First Solar 2026 Q2 Earnings Call

Good afternoon, thank you for joining First Solar's second quarter 2026 earnings call. With me today are Mark Widmar, Chief Executive Officer, and Alex Bradley, Chief Financial Officer. Mark will begin with second quarter highlights, followed by Alex. We'll open the line for questions. Today's discussion contains forward-looking statements. Actual results may differ materially due to risks and uncertainties as described in our earnings press release and other SEC filings and the earnings material available at investor.firstsolar.com. We undertake no obligation to update these statements due to new information or future events. We will also reference certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are in our earnings press release and presentation. This non-GAAP financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. With that, I will turn it over to Mark.

Thank you, good afternoon. Beginning on slide four, we delivered both record second quarter and first-half sales volume and improved financial performance relative to the prior year. During the quarter, we generated over $1 billion in net sales, expanded gross margin to approximately 57%, and delivered strong adjusted EBITDA performance. We also surpassed an important milestone for First Solar, exceeding 100 gigawatts of cumulative module sales globally. We view this as a reflection of the trust customers have placed in First Solar over the more than two and a half decades, and the durability of our technology and manufacturing platform. We entered the quarter with approximately 45.1 gigawatts of contract backlog. With deliveries extending through the end of the decade, demonstrating the demand for our differentiated technology platform, domestic manufacturing footprint, and delivery certainty.

Turning to manufacturing, our U.S. facilities continued to operate at high utilization rates during the quarter. In South Carolina, the phase 1 of the finishing facility remains on track to begin production in the second half of 2026, with equipment installations progressing as expected. For the phase 2, we now expect completion in mid-2027. While the revised timing reflects a number of factors associated with optimizing the facility's launch, it also enables the earlier incorporation of CuRe technology. We are pleased with the performance of CuRe, with both high-volume manufacturing at our Perrysburg facility and performance data from field deployments across multiple climates exceeding expectations. We believe incorporating the technology closer to the onset of the facility's commercial launch will simplify execution, accelerate value realization, and enhance customer value and the facility's long-term financial performance.

Once completed, the South Carolina facility is expected to provide up to 3.5 gigawatts of finishing capacity for modules initiated at our international manufacturing sites, giving us greater flexibility to optimize our supply chain flexibility while also optimizing freight, tariff, domestic content, and Section 45X economics. With respect to our international manufacturing fleet, production planning and utilization levels in Malaysia and Vietnam continued to be influenced by U.S. market demand drivers and economics, including the pending Section 232 polysilicon and derivative investigation and tariffs. We expect greater policy clarity will help inform the long-term operating profile for the approximately 1.8 gigawatts of fully finished international capacity that remains available after accounting for capacity being used to produce semi-finished product destined for our new South Carolina finishing line. A note on manufacturing optimization and allocation. Approximately 41 gigawatts of our 45-gigawatt backlog includes some form of domestic content requirement.

These requirements vary significantly and range from requiring exclusive supply from U.S. fully integrated factories to blending U.S.-made supply with both fully integrated domestic factories as well as product from our upcoming South Carolina finishing line to a domestic content points requirement, which is factory-agnostic, allowing blending of product from across our global fleet. We therefore continually balance and refine our module supply and demand allocation across the fleet to meet customer contractual obligations, optimize factory throughput, and optimize gross margin. This typically means that over a period of time, we will seek to maximize production and sales firstly from our fully integrated U.S. factories. Secondly, from our South Carolina finishing line, and thirdly, from our international facilities. As it relates to perovskites, we continue to advance our development program for this potentially significant technology platform.

Our previously announced development line continues to progress to process improved efficiency and reliability attributes on smaller form factor modules, while our Series 6 form factor pilot line remains on schedule and is expected to reach operational readiness in the first half of 2027. Our continued progress has given us confidence as we continue to invest substantial capital in our efforts to realize the commercialization of perovskites. Earlier today, we published our latest corporate responsibility report, reinforcing our conviction that how and where solar technology is made matters. The report details how we create enduring value by developing, sourcing, manufacturing, and recycling solar modules domestically, supporting jobs and communities, strengthening industrial capacity, and help ensure the benefits are realized locally. It also highlights our continued focus on responsible manufacturing, supply chain transparency, workforce development, and resource efficiency.

