Item 1. Condensed Consolidated Financial Statements (Unaudited)

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

						Three Months Ended June 30,												Six Months Ended June 30,
						2024						2023						2024						2023
Net sales						$	1,010,482					$	810,673					$	1,804,590					$	1,358,959
Cost of sales						511,593						500,253						959,698						936,488
Gross profit						498,889						310,420						844,892						422,471
Operating expenses:
Selling, general and administrative						46,560						46,328						92,387						90,356
Research and development						51,937						36,745						94,679						67,255
Production start-up						27,451						23,377						42,859						42,871
Litigation loss						430						35,590						430						35,590
Total operating expenses						126,378						142,040						230,355						236,072
Gain on sales of businesses, net						—						135						1,115						118
Operating income						372,511						168,515						615,652						186,517
Foreign currency loss, net						(9,649)						(4,652)						(12,507)						(10,599)
Interest income						24,599						25,026						51,844						50,848
Interest expense, net						(9,765)						(1,415)						(18,975)						(2,163)
Other (expense) income, net						(565)						997						(3,364)						(459)
Income before taxes						377,131						188,471						632,650						224,144
Income tax expense						(27,775)						(17,892)						(46,678)						(11,004)
Net income						$	349,356					$	170,579					$	585,972					$	213,140
Net income per share:
Basic						$	3.26					$	1.60					$	5.48					$	2.00
Diluted						$	3.25					$	1.59					$	5.45					$	1.99
Weighted-average number of shares used in per share calculations:
Basic						107,042						106,827						107,011						106,791
Diluted						107,525						107,278						107,502						107,256

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

						Three Months Ended June 30,												Six Months Ended June 30,
						2024						2023						2024						2023
Net income						$	349,356					$	170,579					$	585,972					$	213,140
Other comprehensive (loss) income:
Foreign currency translation adjustments						(2,944)						(5,348)						(11,477)						(2,693)
Unrealized (loss) gain on marketable securities and restricted marketable securities, net of tax of $41, $85, $143 and $(317)						(1,197)						(1,315)						(3,200)						5,651
Unrealized (loss) gain on derivative instruments, net of tax of $177, $(165), $(131) and $(873)						(571)						594						491						2,808
Other comprehensive (loss) income						(4,712)						(6,069)						(14,186)						5,766
Comprehensive income						$	344,644					$	164,510					$	571,786					$	218,906

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

						June 30, 2024						December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents						$	1,702,913					$	1,946,994
Marketable securities						37,430						155,495
Accounts receivable trade, net						647,565						660,776
Government grants receivable, net						6,034						659,745
Inventories						1,027,872						819,899
Other current assets						527,109						391,900
Total current assets						3,948,923						4,634,809
Property, plant and equipment, net						5,139,000						4,397,285
Deferred tax assets, net						201,801						142,819
Restricted marketable securities						200,243						198,310
Government grants receivable						607,086						152,208
Goodwill						28,834						29,687
Intangible assets, net						59,267						64,511
Inventories						273,977						266,899
Other assets						555,124						478,604
Total assets						$	11,014,255					$	10,365,132
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable						$	230,894					$	207,178
Income taxes payable						81,172						22,134
Accrued expenses						540,126						524,829
Current portion of debt						140,175						96,238
Deferred revenue						689,468						413,579
Other current liabilities						90,794						42,200
Total current liabilities						1,772,629						1,306,158
Accrued solar module collection and recycling liability						134,803						135,123
Long-term debt						418,725						464,068
Deferred revenue						1,258,880						1,591,604
Other liabilities						173,821						180,710
Total liabilities						3,758,858						3,677,663
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value per share; 500,000,000 shares authorized; 107,045,972 and 106,847,475 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively						107						107
Additional paid-in capital						2,886,569						2,890,427
Accumulated earnings						4,557,038						3,971,066
Accumulated other comprehensive loss						(188,317)						(174,131)
Total stockholders’ equity						7,255,397						6,687,469
Total liabilities and stockholders’ equity						$	11,014,255					$	10,365,132

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

						Three Months Ended June 30, 2024
						Common Stock												Additional Paid-In Capital						Accumulated Earnings						Accumulated Other Comprehensive Loss						Total Stockholders' Equity
						Shares						Amount
Balance at March 31, 2024						107,041						$	107					$	2,878,330					$	4,207,682					$	(183,605)					$	6,902,514
Net income						—						—						—						349,356						—						349,356
Other comprehensive loss						—						—						—						—						(4,712)						(4,712)
Common stock issued for share-based compensation						6						—						—						—						—						—
Tax withholding related to vesting of restricted stock						(1)						—						(196)						—						—						(196)
Share-based compensation expense						—						—						8,435						—						—						8,435
Balance at June 30, 2024						107,046						$	107					$	2,886,569					$	4,557,038					$	(188,317)					$	7,255,397
						Three Months Ended June 30, 2023
						Common Stock												Additional Paid-In Capital						Accumulated Earnings						Accumulated Other Comprehensive Loss						Total Stockholders' Equity
						Shares						Amount
Balance at March 31, 2023						106,825						$	107					$	2,865,753					$	3,182,850					$	(179,982)					$	5,868,728
Net income						—						—						—						170,579						—						170,579
Other comprehensive loss						—						—						—						—						(6,069)						(6,069)
Common stock issued for share-based compensation						7						—						—						—						—						—
Tax withholding related to vesting of restricted stock						(1)						—						(1,933)						—						—						(1,933)
Share-based compensation expense						—						—						8,333						—						—						8,333
Balance at June 30, 2023						106,831						$	107					$	2,872,153					$	3,353,429					$	(186,051)					$	6,039,638

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

						Six Months Ended June 30, 2024
						Common Stock												Additional Paid-In Capital						Accumulated Earnings						Accumulated Other Comprehensive Loss						Total Stockholders' Equity
						Shares						Amount
Balance at December 31, 2023						106,847						$	107					$	2,890,427					$	3,971,066					$	(174,131)					$	6,687,469
Net income						—						—						—						585,972						—						585,972
Other comprehensive loss						—						—						—						—						(14,186)						(14,186)
Common stock issued for share-based compensation						322						—						—						—						—						—
Tax withholding related to vesting of restricted stock						(123)						—						(19,148)						—						—						(19,148)
Share-based compensation expense						—						—						15,290						—						—						15,290
Balance at June 30, 2024						107,046						$	107					$	2,886,569					$	4,557,038					$	(188,317)					$	7,255,397
						Six Months Ended June 30, 2023
						Common Stock												Additional Paid-In Capital						Accumulated Earnings						Accumulated Other Comprehensive Loss						Total Stockholders' Equity
						Shares						Amount
Balance at December 31, 2022						106,609						$	107					$	2,887,476					$	3,140,289					$	(191,817)					$	5,836,055
Net income						—						—						—						213,140						—						213,140
Other comprehensive income						—						—						—						—						5,766						5,766
Common stock issued for share-based compensation						371						—						—						—						—						—
Tax withholding related to vesting of restricted stock						(149)						—						(30,247)						—						—						(30,247)
Share-based compensation expense						—						—						14,924						—						—						14,924
Balance at June 30, 2023						106,831						$	107					$	2,872,153					$	3,353,429					$	(186,051)					$	6,039,638

