First Solar, Inc. — FY 2022 Form 10-K
Reporting period: Year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing; the supplied text does not provide a separate Q4 financial-results breakdown.
Business context
First Solar manufactures and sells cadmium telluride thin-film solar modules, principally to utility-scale project developers and operators. The United States generated 84% of 2022 net sales. The company also had residual project, energy-generation, and operations and maintenance activities, which it continued to reduce through business sales.
Financial and operating performance
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Net sales | $2.619 billion | $2.923 billion |
| Gross profit / margin | $69.9 million / 2.7% | $730.0 million / 25.0% |
| Operating income (loss) | $(27.2) million | $586.8 million |
| Net income (loss) | $(44.2) million; $(0.41) per diluted share | $468.7 million; $4.38 per diluted share |
| Cash from operating activities | $873.4 million | $237.6 million |
| Capital spending on property, plant and equipment | $903.6 million | $540.3 million |
| Cash, cash equivalents and marketable securities | $2.578 billion | $1.826 billion |
| Long-term debt, carrying value | $184.3 million | $239.9 million |
- Module-segment sales rose 4% to $2.428 billion: module wattage sold increased 20%, while average selling price per watt declined 13%. Total company sales fell 10%, chiefly because prior-year project sales and a project-indemnification settlement did not recur.
- Gross profit fell 90% year over year. Management cited lower module pricing, prior-year higher-margin project sales and indemnification revenue, higher freight and demurrage costs, and a $57.8 million impairment related to the Luz del Norte plant. Module cost reductions and higher sales volume partly offset these factors.
- Reported operating results included $253.5 million of net gains on business sales. Cash from operations was also supported by a $912.9 million increase in deferred revenue, primarily customer advances; this cash-flow result should be considered alongside those advance payments and the company’s substantial investment program.
- At year-end, current assets were $3.791 billion and current liabilities were $1.038 billion. Deferred revenue totaled $1.208 billion, including current and long-term balances. The company reported no off-balance-sheet debt or similar obligations, apart from financial-assurance instruments.
Changes, outlook and material items
- Production was 9.1 GW DC, up 15% from 2021; installed nameplate capacity was approximately 9.8 GW DC. Management forecast 2023 production of 11.5–12.2 GW DC.
- First Solar planned approximately 11 GW DC of additional capacity by 2025, with roughly $2.7 billion of aggregate investment. Its third U.S. factory began commercial production in early 2023; the India factory was expected to start in the second half of 2023, and a fourth U.S. factory in late 2024. Planned 2023 capital expenditures were $1.9–$2.1 billion.
- The company had contracted future module sales of 61.4 GW DC for an aggregate transaction price of $17.7 billion, expected to be recognized through 2029. Some contracts permit price, volume, or delivery changes; stated transaction price excludes certain potential adjustments.
- Management expected to qualify for the Inflation Reduction Act’s Section 45X manufacturing credit and estimated approximately 17 cents per watt for U.S.-made modules sold to third parties. Eligibility, calculation, monetization and domestic-content rules remained subject to government guidance; actual benefits could differ materially.
- The company sold its Japan project development business and Japan O&M operations in 2022. The Japan development-business sale generated a $245.2 million gain. It also sold the Luz del Norte plant, recording an impairment before sale and a $30.2 million gain from partial debt forgiveness.
- Key risks include global module oversupply and price competition; reliance on a limited number of customers and suppliers; execution, cost and ramp risks in factory expansion and Series 7 production; logistics and raw-material costs; customer financing and interest rates; policy and trade changes; warranty and recycling estimates; and environmental, litigation, foreign-exchange and tax exposures.
- Contingencies include an arbitration involving Southern Power, which the company described as reasonably possible with approximately $60 million sought, but said it could not estimate a loss range. Securities class and derivative actions and customer-related tracker-patent claims also remained pending; the filing did not estimate potential losses for those matters.
- Management stated that cash, marketable securities, operating cash flows and customer contracts were expected to cover working-capital and capital needs for at least 12 months. No dividend was expected for the foreseeable future. The auditor issued unqualified opinions on the financial statements and internal control; product warranty liability was identified as a critical audit matter.
Most important facts for investors to verify
- Whether gross margins recover as module pricing, freight costs and the sales mix change, and whether module cost reductions keep pace with competition.
- Factory construction, Series 7 ramp, production targets and the planned $1.9–$2.1 billion of 2023 capital spending, including the eventual returns on the approximately $2.7 billion expansion program.
- The final application and cash realization of Section 45X credits, including rules for integrated components, domestic content and credit transfers or direct payments.
- The quality and timing of the $873.4 million operating cash flow, given the large increase in customer advances and deferred revenue, and the company’s capacity to meet future delivery commitments.
- Customer concentration, supplier availability, the $17.7 billion contracted-sales schedule and contract provisions that could change prices, volumes or delivery timing.
- Developments in the Southern Power arbitration and other litigation, along with warranty-liability assumptions and module recycling obligations.