01—Abstract
Summary
Summary of the 10-Q filed November 5, 2021. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. reported a decrease in net sales for the three months ended September 30, 2021, to $583.5 milliona from $927.6 million in the prior year period, primarily due to the sale of certain projects in the prior year.
While module sales volume increased, a decrease in average selling price per watt and higher logistics costs impacted gross profit, which declined to 21.4% from 31.6% year-over-year. The company continues to invest in expanding its manufacturing capacity, announcing plans for new facilities in Ohio and India, signaling a strategic focus on growth and long-term market positioning. Financially, First Solar maintained a strong liquidity position with $1.9 billionb in cash, cash equivalents, and marketable securities as of September 30, 2021.
The company also reported positive net cash from operating activities for the nine months ended September 30, 2021, a significant improvement from the prior year's negative cash flow. Despite ongoing challenges in the solar industry, including supply chain disruptions and competitive pricing, First Solar remains focused on its core module business and strategic expansion plans.
02—Key points
Key Highlights
- Net sales decreased 37% to $583.5 million for Q3 2021 compared to $927.6 million for Q3 2020, primarily due to prior period project sales.
- Gross profit margin declined to 21.4% in Q3 2021 from 31.6% in Q3 2020, impacted by lower average selling prices, increased logistics costs, and a higher module collection and recycling liability.
- The company announced plans to expand manufacturing capacity with new facilities in Ohio, USA, and India, expected to be operational in 2023.
- Cash, cash equivalents, and marketable securities stood at $1.9 billion as of September 30, 2021, indicating a strong liquidity position.
- Net cash provided by operating activities for the nine months ended September 30, 2021 was $203.1 million, a significant improvement from a use of $149.2 million in the same period of 2020.
- Research and development expenses increased by 11% for the three months ended September 30, 2021, reflecting continued investment in technology improvements.
- The company is experiencing delays in its CuRe program due to manufacturing challenges, potentially impacting future revenue and requiring contract amendments.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2021, First Solar, Inc. kept $0.08.
- Revenue$583.5M100.0%
- Cost of revenue−$458.9M78.6%
- Gross profit$124.6M21.4%
- Operating costs−$73.7M12.6%
- Operating income$50.9M8.7%
- Interest, other & tax−$5.7M1.0%
- Net income$45.2M7.7%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2021filed November 5, 2021Financial Statements
Q3 FY2021 against Q3 FY2020
| Line item | Q3 FY2021Q3 FY2020 | Change |
|---|---|---|
| Revenue | $583.50M$927.57M | −37.1% |
| Cost of Revenue | $458.92M$634.55M | −27.7% |
| Gross Profit | $124.58M$293.01M | −57.5% |
| R&D Expenses | $25.43M$22.97M | +10.7% |
| SG&A Expenses | $43.48M$49.86M | −12.8% |
| Operating Expenses | $71.85M$85.85M | −16.3% |
| Operating Income | $50.87M$207.16M | −75.4% |
| Interest Expense | $2.96M$10.97M | −73.0% |
| Net Income | $45.20M$155.04M | −70.8% |
| EPS (Basic) | $0.43$1.46 | −70.5% |
| EPS (Diluted) | $0.42$1.45 | −71.0% |
| Shares Outstanding (Basic) | 106.32M105.97M | +0.3% |
| Shares Outstanding (Diluted) | 106.90M106.75M | +0.1% |
05—Questions
Frequently Asked Questions
What drove the significant decrease in net sales in the third quarter of 2021 compared to the prior year?
The decrease in net sales was primarily driven by the sale of several large projects in the prior year's comparable period. While module sales volume increased, the overall net sales were lower due to the absence of these significant project sales.
Why did First Solar's gross profit margin decrease year-over-year?
The decline in gross profit margin was attributable to several factors, including a decrease in the average selling price per watt of modules, higher logistics costs, and an increase in the module collection and recycling liability. These were partially offset by continued module cost reductions and a benefit from lower product warranty liability claims.
What is the status of First Solar's manufacturing expansion plans, and what are the associated risks?
First Solar is expanding its manufacturing capacity with new facilities in Ohio, USA, and India, expected to be operational in 2023. A key risk highlighted is the delay in the CuRe program due to manufacturing challenges and tooling upgrade impediments, which could lead to further delays, potential price concessions on amended customer contracts, and a need to substitute modules, potentially impacting future revenue.
How is First Solar's liquidity position?
First Solar maintains a strong liquidity position, with cash, cash equivalents, and marketable securities totaling $1.9 billion as of September 30, 2021. This provides the company with ample resources to meet its working capital, capital expenditure, and investment needs.
06—Continue