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

						Six Months Ended June 30,
						2024						2023
Cash flows from operating activities:
Net income						$	585,972					$	213,140
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Depreciation, amortization and accretion						187,921						140,560
Share-based compensation						15,191						15,011
Deferred income taxes						(58,399)						(42,607)
Gain on sales of businesses, net						(1,115)						(118)
Other, net						1,650						(8,843)
Changes in operating assets and liabilities:
Accounts receivable, trade						29,613						(177,591)
Inventories						(215,493)						(131,625)
Government grants receivable						205,528						(225,121)
Other assets						(168,363)						(96,617)
Income tax receivable and payable						3,774						(20,090)
Accounts payable and accrued expenses						(113,255)						(42,994)
Deferred revenue						(12,499)						211,721
Other liabilities						212						40,898
Net cash provided by (used in) operating activities						460,737						(124,276)
Cash flows from investing activities:
Purchases of property, plant and equipment						(778,618)						(753,656)
Purchases of marketable securities and restricted marketable securities						(1,113,826)						(2,492,495)
Proceeds from sales and maturities of marketable securities						1,224,167						2,538,069
Acquisitions, net of cash acquired						—						(35,540)
Other investing activities						(7,697)						—
Net cash used in investing activities						(675,974)						(743,622)
Cash flows from financing activities:
Proceeds from borrowings under debt arrangements, net of issuance costs						110,395						246,825
Repayment of debt						(111,375)						—
Payments of tax withholdings for restricted shares						(19,148)						(30,247)
Contingent consideration payment and other financing activities						(7,527)						—
Net cash (used in) provided by financing activities						(27,655)						216,578
Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents						(5,600)						2,454
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents						(248,492)						(648,866)
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of the period						1,965,069						1,493,462
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of the period						$	1,716,577					$	844,596
Supplemental disclosure of noncash investing and financing activities:
Property, plant and equipment acquisitions funded by liabilities						$	402,263					$	183,482
Proceeds to be received from asset-based government grants						$	158,908					$	—
Acquisitions funded by liabilities and contingent consideration						$	11,000					$	18,686

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of First Solar, Inc. and its subsidiaries in this Quarterly Report have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of First Solar management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. Certain prior period balances have been reclassified to conform to the current period presentation.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Despite our intention to establish accurate estimates and reasonable assumptions, actual results could differ materially from such estimates and assumptions. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or for any other period. The condensed consolidated balance sheet at December 31, 2023 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These interim financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2023 included in our Annual Report on Form 10-K, which has been filed with the SEC.

Unless expressly stated or the context otherwise requires, the terms “the Company,” “we,” “us,” “our,” and “First Solar” refer to First Solar, Inc. and its consolidated subsidiaries, and the term “condensed consolidated financial statements” refers to the accompanying unaudited condensed consolidated financial statements contained in this Quarterly Report.

2. Cash, Cash Equivalents, and Marketable Securities

Cash, cash equivalents, and marketable securities consisted of the following at June 30, 2024 and December 31, 2023 (in thousands):

						June 30, 2024						December 31, 2023
Cash and cash equivalents:
Cash						$	943,765					$	841,310
Money market funds						759,148						1,105,684
Total cash and cash equivalents						1,702,913						1,946,994
Marketable securities:
Foreign debt						—						34,895
U.S. debt						8,517						44,089
Time deposits						28,913						76,511
Total marketable securities						37,430						155,495
Total cash, cash equivalents, and marketable securities						$	1,740,343					$	2,102,489

The following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents reported within our condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023 to the total of such amounts as presented in the condensed consolidated statements of cash flows (in thousands):

						Balance Sheet Line Item						June 30, 2024						December 31, 2023
Cash and cash equivalents						Cash and cash equivalents						$	1,702,913					$	1,946,994
Restricted cash – current						Other current assets						8,262						8,262
Restricted cash – noncurrent						Other assets						3,601						3,621
Restricted cash equivalents – noncurrent						Other assets						1,801						6,192
Total cash, cash equivalents, restricted cash, and restricted cash equivalents												$	1,716,577					$	1,965,069

During the three months ended June 30, 2024, we sold marketable securities for proceeds of $67.5 million and realized a gain of less than $0.1 million on such sales. During the three months ended June 30, 2023, we sold marketable securities for proceeds of $34.9 million and realized a loss of less than $0.1 million on such sales. See Note 8. “Fair Value Measurements” to our condensed consolidated financial statements for information about the fair value of our marketable securities.

The following tables summarize the unrealized gains and losses related to our available-for-sale marketable securities, by major security type, as of June 30, 2024 and December 31, 2023 (in thousands):

						As of June 30, 2024
						Amortized Cost						Unrealized Gains						Unrealized Losses						Allowance for Credit Losses						Fair Value
U.S. debt						$	10,000					$	—					$	1,483					$	—					$	8,517
Time deposits						28,916						—						—						3						28,913
Total						$	38,916					$	—					$	1,483					$	3					$	37,430

						As of December 31, 2023
						Amortized Cost						Unrealized Gains						Unrealized Losses						Allowance for Credit Losses						Fair Value
Foreign debt						$	35,000					$	—					$	91					$	14					$	34,895
U.S. debt						45,625						88						1,614						10						44,089
Time deposits						76,533						—						—						22						76,511
Total						$	157,158					$	88					$	1,705					$	46					$	155,495

The contractual maturities of our marketable securities as of June 30, 2024 were as follows (in thousands):

						Fair Value
Within one year						$	28,913
After one year through five years						4,615
After five years through ten years						3,902
Total						$	37,430

3. Restricted Marketable Securities

Restricted marketable securities consisted of the following as of June 30, 2024 and December 31, 2023 (in thousands):

						June 30, 2024						December 31, 2023
Foreign government obligations						$	48,910					$	51,229
Supranational debt						22,900						15,339
U.S. debt						110,116						113,326
U.S. government obligations						18,317						18,416
Total restricted marketable securities						$	200,243					$	198,310

Our restricted marketable securities represent long-term investments to fund the estimated future cost of collecting and recycling modules covered under our solar module collection and recycling program. We have established a trust under which funds are put into custodial accounts with an established and reputable bank, for which First Solar, Inc.; First Solar Malaysia Sdn. Bhd.; and First Solar Manufacturing GmbH are grantors. As of June 30, 2024 and December 31, 2023, such custodial accounts also included noncurrent restricted cash and cash equivalents balances of $1.8 million and $6.2 million, respectively, which were reported within “Other assets.” Trust funds may be disbursed for qualified module collection and recycling costs (including capital and facility related recycling costs), payments to customers for assuming collection and recycling obligations, and reimbursements of any overfunded amounts. Investments in the trust must meet certain investment quality criteria comparable to highly rated government or agency bonds. As necessary, we fund any incremental amounts for our estimated collection and recycling obligations on an annual basis based on the estimated costs of collecting and recycling covered modules, estimated rates of return on our restricted marketable securities, and an estimated solar module life of 25 years, less amounts already funded in prior years. During the three months ended June 30, 2024, we purchased $7.9 million of restricted marketable securities as part of our ongoing management of the custodial accounts.

