First Solar, Inc. (FSLR) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to First Solar's 2020 Annual Meeting of Stockholders. [Operator Instructions] And as a reminder, today's call is being recorded. I will now like to turn the call over to Mark Widmar, Chief Executive Officer of First Solar. Mr. Widmar, you may begin.

Thank you. Hello, this is Mark Widmar, the Chief Executive Officer of First Solar, Inc. I'd like to welcome you to the 2020 Annual Meeting of Stockholders of First Solar Inc. Today's virtual-only meeting is a live webcast. We believe in engaging with our stockholders and hope that this virtual meeting will maximize the participation of stockholders regardless of their location. This technology enables us to reach a larger audience while containing our costs, and in light of the COVID-19 pandemic, also supports engagement with our stockholders in a safe manner. Our thoughts are with all of those affected by this disease, and we hope each of you and you loved ones are safe in these challenging times. Thank you for taking the time to participate today. On behalf of the Board, I also wish to express thanks to those stockholders who have submitted their proxies in advance. Participating with me today are Alex Bradley, Chief Financial Officer; Jason Dymbort, Interim General Counsel and Secretary; Mitch Ennis, Manager, Investor Relations; and John Koppin, Partner, PricewaterhouseCoopers. I'll call your attention to the rules of conduct set forth for this meeting. They are made available to each stockholder in the meeting center. If you need a copy of the annual report or the proxy statement, these links are also available online in the meeting center. To access this link, click on the broadcast button at the top of the screen to navigate back to the meeting center. Only registered stockholders are entitled to participate in the business in this meeting. The business to be conducted at the meeting is as follows: to elect Directors of the company; to ratify the employment of PricewaterhouseCoopers LLP as registered independent public accounting firm of the company; to approve the adoption of First Solar Inc.'s 2020 Omnibus Incentive Compensation Plan; and to improve an advisory resolution on executive compensation. While we'll be soliciting your questions throughout the meeting, feel free to pose a question at any time. [Operator Instructions] In accordance with the bylaws of the company, as appointed by the Chairman of the company's Board of Directors, I will act as Chair of the meeting. In accordance with the bylaws of the company, I hereby appoint Jason Dymbort, the Interim General Counsel and Secretary of the company to act as Secretary of the meeting. Christal Goldman of Computershare Trust Company, NA, the transfer agent of the company, has been appointed inspector of elections for this meeting. She has taken our oath of office, which will be filed with the records for this meeting. I'll ask Mr. Dymbort to give the Secretary's report on the qualification of this meeting to proceed.

Thank you, Mark. The notice calling this meeting was mailed on April 2, 2020, to stockholders of record as of the close of business on March 23, 2020. And the company has received an affidavit of mailing from the company's transfer agent as to its mailing. The affidavit of mailing is available for inspection by any stockholder and shall be retained with the records of this meeting. Since April 1, 2020, the proxy statement, the form of proxy and the annual report to security holders have been available to stockholders on the company's website in accordance with the Securities and Exchange Commission's notice and access rules. In addition, the proxies and the certified list of stockholders are in the custody of the inspector of election. For more than 10 days prior to this meeting, the stockholders list was available for inspection by any stockholder at our corporate headquarters located at 350 West Washington Street, Suite 600 in Tempe, Arizona. Also, the company's audited financial statements for the year ended December 31, 2019, are provided online. Pursuant to the bylaws of the company, the holders of the majority and total voting power of the outstanding capital stock of the company present in person or represented by proxy constitute a quorum for the company's annual meeting. Based on the inspector of election's preliminary report on attendance and proxy share count, I've been advised by the inspector of election that a quorum is present at this meeting. When delivered, a copy of the inspector of election's report on attendance shall be retained with the records of this meeting. As notice of this meeting has been given in accordance with applicable law, and there is a quorum present, all legal requirements for holding this meeting have been satisfied. Following the formal portion of this meeting, Mark and Alex will present an overview of the company's business and address questions that are submitted. Please note, this presentation and the ensuing question-and-answer session may 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 presentation for a more complete description.

