10-QPeriod: Q3 FY2023

FIRST SOLAR, INC. Quarterly Report for Q3 Ended Sep 30, 2023

Filed October 31, 2023For Securities:FSLR

Summary

First Solar, Inc. (FSLR) reported strong financial results for the third quarter of 2023, demonstrating significant top-line growth and a substantial improvement in profitability. Net sales increased by 27% year-over-year, driven by higher module volumes sold and an improved average selling price per watt. The company's gross profit margin saw a dramatic expansion, largely attributable to the recognition of advanced manufacturing production credits under Section 45X of the IRC, coupled with reduced freight costs and higher average selling prices. Operationally, First Solar continues to expand its manufacturing capacity, commencing Series 7 module production in India and announcing further expansion plans in the United States. The company also highlighted advancements in its technology roadmap, including progress on bifacial modules and its CuRe program, aimed at enhancing module performance and competitiveness. Despite ongoing investments in capacity and R&D, the company's liquidity remains robust, supported by strong cash flows and available credit facilities, positioning First Solar for continued growth in the expanding solar market.

Financial Highlights

54 data points
Beta

Revenue

$801.09M

47.0% Gross Margin

Net Income

$268.40M

33.5% Net Margin

EPS (Diluted)

$2.50

Total Assets

$9.58B

Cash & Equivalents

$1.51B

Free Cash Flow

-$120.78M

Financial Statements
Beta
Revenue$801.09M
Cost of Revenue$424.92M
Gross Profit$376.18M
R&D Expenses$41.19M
SG&A Expenses$50.17M
Operating Expenses$103.42M
Operating Income$272.96M
Interest Expense$3.73M
Net Income$268.40M
EPS (Basic)$2.51
EPS (Diluted)$2.50
Shares Outstanding (Basic)106.83M
Shares Outstanding (Diluted)107.50M

Key Highlights

  • 1Net sales for the third quarter of 2023 increased 27% to $801.1 million compared to $628.9 million in the same period of 2022.
  • 2Gross profit margin significantly improved to 47.0% in Q3 2023 from 3.3% in Q3 2022, largely due to manufacturing production credits and reduced freight costs.
  • 3The company commenced production of Series 7 modules at its India facility and has plans to expand U.S. manufacturing capacity by 3.5 GW.
  • 4Total current assets increased to $3.8 billion from $3.79 billion, primarily driven by higher inventories and accounts receivable.
  • 5Total current liabilities increased to $1.2 billion from $1.04 billion, mainly due to higher accrued expenses and deferred revenue.
  • 6First Solar's cash, cash equivalents, and marketable securities stood at $1.8 billion as of September 30, 2023.
  • 7The company has a substantial contracted backlog of 77.6 GW of solar modules for an aggregate transaction price of $23.0 billion.

Frequently Asked Questions

The significant improvement in profitability, evidenced by the expansion of the gross profit margin to 47.0%, was primarily driven by the recognition of advanced manufacturing production credits under Section 45X of the Internal Revenue Code (IRC). This was further supported by reductions in sales freight costs and higher average selling prices per watt for modules.

First Solar is actively expanding its manufacturing capacity. They commenced Series 7 module production at their India facility and have announced plans to build a fifth manufacturing facility in the U.S. (Louisiana), adding 3.5 GW. Combined with other expansions, this is expected to increase total installed nameplate capacity to approximately 25 GW by 2026.

The IRA is a significant positive factor for First Solar. It is expected to increase demand for U.S.-manufactured modules and provides manufacturing production credits (Section 45X) which First Solar expects to qualify for, significantly benefiting its cost of sales and overall financial performance. The company anticipates these credits will provide a substantial source of funding over the next decade.

The company has resolved a significant class-action lawsuit and a derivative action, both dismissed with prejudice. However, an arbitration panel issued an interim award of $35.6 million to Southern Power Company related to EPC agreements, which First Solar accrued as a loss. Additionally, First Solar is involved in patent infringement litigation and has accrued a $21.8 million liability for a damages award in a subcontractor injury case, which is being appealed. The company is also cooperating with an SEC subpoena regarding operations in India.