See Note 8. “Fair Value Measurements” to our condensed consolidated financial statements for information about the fair value of our restricted marketable securities. The following tables summarize the unrealized gains and losses related to our restricted marketable securities, by major security type, as of June 30, 2024 and December 31, 2023 (in thousands):

						As of June 30, 2024
						Amortized Cost						Unrealized Gains						Unrealized Losses						Allowance for Credit Losses						Fair Value
Foreign government obligations						$	63,752					$	—					$	14,842					$	—					$	48,910
Supranational debt						25,460						1						2,561						—						22,900
U.S. debt						145,573						—						35,457						—						110,116
U.S. government obligations						24,414						—						6,097						—						18,317
Total						$	259,199					$	1					$	58,957					$	—					$	200,243

						As of December 31, 2023
						Amortized Cost						Unrealized Gains						Unrealized Losses						Allowance for Credit Losses						Fair Value
Foreign government obligations						$	65,202					$	—					$	13,963					$	10					$	51,229
Supranational debt						17,688						—						2,349						—						15,339
U.S. debt						146,484						—						33,129						29						113,326
U.S. government obligations						24,460						—						6,039						5						18,416
Total						$	253,834					$	—					$	55,480					$	44					$	198,310

As of June 30, 2024, the contractual maturities of these securities were between 7 years and 15 years.

4. Consolidated Balance Sheet Details

Accounts receivable trade, net

Accounts receivable trade, net consisted of the following at June 30, 2024 and December 31, 2023 (in thousands):

						June 30, 2024						December 31, 2023
Accounts receivable trade, gross						$	649,241					$	662,390
Allowance for credit losses						(1,676)						(1,614)
Accounts receivable trade, net						$	647,565					$	660,776

Inventories

Inventories consisted of the following at June 30, 2024 and December 31, 2023 (in thousands):

						June 30, 2024						December 31, 2023
Raw materials						$	449,084					$	478,138
Work in process						101,780						78,463
Finished goods						750,985						530,197
Inventories						$	1,301,849					$	1,086,798
Inventories – current						$	1,027,872					$	819,899
Inventories – noncurrent						$	273,977					$	266,899

Other current assets

Other current assets consisted of the following at June 30, 2024 and December 31, 2023 (in thousands):

						June 30, 2024						December 31, 2023
Spare maintenance materials and parts						$	182,229					$	148,218
Indirect tax receivables						114,484						65,301
Prepaid expenses						78,931						62,480
Operating supplies						54,425						43,995
Prepaid income taxes						39,285						7,064
Insurance receivable for accrued litigation (1)						21,800						21,800
Restricted cash						8,262						8,262
Derivative instruments (2)						267						1,778
Other						27,426						33,002
Other current assets						$	527,109					$	391,900

——————————

(1)See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our legal proceedings.

(2)See Note 6. “Derivative Financial Instruments” to our condensed consolidated financial statements for discussion of our derivative instruments.

Property, plant and equipment, net

Property, plant and equipment, net consisted of the following at June 30, 2024 and December 31, 2023 (in thousands):

						June 30, 2024						December 31, 2023
Land						$	38,780					$	35,364
Buildings and improvements						1,354,644						1,037,421
Machinery and equipment						3,921,930						3,593,347
Office equipment and furniture						175,177						161,187
Leasehold improvements						40,313						40,084
Construction in progress						1,476,532						1,223,998
Property, plant and equipment, gross						7,007,376						6,091,401
Accumulated depreciation						(1,868,376)						(1,694,116)
Property, plant and equipment, net						$	5,139,000					$	4,397,285

Depreciation of property, plant and equipment was $93.4 million and $180.1 million for the three and six months ended June 30, 2024, respectively, and $76.9 million and $142.8 million for the three and six months ended June 30, 2023, respectively.

Other assets

Other assets consisted of the following at June 30, 2024 and December 31, 2023 (in thousands):

						June 30, 2024						December 31, 2023
Advance payments for raw materials						$	261,849					$	204,370
Lease assets (1)						99,834						101,468
Income tax receivables						87,025						68,591
Prepaid expenses						30,836						23,954
Project assets						24,984						28,430
Restricted cash						3,601						3,621
Restricted cash equivalents						1,801						6,192
Other (2)						45,194						41,978
Other assets						$	555,124					$	478,604

——————————

(1)See Note 7. “Leases” to our condensed consolidated financial statements for discussion of our lease arrangements.

(2)In November 2023, First Solar entered into a power purchase agreement with Cleantech Solar (“Cleantech”), a leading provider of renewable energy solutions in India and Southeast Asia. Under the agreement, Cleantech plans to construct certain photovoltaic (“PV”) solar and wind generating assets, which are expected to supply electricity to our manufacturing facility in India.

In February 2024, we purchased an ownership interest in a subsidiary of Cleantech for $3.0 million. This subsidiary owns certain of the generation assets that are expected to supply our facility, and we account for our investment in the subsidiary under the equity method of accounting. During the six months ended June 30, 2024, we recognized revenue of $19.0 million for module sales of 75 megawatts to this subsidiary.

Accrued expenses

Accrued expenses consisted of the following at June 30, 2024 and December 31, 2023 (in thousands):

						June 30, 2024						December 31, 2023
Accrued property, plant and equipment						$	257,296					$	210,233
Accrued freight						100,465						58,494
Accrued inventory						45,536						101,161
Accrued other taxes						38,448						26,781
Accrued compensation and benefits						31,315						55,960
Accrued interest						11,408						11,011
Product warranty liability (1)						5,684						5,920
Other						49,974						55,269
Accrued expenses						$	540,126					$	524,829

——————————

(1)See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our “Product Warranties.”

Other current liabilities

Other current liabilities consisted of the following at June 30, 2024 and December 31, 2023 (in thousands):

						June 30, 2024						December 31, 2023
Accrued litigation (1)						$	21,800					$	21,800
Lease liabilities (2)						10,806						10,358
Derivative instruments (3)						4,199						1,744
Contingent consideration (4)						—						7,500
Other						53,989						798
Other current liabilities						$	90,794					$	42,200

——————————

(1)See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our legal proceedings.

(2)See Note 7. “Leases” to our condensed consolidated financial statements for discussion of our lease arrangements.

(3)See Note 6. “Derivative Financial Instruments” to our condensed consolidated financial statements for discussion of our derivative instruments.

(4)See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our contingent consideration arrangements.

Other liabilities

Other liabilities consisted of the following at June 30, 2024 and December 31, 2023 (in thousands):

						June 30, 2024						December 31, 2023
Lease liabilities (1)						$	52,228					$	53,725
Deferred tax liabilities, net						44,048						42,771
Other taxes payable						34,626						39,431
Product warranty liability (2)						18,011						19,571
Contingent consideration (3)						11,000						11,000
Other						13,908						14,212
Other liabilities						$	173,821					$	180,710

——————————

(1)See Note 7. “Leases” to our condensed consolidated financial statements for discussion of our lease arrangements.

