01—Abstract
Summary
Summary of the 10-Q filed July 30, 2021. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. reported mixed financial results for the second quarter and first six months of 2021 compared to the prior year.
While net sales saw a slight decrease year-over-year for the quarter, they significantly increased for the six-month period, driven by strong module segment performance. Gross profit improved considerably in both periods, largely due to a notable indemnification settlement and ongoing module cost reductions. The company continued its strategic divestiture of non-core assets, completing the sales of its North American O&M operations and U.S. project development business in the first half of 2021, which contributed to significant gains on sales of businesses.
Despite a decrease in operating expenses driven by lower SG&A, net income saw a substantial increase for the six-month period, reflecting the positive impact of business sales and improved gross margins, although the prior year benefited from a significant tax benefit related to the CARES Act. Looking ahead, First Solar is focused on expanding its manufacturing capacity with plans for new facilities in Ohio and India, signaling continued investment in growth.
The company maintains a positive outlook on its liquidity and capital resources, sufficient to meet its obligations for the next twelve months. Investors should note the ongoing competitive landscape and potential for pricing pressures in the solar industry, balanced by First Solar's technological advantages and strategic expansions.
02—Key points
Key Highlights
- Net sales increased by 22% for the first six months of 2021 compared to the same period in 2020, reaching $1.43 billion, primarily driven by a 41% increase in the modules segment.
- Gross profit margin improved significantly, rising to 27.7% in Q2 2021 (from 21.4% in Q2 2020) and 25.1% for the first six months of 2021 (from 19.4% in H1 2020), boosted by an indemnification settlement and module cost reductions.
- The company recognized a substantial $149.2 million gain on sales of businesses in the first six months of 2021, stemming from the divestitures of its North American O&M operations and U.S. project development business.
- Selling, general, and administrative expenses decreased by 30% year-over-year for the second quarter and 20% for the first six months, attributed to reduced headcount and lower project development expenses.
- Net income for the first six months of 2021 more than doubled to $292.1 million, compared to $127.6 million in the prior year period.
- First Solar is investing in future growth, announcing plans for new manufacturing facilities in Ohio (USA) and India, expected to commence operations in 2023.
- The company ended the period with a strong liquidity position, with $1.63 billion in cash, cash equivalents, and restricted cash, and projects sufficient resources to meet its obligations for the next 12 months.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2021, First Solar, Inc. kept $0.13.
- Revenue$629.2M100.0%
- Cost of revenue−$455.1M72.3%
- Gross profit$174.1M27.7%
- Operating costs−$63.7M10.1%
- Operating income$110.4M17.5%
- Interest, other & tax−$27.9M4.4%
- Net income$82.4M13.1%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2021filed July 30, 2021Financial Statements
Q2 FY2021 against Q2 FY2020
| Line item | Q2 FY2021Q2 FY2020 | Change |
|---|---|---|
| Revenue | $629.18M$642.41M | −2.1% |
| Cost of Revenue | $455.06M$504.95M | −9.9% |
| Gross Profit | $174.12M$137.46M | +26.7% |
| R&D Expenses | $23.93M$22.48M | +6.5% |
| SG&A Expenses | $36.35M$51.77M | −29.8% |
| Operating Expenses | $62.00M$86.56M | −28.4% |
| Operating Income | $110.38M$50.90M | +116.9% |
| Interest Expense | $4.62M$3.25M | +42.1% |
| Net Income | $82.45M$36.91M | +123.4% |
| EPS (Basic) | $0.78$0.35 | +122.9% |
| EPS (Diluted) | $0.77$0.35 | +120.0% |
| Shares Outstanding (Basic) | 106.31M105.93M | +0.4% |
| Shares Outstanding (Diluted) | 106.84M106.47M | +0.3% |
05—Questions
Frequently Asked Questions
What were the primary drivers of the change in net sales for the first six months of 2021?
Net sales increased by 22% to $1.43 billion for the first six months of 2021. This growth was primarily driven by a 41% increase in net sales from the modules segment, due to a 55% rise in the volume of watts sold, partially offset by an 11% decrease in the average selling price per watt. The systems segment saw a decrease in net sales.
How did the company's gross profit margin change, and what influenced this change?
First Solar experienced a significant improvement in its gross profit margin. For the second quarter of 2021, the margin was 27.7% compared to 21.4% in the same period of 2020. For the first six months of 2021, the margin was 25.1% versus 19.4% in the prior year. This improvement was largely due to a $65.1 million indemnification settlement and ongoing module cost reductions.
What impact did the divestitures of non-core businesses have on the financial results?
The divestitures of the North American O&M operations and U.S. project development business, completed in the first half of 2021, resulted in a significant gain on sales of businesses, net of $149.2 million for the six-month period. These transactions are part of First Solar's strategy to focus on its core module and utility-scale systems business.
What is the company's outlook on its financial health and future investments?
First Solar expects its current cash, cash equivalents, and marketable securities, along with operating cash flows and future contracts, to be sufficient for its needs over the next 12 months. The company maintains a strong liquidity position and is actively investing in future growth, notably with plans to expand manufacturing capacity through new facilities in Ohio, USA, and India.
06—Continue