energy future. With that, we conclude our prepared remarks, and over to the questions. Operator?

Thank you, sir. [Operator Instructions] We'll take the first question from Moses Sutton, BNP Paribas.

Hi, thanks for taking the question, and congrats on continued price momentum and its execution. At some point, should we see bookings, I want to say, near zero in a given quarter having -- simply can't book more till time passes naturally, and I think investors think of that? Or conversely, like to eventually lower that ASP into like $0.29 range? It went all the way to $0.32 which was great to see. So, just curious how that dynamic plays through the year? I know you could book some, but what should we expect more precisely?

Yes, so, I'll take one, I guess. And in terms of -- as Alex included in his remarks, our plan is to be patient. The opportunities are there. You can see it, the pipeline of opportunities that we represent, both mid-to-late and obviously the early-stage pipeline. Separating U.S. from India, you're going to continue to see bookings in India, clearly. As we indicated, we've got a conversion that will happen of those contracted subject to CP. So, that's going to continue on a cadence that you would expect, call it hundreds of megawatts, maybe a gigawatt on any particular quarter to sell through that and to position for 2024. So, you'll see that momentum continuing. As it relates to the U.S., our strategy of being patient is largely how we're going to engage the market in conversations with our customers. I am very happy with the bookings that we showed up with this last quarter, great ASPs, good counterparties, technology adders associated with it. So, and feathered into a period of time that's very constructive for us, so a lot of that volume goes out into '27, '28, and '29, and touches '30 even. So, happy from that standpoint. We've got, right now, we got a short window between now and the next earnings call, so you could see maybe a period of softness there outside of the volume that we would expect to continue to recognize for India. But I've got ongoing commercial conversations right now for north of three gigawatts of bookings here for shipments into the U.S. that are in late-stage negotiations. And actually as this call was ongoing, I got a text that about 10% of that now has been booked, and will reflect in next earnings call. So, the momentum is there, it's available to us. It's how we choose to engage. And our strategy is to try to maintain the ASPs and delivering the certainty that we provide to our customers. There's a lot going on right now when you step back and reflect. There's a whole policy environment and the issues that have to be resolved, and uncertainty, and there's potential change in the administration in D.C., which Alex highlighted as well. And if there was a Republican administration, how would they choose to engage. And there's all kinds of conversations on how they'd think through IRA, sure. But I don't think that they would be any less lenient on the Chinese, and I think they could get more aggressive in the potential trade barriers that our customers are concerned about. And so, they value the certainty of First Solar, and looking to de-risk their projects as far out as they can go. The other thing that's still driving some uncertainty in the marketplace is, as you've seen recently with on an IP standpoint, especially as the market has transitioned to TopCon. Gencos has indicated that they're going to have a strong IP position for TopCon and they're going to enforce that IP. You've seen Maxeon make statements as well that they've got an IP position around TopCon that they're also going to enforce. And as you know, there is a significant transition towards TopCon. So, our customers also have to think through freedom to operate with their counterparties around intellectual properties. So, there is a lot that they have to think through, and there's a lot of uncertainty outside of engaging with First Solar. And so, we'll be disciplined and measured in our negotiations. But I would not at all be surprised that, as we finish out this year, we'll be somewhere around a 1:1 book to bill, which will add 16 gigawatts or so, that was our shipment profile. I wouldn't be surprised if our bookings is somewhat in that

We'll take the next question from Philip Shen, Roth Capital Partners.

Hey, guys, thanks for taking my questions. First one's on pricing. Great job on the recent bookings ASP at $0.32 almost. And can you talk through the dynamics influencing that pricing? You mentioned a bunch of the earlier, Mark, but I'd love to get a feel for how the customer conversations have inflected. Last year, it was very much an oversupply price decline environment. And recently, a lot of this policy activity has kind of swung back in your favour as it relates to greater UFLPA enforcement or the potential to do one bifacial exemption being removed. Can you just talk through that customer conversation, and how that may have inflected recently? And then also, do you expect that pricing momentum to remain steady through '24 or is there even potential that it could go higher or do you think there is risk that it could go lower? The second here is around module volume, that you talked about there's a customer that can't take delivery of 381 megawatts of product. Are checks on this suggests there could be as much as 1.5 gigawatts floating around. And so, how many megawatts do you expect the market to transact in the secondary market, if you will, in '24? So, I know it's not your risk ultimately, but you do have to manage it at some level, and your customers, ultimately, have to deal with it. But -- and yes, you should have protections, but it's something that can be an issue to understand better as well. So, thanks, Mark.