(2)See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our “Product Warranties.”

(3)See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our contingent consideration arrangements.

5. Government Grants

Government grants represent benefits provided by federal, state, or local governments that are not subject to the scope of Accounting Standards Codification (“ASC”) 740. We recognize a grant when we have reasonable assurance that we will comply with the grant’s conditions and that the grant will be received. Government grants whose primary condition is the purchase, construction, or acquisition of a long-lived asset are considered asset-based grants and are recognized as a reduction to such asset’s cost-basis, which reduces future depreciation. Other government grants not related to long-lived assets are considered income-based grants, which are recognized as a reduction to the related cost of activities that generated the benefit.

The following table presents the benefits recognized from asset-based government grants in our condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023 (in thousands):

Balance Sheet Line Item						June 30, 2024						December 31, 2023
Property, plant and equipment, net						$	153,064					$	146,348
Other assets						5,844						5,860

In February 2021, the state government of Tamil Nadu, India granted First Solar certain incentives associated with the construction of our first manufacturing facility in the country. Among other things, such incentives provide a 24% subsidy for eligible capital investments, contingent upon meeting certain minimum investment and employment commitments. The capital subsidy funding application process begins in the fiscal year following the initial period of module production and is expected to be paid in six annual installments thereafter. The timing of cash receipts is subject to the completion of audit certifications, funding applications by First Solar, and review by state government authorities. Module production in India began during the year ended December 31, 2023. We expect to submit initial funding applications in the second half of 2024. Such credit is reflected on our condensed consolidated balance sheets within “Government grants receivable.”

The following table presents the benefits recognized from income-based government grants in our condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023 (in thousands):

						Three Months Ended June 30,												Six Months Ended June 30,
Income Statement Line Item						2024						2023						2024						2023
Cost of sales						$	258,580					$	155,007					$	453,007					$	225,121
Research and development						—						—						4,000						—

In August 2022, the U.S. President signed into law the Inflation Reduction Act of 2022 (“IRA”). Among other things, the IRA offers a tax credit, pursuant to Section 45X of the Internal Revenue Code (“IRC”), for solar modules and solar module components manufactured in the United States and sold to third parties. Such credit may be refundable by the Internal Revenue Service (“IRS”) or transferable to a third party and is available from 2023 to 2032, subject to phase down beginning in 2030. For eligible components, the credit is equal to (i) $12 per square meter for a PV wafer, (ii) 4 cents multiplied by the capacity of a PV cell, and (iii) 7 cents multiplied by the capacity of a PV module. Based on the current form factor of our modules, we expect to qualify for a credit of approximately 17 cents per watt for each module produced in the United States and sold to a third party. We recognize such credit as a reduction to “Cost of sales” in the period the modules are sold to customers. Such credit is also reflected on our condensed consolidated balance sheets within “Government grants receivable.”

In December 2023, we entered into an agreement with Fiserv, Inc. (“Fiserv”) for the sale of $687.2 million of Section 45X tax credits we generated during 2023 for aggregate cash proceeds of $659.7 million. We received the full cash proceeds during the six months ended June 30, 2024.

6. Derivative Financial Instruments

As a global company, we are exposed in the normal course of business to various risks, including foreign currency and commodity price risks, that could affect our financial position, results of operations, and cash flows. We may use derivative instruments to hedge against these risks and only hold such instruments for hedging purposes, not for speculative or trading purposes.

Depending on the terms of the specific derivative instruments and market conditions, some of our derivative instruments may be assets and others liabilities at any particular balance sheet date. We report all of our derivative instruments at fair value and account for changes in the fair value of derivative instruments within “Accumulated other comprehensive loss” if the derivative instruments qualify for hedge accounting. For those derivative instruments that do not qualify for hedge accounting (i.e., “economic hedges”), we record the changes in fair value directly to earnings. See Note 8. “Fair Value Measurements” to our condensed consolidated financial statements for information about the techniques we use to measure the fair value of our derivative instruments.

The following tables present the fair values of derivative instruments included in our condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023 (in thousands):

						June 30, 2024
						Other Current Assets												Other Current Liabilities
Derivatives designated as hedging instruments:
Commodity swap contracts						$	—											$	780
Total derivatives designated as hedging instruments						$	—											$	780
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts						$	267											$	3,419
Total derivatives not designated as hedging instruments						$	267											$	3,419
Total derivative instruments						$	267											$	4,199

						December 31, 2023
						Other Current Assets												Other Current Liabilities
Derivatives designated as hedging instruments:
Commodity swap contracts						$	—											$	344
Total derivatives designated as hedging instruments						$	—											$	344
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts						$	1,778											$	1,400
Total derivatives not designated as hedging instruments						$	1,778											$	1,400
Total derivative instruments						$	1,778											$	1,744

The following table presents the pretax amounts related to derivative instruments designated as cash flow hedges affecting accumulated other comprehensive income (loss) and our condensed consolidated statements of operations for the six months ended June 30, 2024 and 2023 (in thousands):

												Commodity Swap Contracts
Balance as of December 31, 2023												$	(1,493)
Amounts recognized in other comprehensive income (loss)												(873)
Amount reclassified to cost of sales												1,495
Balance as of June 30, 2024												$	(871)
Balance as of December 31, 2022												$	(7,242)
Amounts recognized in other comprehensive income (loss)												(984)
Amount reclassified to cost of sales												4,665
Balance as of June 30, 2023												$	(3,561)

The following table presents the effect of derivative instruments not designated as hedges on our condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023 (in thousands):

												Amount of Loss Recognized in Income Statement
												Three Months Ended June 30,												Six Months Ended June 30,
						Income Statement Line Item						2024						2023						2024						2023
Foreign exchange forward contracts						Foreign currency loss, net						$	(6,859)					$	(9,418)					(15,808)						(14,101)

Foreign Currency Risk

Transaction Exposure and Economic Hedging

Many of our subsidiaries have assets and liabilities (primarily cash, receivables, deferred taxes, payables, accrued expenses, lease liabilities, debt, and solar module collection and recycling liabilities) that are denominated in currencies other than the subsidiaries’ functional currencies. Changes in the exchange rates between the functional currencies of our subsidiaries and the other currencies in which these assets and liabilities are denominated will create fluctuations in our reported condensed consolidated statements of operations. We may enter into foreign exchange forward contracts or other financial instruments to economically hedge assets and liabilities against the effects of currency exchange rate fluctuations. The gains and losses on such foreign exchange forward contracts will economically offset all or part of the transaction gains and losses that we recognize in earnings on the related foreign currency denominated assets and liabilities.

We also enter into foreign exchange forward contracts to economically hedge balance sheet and other exposures related to transactions between certain of our subsidiaries and transactions with third parties. Such contracts are considered economic hedges and do not qualify for hedge accounting. Accordingly, we recognize gains or losses from the fluctuations in foreign exchange rates and the fair value of these derivative contracts in “Foreign currency loss, net” on our condensed consolidated statements of operations.

