01—Abstract
Summary
Summary of the 10-Q filed July 29, 2022. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. reported net sales of $620.96 milliona for the second quarter of 2022, a slight decrease of 1% compared to the same period in the prior year.
This decrease was primarily attributed to a prior period settlement of an indemnification arrangement and a lower average selling price per watt, partially offset by an increase in module sales volume. The company experienced a gross loss of $23.2 millionb in Q2 2022, a significant decline from a gross profit of $174.1 million in Q2 2021. This was largely due to reduced average selling prices, an impairment loss on the Luz del Norte PV solar power plant, and increased sales freight costs.
The company did, however, recognize a substantial gain of $245.4 millionc from the sale of its Japan project development business, which significantly boosted operating income. Operationally, First Solar produced 2.2 GWDC of solar modules in Q2 2022, a 12% increase year-over-year, driven by higher manufacturing throughput. The company continues to expand its production capacity with new facilities planned in the U.S. and India.
Despite the challenges in gross margin, the company maintained a strong cash and marketable securities position of $1.8 billiond as of June 30, 2022, and expects to have sufficient liquidity to meet its needs for the next 12 months. The strategic sale of non-core assets and ongoing capacity expansion signal a focus on core module manufacturing operations.
02—Key points
Key Highlights
- Net sales for Q2 2022 were $620.96 million, down 1% year-over-year, impacted by lower average selling prices and a prior period indemnification settlement.
- The company reported a gross loss of $23.2 million in Q2 2022, a significant decrease from a gross profit of $174.1 million in Q2 2021, primarily due to pricing pressures and an impairment charge.
- A significant gain of $245.4 million was recognized from the sale of the Japan project development business.
- Module production increased by 12% year-over-year to 2.2 GWDC in Q2 2022, driven by improved manufacturing throughput.
- First Solar is expanding its manufacturing capacity with new facilities under construction in the U.S. and India, expected to commence operations in 2023.
- The company held $1.8 billion in cash and marketable securities as of June 30, 2022, indicating strong liquidity.
- Operating income was $144.8 million, significantly boosted by the gain on the sale of the Japan business, despite the gross loss.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2022, First Solar, Inc. kept $0.09.
- Revenue$621.0M100.0%
- Cost of revenue−$644.2M103.7%
- Gross profit−$23.2M3.7%
- Operating costs$168.0M27.1%
- Operating income$144.8M23.3%
- Interest, other & tax−$89.0M14.3%
- Net income$55.8M9.0%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2022filed July 29, 2022Financial Statements
Q2 FY2022 against Q2 FY2021
| Line item | Q2 FY2022Q2 FY2021 | Change |
|---|---|---|
| Revenue | $620.96M$629.18M | −1.3% |
| Cost of Revenue | $644.15M$455.06M | +41.6% |
| Gross Profit | -$23.20M$174.12M | −113.3% |
| R&D Expenses | $25.23M$23.93M | +5.4% |
| SG&A Expenses | $38.89M$36.35M | +7.0% |
| Operating Expenses | $77.35M$62.00M | +24.8% |
| Operating Income | $144.83M$110.38M | +31.2% |
| Interest Expense | $3.24M$4.62M | −30.0% |
| Net Income | $55.80M$82.45M | −32.3% |
| EPS (Basic) | $0.52$0.78 | −33.3% |
| EPS (Diluted) | $0.52$0.77 | −32.5% |
| Shares Outstanding (Basic) | 106.59M106.31M | +0.3% |
| Shares Outstanding (Diluted) | 107.06M106.84M | +0.2% |
05—Questions
Frequently Asked Questions
What led to the significant decrease in gross profit year-over-year?
The gross profit decreased significantly from $174.1 million in Q2 2021 to a gross loss of $23.2 million in Q2 2022. This was primarily driven by a decrease in the average selling price per watt of modules, a substantial prior period indemnification settlement of $65.1 million recognized as revenue in Q2 2021, an impairment loss of $57.8 million recognized for the Luz del Norte PV solar power plant in the current quarter, and an increase in sales freight costs. These factors outweighed the benefits of increased module sales volume.
How did the sale of the Japan project development business impact the financial results?
The sale of the Japan project development business was a significant event in the quarter. First Solar recognized a gain of $245.4 million from this transaction in Q2 2022. This gain substantially contributed to the company's operating income, helping to offset the negative impact of the gross loss on the core module business.
What is the outlook for manufacturing capacity and production?
First Solar is actively expanding its manufacturing capacity. Module production increased by 12% year-over-year to 2.2 GWDC in Q2 2022, driven by higher manufacturing throughput. The company is constructing new facilities in the U.S. and India, expected to commence operations in 2023, and aims to produce between 8.5 GWDC and 9.0 GWDC of modules in 2022.
How is the company managing its liquidity and capital resources?
As of June 30, 2022, First Solar maintained a strong financial position with $1.8 billion in cash and marketable securities. The company believes this, along with operating cash flows and future module sales contracts, will be sufficient to meet its working capital and capital expenditure needs for at least the next 12 months. They also have plans for significant capital expenditures for capacity expansion, funded through a combination of cash, potential debt, and local financing alternatives.
06—Continue