First Solar, Inc.
CEO : Mr. Mark R. Widmar
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2023 Q2 | 30.6% YoY | 16.4% | 207.7% | 2023-07-27 |
Mark Widmar says,
Key Highlights from Q2 2023 Earnings Call:
- Continued strength in commercial, operational, and financial foundations
- Ramped up production and delivery of next-generation Series 7 modules
- Acquisition of Evolar to accelerate development of next-generation PV technology
- Investment of up to $1.1 billion in building a new manufacturing facility in the US
- Expected manufacturing footprint growth to 14 gigawatts in the US and 25 gigawatts globally by 2026
- Net bookings of 8.9 gigawatts in Q2, bringing year-to-date net bookings to 21.1 gigawatts
- Total backlog of future bookings at 78.3 gigawatts, including 48.5 gigawatts of mid- to late-stage opportunities
- Produced 2.4 gigawatts of Series 6 modules in Q2 with a manufacturing yield of 98%
- Q2 sales of 215 megawatts of Series 7 modules
- Announcement of limited production run of bifacial module panels
- Construction of Indian factory complete, expected to begin production by end of August 2023
- Expansion and upgrade of Ohio Series 6 factory on track, additional capacity expected in 2024
- New Alabama facility on schedule for completion by end of 2024
- Announcement of fifth US manufacturing facility, location decision expected soon
- Investment of over $2.8 billion in capital investments into the US
- Appreciation for Biden administration’s guidance on IRA-related policies
- Awaiting Department of Commerce’s final determination on Chinese manufacturers investigation
- Engagement with EU’s path to energy self-sufficiency and Germany’s interest in solar manufacturing
Alex Bradley says,
Financial Results for Q2 2023
- Net sales in Q2 were $811 million, a $262 million increase compared to Q1.
- The increase in net sales was driven by strong market demand, higher volumes sold, next-generation Series 7 module sales, and an increase in module ASP.
- Gross margin was 38% in Q2, compared to 20% in Q1, primarily due to higher module ASPs, lower sales freight costs, and higher volumes sold.
- Ramp costs for the new Series 7 factory in Ohio were $29 million in Q2.
- SG&A and R&D expenses totaled $83 million in Q2, primarily due to additional investments in R&D and higher professional fees.
- Operating income was $169 million in Q2, including ramp costs, production start-up expense, and a litigation loss.
- Tax expense was $18 million in Q2, driven by higher pre-tax income and lower tax benefits associated with share-based compensation.
- Diluted earnings per share in Q2 were $1.59, compared to $0.40 in Q1.
Balance Sheet and Cash Flow
- Cash, cash equivalents, restricted cash, restricted cash equivalents, and marketable securities at the end of Q2 were $1.9 billion.
- Cash decreased due to capital expenditures, acquisition payments, and drawdown by the India credit facility.
- Cash deposits as deferred revenue totaled approximately $1.5 billion at the end of Q2, providing financial resources for expansion.
- Total debt at the end of Q2 was $437 million, an increase of $117 million from Q1.
- Net cash position decreased by approximately $0.5 billion to $1.5 billion.
- Cash flows used in operations were $89 million in Q2, primarily due to expansion-related activities.
- Capital expenditures were $383 million in Q2.
- A five-year revolving credit facility for $1 billion was secured during Q2.
Full Year 2023 Guidance
- Legacy systems business-related revenue and gross profit impact so far in 2023 was $20 million and $14 million, respectively.
- Module business expects a $40 million improvement in gross profit.
- Revenue and gross margin guidance ranges remain unchanged.
- Section 45X tax benefits forecast remains unchanged at $660 million to $710 million.
- Operating expenses guidance increased to $450 million to $475 million due to litigation losses.
- Operating income and earnings per share guidance remain unchanged.
- Expected earnings cadence: approximately 40% in Q3 and 60% in Q4.
- Capital expenditures forecast reduced to $1.7 billion to $1.9 billion.
- Expected $0.3 billion increase in year-end net cash balance to $1.5 billion to $1.8 billion.
Key Messages from the Earning Call
- Robust demand with 21.1 gigawatts of net bookings year-to-date and record contracted backlog of 77.8 gigawatts.
- India, Ohio, and Alabama expansions on schedule.
- Investing an additional $1.1 billion in a new U.S. factory expected to begin production in H1 2026.
- Investments in advanced technology and acquisition of Evolar expected to accelerate development of next-generation PV technology.
- Ended Q2 with $1.9 billion gross cash balance, $1.5 billion net of debt, and additional debt capacity of $1 billion.
- Maintaining revenue and EPS guidance, including forecasted full-year earnings per diluted share of $7 to $8.
Q & A sessions,
Supply for 2024-2025
- Using India for U.S. shipments to meet strong demand and restructure deals
- Ramping up Perrysburg Series 7 factory and pulling forward Ohio upgrades to create additional capacity
Bookings ASP
- Bookings average ASP was $0.293
- Including sales rates for half of the volume would increase ASP to the low 30s
- Over $300 million of conversions of existing volumes to deliver Series 7 and meet domestic content requirements
Domestic content rules
- Series 7 modules will be 100% compliant with all domestic content requirements
- First Solar is the best-positioned module to ensure the domestic content bonus
- Working closely with customers to ensure qualification for the bonus and provide cost-level information
Perovskites and new technologies
- Evolar’s capabilities in perovskites are complementary to First Solar’s capabilities in CIGS6
- Looking at tandem technology (cadmium telluride top cell, CIGS bottom cell) for higher-efficiency product
- Still early to determine when this technology can get to market
Impact of domestic content on agreements
- Existing agreements for 2023, 2024, and 2025 are not affected by callbacks or provisions
- New agreements have provisions for adjustments if domestic content requirements are not met
- No recovery or clawback from First Solar as long as requirements are met
Sourcing for Europe
- Currently not envisioning sourcing anything from the U.S. to Europe
- Intent is to support Europe out of international factories
No bad stock 