As of June 30, 2024 and December 31, 2023, the notional values of our foreign exchange forward contracts that do not qualify for hedge accounting were as follows (notional amounts and U.S. dollar equivalents in millions):

						June 30, 2024
Transaction						Currency						Notional Amount						USD Equivalent
Sell						Canadian dollar						CAD 4.2						$3.1
Purchase						Euro						€148.1						$158.5
Sell						Euro						€15.7						$16.8
Purchase						Indian rupee						INR 7,710.0						$92.4
Sell						Indian rupee						INR 72,554.5						$869.9
Sell						Japanese yen						¥563.6						$3.5
Purchase						Malaysian ringgit						MYR 186.0						$39.4
Sell						Malaysian ringgit						MYR 12.4						$2.6
Sell						Mexican peso						MXN 34.6						$1.9
Purchase						Singapore dollar						SGD 25.8						$19.0
Sell						Singapore dollar						SGD 18.8						$13.9

						December 31, 2023
Transaction						Currency						Notional Amount						USD Equivalent
Sell						Canadian dollar						CAD 4.2						$3.2
Sell						Chilean peso						CLP 1,372.6						$1.6
Purchase						Euro						€98.3						$108.7
Sell						Euro						€14.1						$15.6
Sell						Indian rupee						INR 62,967.4						$756.9
Purchase						Japanese yen						¥1,053.6						$7.5
Sell						Japanese yen						¥705.2						$5.0
Purchase						Malaysian ringgit						MYR 160.7						$35.0
Sell						Mexican peso						MXN 34.6						$2.0
Purchase						Singapore dollar						SGD 6.5						$4.9

Commodity Price Risk

From time to time, we use commodity swap contracts to mitigate our exposure to commodity price fluctuations for certain raw materials used in the production of our modules. During the year ended December 31, 2022, we entered into various commodity swap contracts to hedge a portion of our forecasted cash flows for purchases of aluminum frames between July 2022 and December 2023. Such swaps had an aggregate initial notional value based on metric tons of forecasted aluminum purchases, equivalent to $70.5 million, and entitled us to receive a three-month average London Metals Exchange price for aluminum while requiring us to pay certain fixed prices. The notional amount of the commodity swap contracts proportionately adjusted with forecasted purchases of aluminum frames.

During the six months ended June 30, 2024, we entered into various commodity swap contracts to hedge a portion of our forecasted cash flows for purchases of steel between April 2024 and December 2024. Such swaps had an aggregate initial notional value based on short tons of forecasted steel purchases, equivalent to $7.6 million, and entitle us to receive the price based on the U.S. Midwest Hot-Rolled Coil Steel Index while requiring us to pay certain fixed prices. The notional amount of the commodity swap contracts proportionately adjusts with forecasted purchases of steel. As of June 30, 2024, the notional value associated with these contracts was $3.2 million.

These commodity swap contracts qualify for accounting as cash flow hedges in accordance with ASC 815, and we designated them as such. We report unrealized gains or losses on such contracts in “Accumulated other comprehensive loss” and subsequently reclassify applicable amounts into earnings when the hedged transactions occur and impact earnings. We determined that these derivative financial instruments were highly effective as cash flow hedges as of June 30, 2024 and December 31, 2023. In the following 12 months, we expect to reclassify into earnings $0.9 million of net unrealized losses related to these commodity swap contracts that are included in “Accumulated other comprehensive loss” at June 30, 2024 as we realize the earnings effects of the related forecasted transactions.

7. Leases

Our lease arrangements include land associated with our corporate and administrative offices, land for our manufacturing facilities, and certain of our manufacturing equipment. Such leases primarily relate to assets located in the United States, Malaysia, India, and Vietnam.

The following table presents certain quantitative information related to our lease arrangements for the three and six months ended June 30, 2024 and 2023, and as of June 30, 2024 and December 31, 2023 (in thousands):

						Three Months Ended June 30,												Six Months Ended June 30,
						2024						2023						2024						2023
Finance lease cost:
Amortization of right-of-use assets						$	120					$	—					$	236					$	—
Interest on lease liabilities						254						—						484						—
Operating lease cost						3,228						3,014						6,449						5,951
Variable lease cost						723						1,121						1,432						2,016
Short-term lease cost						294						98						478						168
Total lease cost						$	4,619					$	4,233					$	9,079					$	8,135
Cash paid for amounts included in the measurement of:
Operating lease liabilities																		$	6,123					$	5,721
Finance lease liabilities																		110						—
Lease assets obtained in exchange for:
Operating lease liabilities																		$	532					$	1,080
Finance lease liabilities																		3,428						—
						June 30, 2024												December 31, 2023
						Operating Leases						Finance Leases						Operating Leases						Finance Leases
Lease assets						$	79,593					$	20,241					$	84,419					$	17,049
Lease liabilities – current						10,272						534						10,307						51
Lease liabilities – noncurrent						31,846						20,382						36,662						17,063
Weighted-average remaining lease term						4 years						36 years						5 years						40 years
Weighted-average discount rate						5.2		%				5.9		%				5.2		%				5.4		%

As of June 30, 2024, the future payments associated with our lease liabilities were as follows (in thousands):

						Operating Leases						Finance Leases
Remainder of 2024						$	6,029					$	271
2025						11,539						587
2026						9,865						1,405
2027						7,317						1,405
2028						6,950						1,407
2029						5,285						1,442
Thereafter						13						47,539
Total future payments						46,998						54,056
Less: interest						(4,880)						(33,140)
Total lease liabilities						$	42,118					$	20,916

8. Fair Value Measurements

The following is a description of the valuation techniques that we use to measure the fair value of assets and liabilities that we measure and report at fair value on a recurring basis:

*•*Cash Equivalents and Restricted Cash Equivalents. At June 30, 2024 and December 31, 2023, our cash equivalents and restricted cash equivalents consisted of money market funds. We value our cash equivalents and restricted cash equivalents using observable inputs that reflect quoted prices for securities with identical characteristics and classify the valuation techniques that use these inputs as Level 1.

*•*Marketable Securities and Restricted Marketable Securities. At June 30, 2024 and December 31, 2023, our marketable securities consisted of foreign debt, U.S. debt, and time deposits, and our restricted marketable securities consisted of foreign and U.S. government obligations, supranational debt, and U.S. debt. We value our marketable securities and restricted marketable securities using observable inputs that reflect quoted prices for securities with identical characteristics or quoted prices for securities with similar characteristics and other observable inputs (such as interest rates that are observable at commonly quoted intervals). Accordingly, we classify the valuation techniques that use these inputs as either Level 1 or Level 2 depending on the inputs used. We also consider the effect of our counterparties’ credit standing in these fair value measurements.

