First Solar Inc. (NASDAQ:FSLR)

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Segment Profit Margin: Modules Business

First Solar Inc.; Modules Business; segment profit margin calculation

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in thousands)
Gross profit (loss)	1,277,421)	115,397)	472,926)	429,131)	290,079)
Net sales	3,296,809)	2,428,278)	2,331,380)	1,736,060)	1,460,116)
Segment Profitability Ratio
Segment profit margin¹	38.75%	4.75%	20.29%	24.72%	19.87%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ 2023 Calculation
Segment profit margin = 100 × Gross profit (loss) ÷ Net sales
= 100 × 1,277,421 ÷ 3,296,809 = 38.75%

The Modules Business exhibited consistent revenue growth over the five-year period from 2019 to 2023, although profitability experienced significant volatility, particularly between 2021 and 2023.

Net Sales Trend: Net sales demonstrated a continuous upward trajectory, increasing from US$ 1.46 billion in 2019 to US$ 3.30 billion in 2023. The most substantial year-over-year growth occurred in 2023, where sales expanded by approximately 35% compared to the previous year.
Gross Profit Volatility: Gross profit did not follow the linear growth of net sales. While profits rose steadily from 2019 to 2021, a sharp contraction occurred in 2022, with gross profit falling to US$ 115.39 million. This was followed by an exponential increase in 2023, reaching a period high of US$ 1.28 billion, representing a more than ten-fold increase from the 2022 low.
Segment Profit Margin Analysis: The segment profit margin reflected high variability. After peaking at 24.72% in 2020, the margin contracted to 20.29% in 2021 and collapsed to 4.75% in 2022, indicating a period of severe margin compression despite rising sales. However, 2023 marked a significant recovery and expansion, with the profit margin surging to 38.75%, the highest level recorded in the analyzed timeframe.

The divergence between sales and profit in 2022 suggests a period of increased cost of goods sold or pricing pressures that temporarily eroded profitability. The subsequent surge in 2023 indicates a successful realignment of cost structures or a significant increase in average selling prices, resulting in record-level operational efficiency for the Modules Business.

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Segment Profit Margin: Other

First Solar Inc.; Other; segment profit margin calculation

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in thousands)
Gross profit (loss)	23,258)	(45,539)	257,028)	251,542)	259,133)
Net sales	21,793)	191,041)	591,997)	975,272)	1,603,001)
Segment Profitability Ratio
Segment profit margin¹	106.72%	-23.84%	43.42%	25.79%	16.17%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ 2023 Calculation
Segment profit margin = 100 × Gross profit (loss) ÷ Net sales
= 100 × 23,258 ÷ 21,793 = 106.72%

The "Other" reportable segment has experienced a severe and consistent contraction in net sales over the five-year period ending December 31, 2023. Revenue declined from $1,603,001 thousand in 2019 to $21,793 thousand in 2023, representing a near-total erosion of the segment's sales base.

Revenue and Profitability Trends (2019–2021): During the initial three-year period, a divergence is observed between net sales and segment profit margins. While net sales fell from $1,603,001 thousand to $591,997 thousand, the segment profit margin expanded significantly, rising from 16.17% in 2019 to 43.42% in 2021. This suggests that despite the reduction in scale, the segment maintained strong gross profit levels, which remained relatively stable between $251 million and $259 million.
Operational Downturn (2022): The year 2022 marked a sharp transition into negative profitability. Gross profit shifted to a loss of $45,539 thousand, resulting in a negative segment profit margin of -23.84%. This coincides with a continued decline in net sales, which dropped to $191,041 thousand, indicating a period of significant operational instability or the realization of substantial losses within the segment.
Margin Anomaly (2023): In 2023, the segment reported a gross profit of $23,258 thousand against net sales of only $21,793 thousand. This resulted in a segment profit margin of 106.72%. The fact that gross profit exceeded net sales suggests the presence of non-standard accounting adjustments, credits, or other income recognized within the gross profit calculation that outweighs the actual sales generated during the period.

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First Solar Inc., net sales by reportable segment

US$ in thousands

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Modules Business	3,296,809)	2,428,278)	2,331,380)	1,736,060)	1,460,116)
Other	21,793)	191,041)	591,997)	975,272)	1,603,001)
Total	3,318,602)	2,619,319)	2,923,377)	2,711,332)	3,063,117)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Net sales exhibit a profound structural shift in revenue composition between 2019 and 2023. The overall revenue trajectory is characterized by a transition from a diversified revenue base toward a near-total reliance on a single reportable segment, resulting in an overall increase in total net sales by the conclusion of the period.

Modules Business Performance: A consistent upward trend is observed in the Modules Business, with net sales increasing from US$ 1,460,116 thousand in 2019 to US$ 3,296,809 thousand in 2023. This represents a continuous growth trajectory, with the most significant year-over-year expansion occurring between 2022 and 2023, where revenue increased by approximately 35%.
Other Segment Contraction: The segment categorized as Other has experienced a precipitous and uninterrupted decline. Starting at US$ 1,603,001 thousand in 2019, revenues in this category fell to US$ 21,793 thousand by 2023. This contraction indicates a systemic phase-out of non-module related revenue streams, effectively reducing this segment's contribution to total net sales from approximately 52% in 2019 to less than 1% in 2023.
Total Net Sales Dynamics: Total net sales remained volatile but fluctuated within a range of US$ 2.6 billion to US$ 3.3 billion throughout the five-year period. While total revenue experienced declines in 2020 and 2022, the accelerated expansion of the Modules Business eventually offset the losses from the Other segment, culminating in a period high of US$ 3,318,602 thousand in 2023.

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First Solar Inc., gross profit (loss) by reportable segment

US$ in thousands

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Modules Business	1,277,421)	115,397)	472,926)	429,131)	290,079)
Other	23,258)	(45,539)	257,028)	251,542)	259,133)
Total	1,300,679)	69,858)	729,954)	680,673)	549,212)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Total gross profit exhibited a period of steady growth from 2019 through 2021, followed by a severe contraction in 2022 and a substantial recovery in 2023. The overall financial performance is heavily driven by the Modules Business segment, which has transitioned from a primary contributor to the overwhelming driver of gross profitability.

Modules Business Performance: Gross profit within the Modules Business grew incrementally from US$ 290.1 million in 2019 to US$ 472.9 million in 2021. A sharp decline was observed in 2022, where profit fell to US$ 115.4 million. This was followed by an explosive increase in 2023, with gross profit reaching US$ 1.28 billion, representing a significant expansion in the segment's earnings capacity.
Other Segment Analysis: The Other segment demonstrated relative stability between 2019 and 2021, with gross profits remaining consistent around the US$ 250 million to US$ 260 million range. A critical reversal occurred in 2022, resulting in a gross loss of US$ 45.5 million. Although the segment returned to a positive balance in 2023, the profit of US$ 23.3 million is substantially lower than the levels maintained prior to 2022.
Aggregate Profitability Trends: Total gross profit peaked at US$ 1.3 billion in 2023, reflecting a massive recovery from the 2022 low of US$ 69.9 million. The data indicates a shift in the company's profit structure; while the Other segment provided nearly half of the total gross profit in 2019, the Modules Business accounted for approximately 98% of total gross profit by the end of 2023.

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