Yes, so let me -- I'll start with your second one, and then I'll go back to the first one. Look, this 380 megawatts was to -- think of it almost as a one-off transaction that I think we booked two, three years ago, can't remember the exact timeframe it was for. And we specifically stated in the prepared remarks, it was for a corporate customer who basically was going to use it for self-generation, self-consumption, right, and then -- and ultimately was looking potentially not just from -- to potentially that were just beyond just the raw form of the electricity generation that it would provide. That customer has gone into some financial challenges that they're having to deal with. And so those megawatts are an obligation to the customer, we won't force the rights on the contract. We will also work with the customer to re-contract that if we -- if that opportunity is available to us. If not, then there's an obligation for them to take delivery, and then to pay for that. That particular project, it is a project that is cited in a state of permitting and I believe has an interconnection. That project asset itself is being marketed right now. And we'll see how successful that is to the extent that that transaction does happen, then the modules will go along with it, they'll be an assignment with -- given our consent, and we'll support that type of consent, again with the spirit of honouring -- enforcing rights underneath our contract. So, that one is that issue. So, to the other question, because I know you've asked this a couple of times about markets -- product that's out in the secondary market. There are customers who are challenged right now from a development standpoint as it relates to interconnection positions, it's something that you are very well aware of. Our contracts and our customers are aware of the fact that they need to take delivery of those modules. And when I'm talking about this, this is hundreds of megawatts. This is not a lot of volume in 2024. Their option is to find a warehouse and to put it into a warehouse or potentially they could look to try to transact with a third-party. We'll try to find the right possible outcome with our customers. We always have worked in the spirit of let's figure out a solution that can work, so, aware of that. I don't believe it will have any significant impact on our ability to continue to book any volumes that may be available in 2024, given schedule movements and those types of things. But we'll have to keep an eye on it. But I also just want to make sure that the one deal that we talked about was unique in its circumstances and is it necessary to reflect it with maybe the other opportunities that you were hearing about in the marketplace. As it relates to pricing and ASP and momentum, policy is clearly -- toggles back and forth and trends up and down, and right now, I think there is a lot of uncertainty from that standpoint. But the other thing I want to continue to try to emphasize is the value of certainty of First Solar and the value of our relationship and our value proposition. I was having a conversation with one of our largest partners just last week. And they couldn't be happier to be partnering with First Solar. And the attributes we're talking about, the strength of the technology, the certainty of First Solar, but it also gets into the responsible solar aspects as well and our carbon footprint and our water usage and our energy payback and our circular economy. And when you -- that's inherent to their value proposition that they're selling to their contracted off-take customers, like data centers, who value that as well. This work that we're doing around economic impact, no different than that, I mean, creating American jobs, and we being closely tethered to that, supporting, and investing back into America and American manufacturing, American technology, all that plays to our strengths. And so, yes, policy environment is helpful right now, but these other attributes are almost equally as important. And our partner said, basically, look, I know I may have to pay a little bit more for First Solar, but when I look at the brand and the certainty and the value proposition that they're creating, more than happy to do that. And this is a counterparty that is almost 80 plus percent, 100% sole source into First Solar, and we've got a deep relationship and multi-gigawatts of opportunity still in front of us. And I don't see this as a unique one-off. This is generally the engagement and conversations that we're having with our customers.

And so, you mentioned if what probably the pricing would stay steady, there's definitely some elasticity of demand related to pricing, which is why we want to be disciplined and why the position of strength that we put ourselves in is so important. We have no need to go out and chase deals. As I mentioned on the call, we could book nothing between now and the end of the year and still find ourselves two years forward sold out. If there is uncertainty in the market, we can afford to step back and therefore we can manage to some degree some of that price erosion. So, we'll continue to work with people that value the attributes that Mark brings, and therefore I think you'll see slower bookings, lower pace of bookings at pricing that we find accessible in the long-term. Clearly, if we wanted to sell a lot more and drop pricing, that would happen, but that's not the strategy.

Yes, and I think we just tether back to, look, if we can achieve a one-to-one book-to-bill this year, largely sell through our open position in 2027, I think that would be a great result and position the company very well as we exit 2024.