The report reflects the effectiveness of a business model where corporate responsibility isn't a construct, but the default. Before turning the call over to Alex, I want to briefly address the market and policy environment and how it is informing our commercial approach. The underlying drivers for utility-scale solar remain intact, including load growth, data center development, electrification, aging generation assets, and the need for affordable, scalable new capacity. The policy landscape continues to evolve, particularly as it relates to pending outcome for the Section 232 polysilicon and derivatives investigation, as well as final FEOC regulations. In this environment, we continue to prioritize pricing, contract quality, appropriate risk allocation, and long-term value over short-term booking volume. Relative to the beginning of the year, we are seeing increased customer engagement, and as policy clarity improves, we believe First Solar remains well-positioned to capitalize on these opportunities.

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

Thanks, Mark. Beginning on slide five, as of June 30, 2026, our contracted backlog totals 45.1 gigawatts, with an aggregate transaction value of $13.6 billion, exclusive of technology adjusters, with scheduled deliveries extending through 2030. Early this month, Cypress Creek Energy broke ground on the Steel River Energy Center in Arkansas, a project utilizing First Solar modules and previously included in our contracted backlog. The initial phase is expected to provide approximately 1.6 gigawatts of solar generation capacity and 1.9 gigawatt hours of battery storage to support Google's growing energy needs, with the opportunity for future expansion. Since our last earnings call, we've recorded approximately 1.9 gigawatts of additional U.S. gross bookings at an average selling price of approximately $0.36 per watt, inclusive of applicable technology adjusters.

While near-term customer activity continues to be influenced by the current policy environment discussed by Mark, our fully integrated domestic manufacturing fleet remains substantially committed through 2028, providing a high degree of volume and pricing visibility. Given the limited amount of uncommitted domestic capacity available over the next several years, we continue to be disciplined in evaluating incremental contracting opportunities. We also initiated our first customer notifications related to contractual Q.O.R adjusters during the quarter, an important milestone in beginning to translate Q.O.R's performance benefits from potential ASP adjusters into backlog value and future revenue realization. We expect the contribution from these adjusters to increase as Q.O.R deployment expands across our contracted portfolio. As a reminder, we expect limited ASP upside from Q.O.R sales in 2026, largely as a function of contractual notification deadlines relative to the timing of decision to recommence Q.O.R production.

Turning to India, our guidance continues to assume production is largely sold domestically in a short cycle book-and-bill market, with the factory operating at a high utilization rate. India gross bookings during the first half of the year totaled approximately 1.1 gigawatts, an average selling price of approximately $0.20 per watt. Given the shorter contracting cycle of the domestic India market, booking economics generally provide a reasonable indicator of near-term revenue realization, subject to normal foreign currency movements. Turning to slide six. Net sales for the second quarter were approximately $1.06 billion, a decrease of approximately 4% year-over-year. Decrease is primarily driven by lower revenue associated with customer contract terminations recognized in the prior year period, partially offset by higher module volume sold. Gross margin was approximately 57%, an increase of approximately 12 percentage points compared to the second quarter of 2025.

The increase was primarily driven by an estimated $89 million net IEEPA tariff related benefit, a higher mix of modules qualifying for Section 45X tax credits, and lower logistics costs. The net IEEPA tariff related benefit reflects our current estimate of expected recoveries related to commercial obligations and other tariff related considerations and remains subject to refinement as additional information becomes available. These benefits were partially offset by lower termination-related revenue and higher duties and tariffs. While logistics costs improved year-over-year, the quarter included higher over-the-road freight costs driven by overall capacity tightening and volatility in diesel costs. These impacts were partially offset by higher sales rate recovery. Operating expenses were approximately $155 million, including $76 million of R&D expense.

R&D increased year-over-year, primarily affecting continued investment in perovskite development and the impairment of certain R&D equipment that is no longer expected to be used as part of our technology roadmap. Net income was $423 million, up approximately 24% year-over-year. Adjusted EBITDA was $644 million, above the high end of our previously communicated Q2 preview range, with an adjusted EBITDA margin of 61%. Moving to slide seven. We ended the quarter with approximately $1.7 billion of net cash, providing substantial balance sheet strength and financial flexibility while remaining within our targeted long-term cash range of $1.5 billion-$2 billion. Operating cash outflows year-to-date were $360 million, reflecting first half working capital dynamics, and improved compared to outflows of $458 million during the first half of 2025. First half capital expenditures were $280 million, primarily supporting our South Carolina finishing facility and technology investments.