01—Abstract
Summary
Summary of the 10-Q filed April 29, 2022. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. reported a net loss of $43.3 milliona 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 millionb, 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 billionc 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.
02—Key points
Key Highlights
- Net loss of $43.3 million in Q1 2022, a reversal from a net income of $209.7 million in Q1 2021.
- Net 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.
- Gross 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.
- Research and Development expenses increased by 36% to $27.1 million as the company continues to invest in technology.
- Expanded manufacturing capacity is underway with new facilities planned in the U.S. and India, targeting 2023 operational start-up.
- The company ended the quarter with $1.3 billion in cash and marketable securities, indicating sufficient liquidity for the near term.
- Despite investments in capacity expansion and R&D, the company faces significant headwinds from market competition, supply chain issues, and cost pressures.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2022, First Solar, Inc. lost $0.12.
- Revenue$367.0M100.0%
- Cost of revenue−$355.6M96.9%
- Gross profit$11.5M3.1%
- Operating costs−$69.3M18.9%
- Operating income−$57.8M15.7%
- Interest, other & tax$14.5M4.0%
- Net income−$43.3M11.8%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2022filed April 29, 2022Financial Statements
Q1 FY2022 against Q1 FY2021
| Line item | Q1 FY2022Q1 FY2021 | Change |
|---|---|---|
| Revenue | $367.04M$803.37M | −54.3% |
| Cost of Revenue | $355.58M$618.61M | −42.5% |
| Gross Profit | $11.46M$184.77M | −93.8% |
| R&D Expenses | $27.11M$19.87M | +36.4% |
| SG&A Expenses | $36.73M$52.09M | −29.5% |
| Operating Expenses | $71.17M$83.31M | −14.6% |
| Operating Income | -$57.80M$252.35M | −122.9% |
| Interest Expense | $2.87M$3.00M | −4.4% |
| Net Income | -$43.26M$209.67M | −120.6% |
| EPS (Basic) | $-0.41$1.98 | −120.7% |
| EPS (Diluted) | $-0.41$1.96 | −120.9% |
| Shares Outstanding (Basic) | 106.41M106.09M | +0.3% |
| Shares Outstanding (Diluted) | 106.41M106.89M | −0.4% |
05—Questions
Frequently Asked Questions
What led to the significant decrease in net sales and profitability in Q1 2022 compared to Q1 2021?
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.
Is First Solar experiencing supply chain issues or cost inflation, and how is it impacting the business?
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.
What are the company's strategic priorities and outlook for future growth?
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.
How is the company managing its liquidity and capital resources?
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.
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