*•*Derivative Assets and Liabilities. At June 30, 2024 and December 31, 2023, our derivative assets and liabilities consisted of foreign exchange forward contracts involving major currencies and commodity swap contracts involving major commodity prices. Since our derivative assets and liabilities are not traded on an exchange, we value them using standard industry valuation models. As applicable, these models project future cash flows and discount the amounts to a present value using market-based observable inputs, including credit risk, foreign exchange rates, forward and spot prices for currencies, and forward prices for commodities. These inputs are observable in active markets over the contract term of the derivative instruments we hold, and accordingly, we classify the valuation techniques as Level 2. In evaluating credit risk, we consider the effect of our counterparties’ and our own credit standing in the fair value measurements of our derivative assets and liabilities, respectively.

At June 30, 2024 and December 31, 2023, the fair value measurements of our assets and liabilities measured on a recurring basis were as follows (in thousands):

												Fair Value Measurements at Reporting Date Using
						June 30, 2024						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents:
Money market funds						$	759,148					$	759,148					$	—					$	—
Restricted cash equivalents:
Money market funds						1,801						1,801						—						—
Marketable securities:
U.S. debt						8,517						—						8,517						—
Time deposits						28,913						28,913						—						—
Restricted marketable securities						200,243						—						200,243						—
Derivative assets						267						—						267						—
Total assets						$	998,889					$	789,862					$	209,027					$	—
Liabilities:
Derivative liabilities						$	4,199					$	—					$	4,199					$	—

												Fair Value Measurements at Reporting Date Using
						December 31, 2023						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents:
Money market funds						$	1,105,684					$	1,105,684					$	—					$	—
Restricted cash equivalents:
Money market funds						6,192						6,192						—						—
Marketable securities:
Foreign debt						34,895						—						34,895						—
U.S. debt						44,089						—						44,089						—
Time deposits						76,511						76,511						—						—
Restricted marketable securities						198,310						—						198,310						—
Derivative assets						1,778						—						1,778						—
Total assets						$	1,467,459					$	1,188,387					$	279,072					$	—
Liabilities:
Derivative liabilities						$	1,744					$	—					$	1,744					$	—

Fair Value of Financial Instruments

At June 30, 2024 and December 31, 2023, the carrying values and fair values of our financial instruments not measured at fair value were as follows (in thousands):

						June 30, 2024												December 31, 2023
						Carrying Value						Fair Value						Carrying Value						Fair Value
Assets:
Government grants receivable - noncurrent						$	607,086					$	569,686					$	152,208					$	107,111
Liabilities:
Long-term debt, including current maturities (1)						$	500,000					$	481,389					$	500,000					$	453,015

——————————

(1)Excludes unamortized issuance costs and debt arrangements with an original maturity of less than one year.

The carrying values in our condensed consolidated balance sheets of our current trade accounts receivable, restricted cash, current government grants receivable, accounts payable, accrued expenses, and debt arrangements with an original maturity of less than one year approximated their fair values due to their nature and relatively short maturities; therefore, we excluded them from the foregoing table. The fair value measurements for our noncurrent government grants receivable and long-term debt are considered Level 2 measurements under the fair value hierarchy.

Credit Risk

We have certain financial and derivative instruments that subject us to credit risk. These consist primarily of cash, cash equivalents, marketable securities, accounts receivable, restricted cash, restricted cash equivalents, restricted marketable securities, foreign exchange forward contracts, and commodity swap contracts. We are exposed to credit losses in the event of nonperformance by the counterparties to our financial and derivative instruments. We place these instruments with various high-quality financial institutions and limit the amount of credit risk from any one counterparty. We monitor the credit standing of our counterparty financial institutions. Our net sales are primarily concentrated among a limited number of customers. We monitor the financial condition of our customers and perform credit evaluations whenever considered necessary. We typically require some form of payment security from our customers, including, but not limited to, advance payments, parent guarantees, letters of credit, bank guarantees, or surety bonds.

9. Debt

Our debt arrangements consisted of the following at June 30, 2024 and December 31, 2023 (in thousands):

												Balance (USD)
Loan Agreement						Currency						June 30, 2024						December 31, 2023
Revolving Credit Facility						USD						$	—					$	—
India Credit Facility						USD						500,000						500,000
India JPM Working Capital Facility						INR						—						60,827
India HSBC Working Capital Facility						INR						59,352						—
Total debt principal												559,352						560,827
Less: unamortized issuance costs												(452)						(521)
Total debt												558,900						560,306
Less: current portion												(140,175)						(96,238)
Noncurrent portion												$	418,725					$	464,068

Revolving Credit Facility

In June 2023, we entered into a credit agreement with several financial institutions as lenders and JPMorgan Chase Bank, N.A. as administrative agent, which provides us with a senior secured credit facility (the “Revolving Credit Facility”) with an aggregate borrowing capacity of $1.0 billion. Borrowing under the Revolving Credit Facility bears interest at a rate per annum equal to, at our option, (i) the Term Secured Overnight Financing Rate (“Term SOFR”), plus a credit spread of 0.10%, plus a margin that ranges from 1.25% to 2.25% or (ii) an alternate base rate as defined in the credit agreement, plus a margin that ranges from 0.25% to 1.25%. The margins under the Revolving Credit Facility are based on the Company’s net leverage ratio or, if the Company elects to switch to a credit ratings-based system after the investment grade ratings trigger date occurs (as defined in the credit agreement), the Company’s public debt rating.

In addition to paying interest on outstanding principal under the Revolving Credit Facility, we are required to pay an unused commitment fee that ranges from 0.125% to 0.375% per annum based on the same factors discussed above and the daily unused commitments under the facility. We are also required to pay (i) a letter of credit fee based on the applicable margin for Term SOFR loans on the face amount of each letter of credit, (ii) a letter of credit fronting fee as agreed by the Company and such issuing lender, and (iii) other customary letter of credit fees. Our Revolving Credit Facility matures in June 2028.

As of June 30, 2024 and December 31, 2023, we had no outstanding debt or letters of credit under our Revolving Credit Facility. Loans and letters of credit issued under the Revolving Credit Facility are secured by liens on substantially all of the Company’s tangible and intangible assets.

India Credit Facility

In July 2022, FS India Solar Ventures Private Limited (“FSISV”), our indirect wholly-owned subsidiary, entered into a finance agreement (the “India Credit Facility”) with the U.S. International Development Finance Corporation for aggregate borrowing of up to $500.0 million for the development and construction of a solar module manufacturing facility in India. Principal on the India Credit Facility is payable in scheduled semi-annual installments beginning in the second half of 2024 through the facility’s expected maturity in August 2029. The India Credit Facility is guaranteed by First Solar, Inc.

India JPM Working Capital Facility

In December 2022, FSISV entered into a working capital facility agreement (the “India JPM Working Capital Facility”) with JPMorgan Chase Bank, N.A. for the issuance of bank guarantees, bonds, and other similar forms of security. During 2023, the India JPM Working Capital Facility was amended to include certain working capital loans of up to INR 6.2 billion ($74.8 million). The India JPM Working Capital Facility is guaranteed by First Solar, Inc. As of June 30, 2024, there was no balance outstanding on the India JPM Working Capital Facility.

