10-QPeriod: Q1 FY2022

FIRST SOLAR, INC. Quarterly Report for Q1 Ended Mar 31, 2022

Filed April 29, 2022For Securities:FSLR

Summary

First Solar, Inc. reported a net loss of $43.3 million for the first quarter of 2022, a significant decline from the $209.7 million net income reported in the same period of 2021. This was primarily driven by a sharp decrease in net sales, which fell 54% year-over-year to $367.0 million, largely due to the prior period's sale of U.S. project development and North American O&M businesses, along with a decrease in module sales volume and average selling price. Gross profit also saw a substantial reduction, declining to 3.1% from 23.0%, impacted by lower sales of higher-margin projects, reduced module ASP, and increased freight costs. Despite the revenue and profit decline, the company continues to invest in research and development, with R&D expenses increasing by 36% to $27.1 million. First Solar is also expanding its manufacturing capacity with new facilities planned in the U.S. and India, expected to commence operations in 2023. The company maintains a solid cash position, with $1.3 billion in cash and marketable securities as of March 31, 2022, and believes it has sufficient liquidity for the next 12 months. However, the company faces ongoing challenges including intense competition, supply chain disruptions, and volatile commodity prices, which are expected to continue to pressure margins.

Financial Highlights

54 data points
Beta

Revenue

$367.04M

3.1% Gross Margin

Net Income

-$43.26M

-11.8% Net Margin

EPS (Diluted)

$-0.41

Total Assets

$7.40B

Cash & Equivalents

$1.33B

Free Cash Flow

-$293.60M

Financial Statements
Beta
Revenue$367.04M
Cost of Revenue$355.58M
Gross Profit$11.46M
R&D Expenses$27.11M
SG&A Expenses$36.73M
Operating Expenses$71.17M
Operating Income-$57.80M
Interest Expense$2.87M
Net Income-$43.26M
EPS (Basic)$-0.41
EPS (Diluted)$-0.41
Shares Outstanding (Basic)106.41M
Shares Outstanding (Diluted)106.41M

Key Highlights

  • 1Net loss of $43.3 million in Q1 2022, a reversal from a net income of $209.7 million in Q1 2021.
  • 2Net sales decreased by 54% to $367.0 million in Q1 2022 compared to $803.4 million in Q1 2021, primarily due to prior period business divestitures and lower module sales volume and pricing.
  • 3Gross profit margin significantly compressed to 3.1% in Q1 2022 from 23.0% in Q1 2021, impacted by lower project sales, reduced module ASP, and higher freight costs.
  • 4Research and Development expenses increased by 36% to $27.1 million as the company continues to invest in technology.
  • 5Expanded manufacturing capacity is underway with new facilities planned in the U.S. and India, targeting 2023 operational start-up.
  • 6The company ended the quarter with $1.3 billion in cash and marketable securities, indicating sufficient liquidity for the near term.
  • 7Despite investments in capacity expansion and R&D, the company faces significant headwinds from market competition, supply chain issues, and cost pressures.

Frequently Asked Questions

The significant decrease in net sales and profitability was primarily due to the completion of sales of U.S. project development and North American O&M businesses in the prior year's first quarter, which generated substantial gains. Additionally, the current quarter experienced a decrease in the volume of modules sold and a lower average selling price per watt for modules. The gross profit margin also compressed due to lower sales of higher-margin projects and increased freight costs.

Yes, First Solar is experiencing supply chain disruptions, including increased costs for commodities like polysilicon, aluminum, and steel, as well as higher freight costs. These factors have put pressure on gross margins. The company is attempting to mitigate these impacts through long-term supply agreements and by adjusting shipping plans, and by bringing manufacturing closer to demand with new facilities in the U.S. and India.

First Solar's strategic priorities include investing in research and development to improve module technology and reduce costs, and expanding manufacturing capacity. The company is building new facilities in the U.S. and India, expected to be operational in 2023, which will produce their next-generation Series 7 modules. They are also focused on utility-scale module offerings in key geographic markets and are working to enhance the competitiveness of their solar modules despite intense market competition and pricing pressures.

As of March 31, 2022, First Solar had $1.5 billion in cash and marketable securities, and it believes this, along with expected cash flows and customer contracts, is sufficient to meet its needs for at least the next 12 months. The company is also planning significant capital expenditures for capacity expansion and has access to capital markets if needed. They are actively exploring local financing alternatives for international projects to manage currency risk.