Thank you, Jason. The meeting is lawfully convened and ready to transact business. The proxy statement that has been made available to the stockholders in connection with the notice of this meeting sets forth the matters to be submitted to a vote of the stockholders. At this time, if you have not voted or wish to change your vote, you may do so by clicking on the link provided online. Any stockholder who has already voted, and does not want to change his vote, need not take any further action. [Voting]

We now proceed with the matters to be voted on. The first item to be voted on is the election of Directors. The proxy statement lists the Director nominees. All of them are currently serving as directors of the company and all of whom have consented to act as Directors for the ensuing year. The Director nominees as set forth in the proxy statement are: Michael Ahearn; Sharon Allen; Richard Chapman; George Hambro; Molly Joseph; Craig Kennedy; William Post; Bill Stebbins, Michael Sweeney and Mark Widmar. Is there any discussion concerning the election of the Directors? The next item of business is the ratification of the appointment of PricewaterhouseCoopers as the independent registered public accounting firm of the company to audit our consolidated financial statements for the year ending December 31, 2020. At this time, Mr. John Koppin, Partner of PricewaterhouseCoopers, is in attendance and available to answer any appropriate questions and to make any statements if he wishes. Mr. Koppin, do you have -- do you wish to make a statement?

No, thank you.

I will pause now to allow for any discussion concerning the ratification of the appointment of PricewaterhouseCoopers as the company's independent registered public accounting firm. The next item of business is the approval of the adoption of the 2020 Omnibus Incentive Compensation Plan. Plan is described in the proxy statement, and a copy of the plan itself is attached here, too. Is there any discussion concerning the adoption of the plan? Next item of business is the advisory vote on executive compensation. The proxy statement sets out a resolution approving, on a nonbinding advisory basis, the compensation of the named executive officers as disclosed in the proxy statement. Is there any discussion concerning the nonbinding resolution? I hereby declare the polls closed. The formal portion of the meeting is hereby concluded. The inspector of election will now tabulate the votes, during which time, Mr. Bradley and I will present an overview of the company's business and answer any questions you may have. We'll report on the results of the election before the close of the meeting. Turning to Slide 6. Our core operating principle is to create shareholder value through a disciplined, data-driven decision-making framework that delivers a balanced business model of growth, liquidity and profitability. With this guiding principle, we have continued to adapt our business model to remain competitive and differentiated in a constantly evolving market. Through our points of differentiation, which include a competitively advantaged cad tel thin-film module technology, a vertically integrated continuous manufacturing process, an industry-leading balance sheet strength and a preeminent sustainability ideology, we have created a resilient business model that better enables us to manage through periods of uncertainty, including the current environment. The strength of our business model is reflected in our Series 6 road map of approximately 6 -- 8 gigawatts and our contracted backlog of over 12 gigawatts. Turning to Slide 7. I'll discuss our primary business segments. At our core, we are a module manufacturer, and we produce a differentiated cad tel module, fully integrated, continuous process, starting with a sheet of glass and a completed module in a matter of hours, quality controlled within a single factory, and we have now started to approach the final transition from our Series 4 to our Series 6 product. Global company with a direct sales presence in the U.S., Europe, India, Latin America, Brazil, Middle East, Japan and Australia. From project development, we have a multi-gigawatt project development pipeline, and we seek development opportunities which capture the energy entitlement of our product. Recently, we have booked 3 PPAs in the U.S. and 60 megawatts of systems opportunities in Japan. As we stated previously, we are still evaluating options to best position the U.S. project development business for long-term success. O&M, we are one of the world's largest O&M providers. Our O&M strategy emphasizes remote monitoring, analytics and predictive maintenance to optimize our plant health. Turning to Slide 8. I want to highlight the strong market opportunity before us. In the graph to the left, the amount of PV capacity sold globally is expected to double. As shown on the graph to the right, PV is in many markets competitive with all major forms of fossil fuel generation. Market momentum for PV continues to build. Our Series 6 technology, product road map and R&D, our differentiators, which we believe will enable us to meaningfully participate in this wave of demand for clean energy. I will now turn the call over to Alex, who will discuss our 2019 and Q1 2020 performance.