India HSBC Working Capital Facility

In February 2024, FSISV entered into a working capital facility agreement (the “India HSBC Working Capital Facility”) with the Hongkong and Shanghai Banking Corporation Limited, which provides certain working capital loans of up to INR 8.2 billion ($98.4 million). The outstanding balance matures in the third quarter of 2024. The India HSBC Working Capital Facility is guaranteed by First Solar, Inc.

Interest Rates

As of June 30, 2024, the borrowing rates for our outstanding debt arrangements were as follows:

Loan Agreement						Interest Rate Description						Interest Rate
India Credit Facility						U.S. Treasury Constant Maturity Yield plus 1.75%						5.57%
India HSBC Working Capital Facility (1)						India Treasury bill rate plus 1.5% to 1.6%						8.36%

——————————

(1)The weighted-average interest rate for our outstanding short-term debt arrangements was 8.36% as of June 30, 2024.

10. Commitments and Contingencies

Commercial Commitments

During the normal course of business, we enter into commercial commitments in the form of letters of credit and surety bonds to provide financial and performance assurance to third parties. As of June 30, 2024, the issued and outstanding amounts and available capacities under these commitments were as follows (in millions):

						Issued and Outstanding						Available Capacity
Revolving Credit Facility (1)						$	—					$	250.0
Bilateral facilities (2)						178.5						126.4
Surety bonds						28.6						225.0

——————————

(1)Our Revolving Credit Facility provides us with a sub-limit of $250.0 million to issue letters of credit, at a fee based on the applicable margin for Term SOFR loans, a fronting fee, and other customary letter of credit fees.

(2)Of the total letters of credit issued under the bilateral facilities, $9.2 million was secured with cash.

Product Warranties

When we recognize revenue for sales of modules, we accrue liabilities for the estimated future costs of meeting our limited warranty obligations. We estimate our limited product warranty liability for power output and defects in materials and workmanship under normal use and service conditions based on return rates for each series of module technology. We make and revise these estimates based primarily on the number of solar modules under warranty installed at customer locations, our historical experience with and projections of warranty claims, and our estimated per-module replacement costs. We also monitor our expected future module performance through certain quality and reliability testing and actual performance in certain field installation sites. From time to time, we have taken remediation actions with respect to affected modules beyond our limited warranties and may elect to do so in the future, in which case we would incur additional expenses. Such potential voluntary future remediation actions beyond our limited warranty obligations may be material to our condensed consolidated statements of operations if we commit to any such remediation actions.

Product warranty activities during the three and six months ended June 30, 2024 and 2023 were as follows (in thousands):

						Three Months Ended June 30,												Six Months Ended June 30,
						2024						2023						2024						2023
Product warranty liability, beginning of period						$	25,194					$	33,315					$	25,491					$	33,787
Accruals for new warranties issued						1,653						851						3,050						1,845
Settlements						(3,152)						(1,867)						(5,344)						(3,193)
Changes in estimate of product warranty liability						—						(330)						498						(470)
Product warranty liability, end of period						$	23,695					$	31,969					$	23,695					$	31,969
Current portion of warranty liability						$	5,684					$	9,243					$	5,684					$	9,243
Noncurrent portion of warranty liability						$	18,011					$	22,726					$	18,011					$	22,726

Indemnifications

In certain limited circumstances, we have provided indemnifications to customers or other parties under which we are contractually obligated to compensate such parties for losses they suffer resulting from a breach of a representation, warranty, or covenant; the resolution of specific matters associated with a project’s development or construction; guarantees of a third party’s payment or performance obligations; or any disallowance or lack of the right to claim all or any portion of certain tax credits. For contracts that have such indemnification provisions, we initially recognize a liability under ASC 460 for the estimated premium that would be required by a guarantor to issue the same indemnity in a standalone arm’s-length transaction with an unrelated party. We may base these estimates on the cost of insurance or other instruments that cover the underlying risks being indemnified and may purchase such instruments to mitigate our exposure to potential indemnification payments. We subsequently measure such liabilities at the greater of the initially estimated premium or the contingent liability required to be recognized under ASC 450. We recognize any indemnification liabilities as a reduction of earnings associated with the related transaction.

After an indemnification liability is recorded, we derecognize such amount pursuant to ASC 460 depending on the nature of the indemnity, which derecognition typically occurs upon expiration or settlement of the arrangement, and any contingent aspects of the indemnity are accounted for in accordance with ASC 450. As of June 30, 2024 and December 31, 2023, we accrued $2.5 million and $3.3 million of current indemnification liabilities, respectively. As of June 30, 2024, the maximum potential amount of future payments under our indemnifications was $688.8 million.

Contingent Consideration

As part of our acquisition of Evolar AB (“Evolar”) in May 2023, we agreed to pay additional consideration of up to $42.5 million to the selling shareholders contingent upon the successful achievement of certain technical milestones. As of December 31, 2023, we recorded $7.5 million of current liabilities and $11.0 million of long-term liabilities for such contingent obligations based on their estimated fair values. During the three months ended June 30, 2024, we paid $7.5 million of contingent consideration to the selling shareholders, and $11.0 million remains in our long-term liabilities as of June 30, 2024.

Solar Module Collection and Recycling Liability

We previously established a module collection and recycling program, which has since been discontinued, to collect and recycle modules sold and covered under such program once the modules reach the end of their service lives. For legacy customer sales contracts that are covered under this program, we agreed to pay the costs for the collection and recycling of qualifying solar modules, and the end-users agreed to notify us, disassemble their solar power systems, package the solar modules for shipment, and revert ownership rights over the modules back to us at the end of the modules’ service lives. Accordingly, we recorded any collection and recycling obligations within “Cost of sales” at the time of sale based on the estimated cost to collect and recycle the covered solar modules.

We estimate the cost of our collection and recycling obligations based on the present value of the expected future cost of collecting and recycling the solar modules, which includes estimates for the cost of packaging materials; the cost of freight from the solar module installation sites to a recycling center; material, labor, and capital costs; and by-product credits for certain materials recovered during the recycling process. We base these estimates on our experience collecting and recycling solar modules and certain assumptions regarding costs at the time the solar modules will be collected and recycled. In the periods between the time of sale and the related settlement of the collection and recycling obligation, we accrete the carrying amount of the associated liability and classify the corresponding expense within “Selling, general and administrative” expense on our condensed consolidated statements of operations.

Our module collection and recycling liability was $134.8 million and $135.1 million as of June 30, 2024 and December 31, 2023, respectively. See Note 3. “Restricted Marketable Securities” to our condensed consolidated financial statements for more information about our arrangements for funding this liability.

Legal Proceedings

In July 2021, Southern Power Company and certain of its affiliates (“Southern”) filed an arbitration demand with the American Arbitration Association against two subsidiaries of the Company, alleging breach of the engineering, procurement, and construction (“EPC”) agreements for five projects in the United States, for which the Company’s subsidiaries served as the EPC contractor. The arbitration demand asserts breach of obligations to design and engineer the projects in accordance with the EPC agreements, particularly as such obligations relate to the procurement of tracker systems and inverters. The Company and its subsidiaries denied the claims, and defended the claims in arbitration hearings, which concluded in February 2023. In May 2023, the parties submitted their final proposals of individual award claims to the arbitration panel. In July 2023, the arbitration panel entered an interim award to Southern for $35.6 million, which was paid during the year ended December 31, 2023. As a result, we recognized a loss for such interim award in our results of operations for the year ended December 31, 2023. The final arbitration award, which did not change the results of the interim award, was signed on November 6, 2023. On February 2, 2024, First Solar commenced an action in the New York County Supreme Court seeking to vacate certain aspects of the final award. On May 6, 2024, such action was denied. First Solar has elected not to appeal, and considers this matter closed.