Thanks, Mark. Turning to Slide 10, I'll review our 2019 performance highlights. Mostly, 2019 was a strong bookings year with 6.1 gigawatts of net bookings. And with record shipments of 5.4 gigawatts, we exceeded our 1:1 target book-to-ship ratio. Operationally, in 2019, we commenced commercial production of Series 6 at expanded manufacturing facilities in both the U.S. and Vietnam, which increased our global Series 6 nameplate production capacity to 5.5 gigawatts at the end of the year. This included an increased nameplate of 1.3 gigawatts at our second factory in the U.S. compared to 1.2-gigawatt nameplate capacity at our current Series 6 factories in Malaysia and Vietnam. Capabilities of our technology also continued to expand. On a commercial production line, we produced a new world record 447-watt cadmium telluride module. Finally, we began to produce 435-watt modules on our commercial lines. Financially, during 2019, we recorded a loss per share of $1.09 on a GAAP basis, disappointed with this outcome, which came in below our EPS guidance range. Despite the EPS results and a year of continued competition across the PV industry, we ended 2019 in a strong financial position. Our net cash, which includes restricted cash and marketable securities less debt, increased to $1.8 billion at the end of 2019. Turning to Slide 11, I'll review our Q1 '20 performance highlights. Commercially, we're pleased with our 2020 year-to-date bookings, and we booked 1.8 gigawatts year-to-date, including 1.1 gigawatts of net bookings between our Q4 '19 and Q1 '20 earnings call. Of the 1.8 gigawatts of bookings year-to-date, 0.7 gigawatts were systems bookings. Operationally, we achieved a fleet-wide capacity utilization of approximately 100% during March and April. Our Series 6 capacity expansion is largely unchanged and our CuRe and technology outlook is also largely unchanged. From a financial perspective, our liquidity position remains strong with $1.6 billion gross and $1.1 billion of net cash as of the end of Q1. And in Q1, we had net sales of $532 million and earnings per share of $0.85. With that, I'll turn the call back over to Mark.

All right. Thanks, Alex. The floor is now open for any questions you may have. [Operator Instructions] Are there any questions that any of the stockholders would like to ask at this time?

Mark, there have not been any questions submitted by stockholders.

Okay. If there are no further or any questions or comments, I've been advised by the inspector of election that tallies are now available, and I'll ask the Secretary of the meeting to read them.

On the proposal regarding election of directors, the inspector advises that each nominee recommended by the Board of Directors has received the majority of the votes cast with respect to such candidate's election. Therefore, each of the 10 nominees have been duly elected. On the proposal concerning the ratification of the appointment of the company's independent registered public accounting firm, for the year ended December 31, 2020, the inspector advises that 91,864,554 shares or approximately 97.5% of the shares represented in voting on this proposal have voted for ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the company and its consolidated subsidiaries for 2020. On the proposal concerning the approval of the adoption of the 2020 Omnibus Incentive Compensation Plan, the inspector advises that 78,547,379 shares or approximately 94.39% of the shares represented in voting on this proposal have voted in favor of approving the adoption of the plan. On the proposal concerning the advisory resolution on executive compensation, the inspector advises that 77,255,002 shares or approximately 92.84% of the shares represented in voting on this proposal have voted in favor of the nonbinding resolution, approving the executive compensation of the named executive officers as disclosed in the company's proxy statement. Mr. Chairman, the final results of the stockholder vote reflecting all proxies received through the close of the meeting and any votes cast during the meeting will be included in the final report of the inspector of election and will be published on a Form 8-K to be filed with the Securities and Exchange Commission and will be available upon request.

Thank you, Jason. The meeting is now concluded. I want to thank you all for attending today's meeting and for the support you have shown First Solar. Thank you.

Ladies and gentlemen, this concludes the meeting. You may now disconnect and have a pleasant day.