During the year ended December 31, 2022, we received several indemnification demands from certain customers, for whom we provided EPC services, regarding claims that such customers’ PV tracker systems infringe, in part, on patents owned by Rovshan Sade (“Plaintiff”), the owner of a company called Trabant Solar, Inc. In January 2023, we were notified by two of our customers that Plaintiff served them with patent infringement complaints, and we have assumed the defense of these claims. We have conducted due diligence on the patents and claims and believe that we will prevail in the actions. In April 2023, we commenced an Inter Partes Review (“IPR”) before the United States Patent and Trademark Office seeking to invalidate such claims. In November 2023, the United States Patent Trial and Appeal Board declined to hear the First Solar IPR. In July 2024, Plaintiff’s counsel filed a motion seeking to withdraw as counsel. The court granted the motion and issued a 45-day stay of all proceedings while Plaintiff seeks new representation. Because all case discovery has been stayed until September 24, 2024, at this time we are not in a position to assess the likelihood of any potential loss or adverse effect on our financial condition or to estimate the amount or range of possible loss, if any, from these actions.

In April 2019, a subcontractor of First Solar sustained certain injuries while performing work at a former project site and, in May 2019, commenced legal action against a subsidiary of the Company. In June 2023, a jury awarded damages of approximately $51.3 million to the plaintiff. On September 21, 2023, the Superior Court of California for Monterey County ruled, in response to a motion for remittitur filed by the Company, that the damages awarded to the plaintiff were excessive and reduced the award from $51.3 million to $21.8 million. The plaintiff and defendant have appealed and cross appealed varying aspects of the verdict and the remittitur. Accordingly, due to the uncertainty surrounding the multiple decisions and appeals, as of June 30, 2024, we recorded a $21.8 million accrued litigation payable included in “Other current liabilities” in our condensed consolidated balance sheet. We believe the full amount of awarded damages will be covered by our various insurance policies. Accordingly, we also recorded a $21.8 million receivable included in “Other current assets” in our condensed consolidated balance sheet as of June 30, 2024. The plaintiff did not accept the reduced award by the court ordered deadline of October 10, 2023, and, as a result, the $21.8 million award has been vacated and a new trial will be scheduled. We, in conjunction with our insurance carriers, are challenging the initial verdict in an appellate court, and the plaintiff is cross appealing from the decision to reduce the award, among other issues, stemming from the trial. The parties are awaiting a briefing schedule from the Appellate Court.

On September 29, 2023 and June 5, 2024, the Company received subpoenas from the Division of Enforcement of the SEC seeking documents and information relating to the Company’s operations in India, the Company's entry into a PV module supply agreement with an India-based customer, and certain aspects of the Company's technology roadmap, among other things. The Company is cooperating with the SEC and cannot predict the ultimate timing, scope, or outcome of this matter.

We are party to other legal matters and claims in the normal course of our operations. While we believe the ultimate outcome of these matters and claims will not have a material adverse effect on our financial position, results of operations, or cash flows, the outcome of such matters and claims is not determinable with certainty, and negative outcomes may adversely affect us.

11. Revenue from Contracts with Customers

We recognize revenue for module sales at a point in time following the transfer of control of the modules to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. Such contracts may contain provisions that require us to pay the customer liquidated damages if we fail to ship or deliver modules by scheduled dates. For certain contracts, we may also be required to pay liquidated damages if we fail to deliver modules that meet certain U.S. domestic content requirements. We recognize these liquidated damages as a reduction of revenue in the period we transfer control of the modules to the customer.

The following table reflects the changes in our contract liabilities, which we classify as “Deferred revenue,” for the six months ended June 30, 2024 (in thousands):

						June 30, 2024						December 31, 2023						Six Month Change
Deferred revenue						$	1,948,348					$	2,005,183					$	(56,835)					(3)		%

During the six months ended June 30, 2024, our contract liabilities decreased by $56.8 million primarily due to the recognition of revenue for sales of solar modules for which payment was received in prior years. Additionally, we restructured the payment security for one of our customer contracts, which resulted in the return of previously received advance payments in exchange for a letter of credit. These decreases were partially offset by advance payments received in the current year for future sales of solar modules. During the six months ended June 30, 2024 and 2023, we recognized revenue of $221.3 million and $215.5 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods.

As of June 30, 2024, we had entered into contracts with customers for the future sale of 74.6 GW of solar modules for an aggregate transaction price of $22.3 billion, which we expect to recognize as revenue through 2030 as we transfer control of the modules to the customers. Such aggregate transaction price excludes estimates of variable consideration associated with (i) future module technology improvements, including enhancements to certain energy related attributes, (ii) sales freight in excess of defined thresholds, (iii) changes to certain commodity prices, and (iv) the module wattage committed for delivery, among other things. As a result, the revenue recognized from such contracts may increase or decrease in future periods relative to the original transaction price. These contracts may also be subject to amendments as agreed to by the parties to the contract. These amendments may increase or decrease the volume of modules to be sold under the contract, change delivery schedules, or otherwise adjust the expected revenue under these contracts.

See Note 16. “Segment Reporting” for the disaggregation of revenue by reportable segment.

12. Share-Based Compensation

The following table presents share-based compensation expense recognized in our condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023 (in thousands):

						Three Months Ended June 30,												Six Months Ended June 30,
						2024						2023						2024						2023
Cost of sales						$	1,388					$	1,349					$	2,415					$	2,275
Selling, general and administrative						6,005						5,981						10,874						10,763
Research and development						1,006						1,035						1,926						1,912
Production start-up						1						46						(24)						61
Total share-based compensation expense						$	8,400					$	8,411					$	15,191					$	15,011

As of June 30, 2024, we had $44.1 million of unrecognized share-based compensation expense related to unvested restricted stock and performance units, which we expect to recognize over a weighted-average period of approximately 1.4 years.

In March 2020, the compensation committee of our board of directors approved grants of performance units (“PU” or “PUs”) for key executive officers to be earned over a multi-year performance period, which ended in December 2022. Vesting of the 2020 grants of PUs was contingent upon the relative attainment of target contracted revenue, module wattage, and return on capital metrics. In March 2023, the compensation committee certified the achievement of the vesting conditions applicable to the grants, which approximated the target level of performance. Accordingly, each participant received one share of common stock for each vested PU granted, net of any tax withholdings.

In May 2021, the compensation committee approved grants of PUs for key executive officers to be earned over a multi-year performance period, which ended in December 2023. Vesting of the 2021 grants of PUs was contingent upon the relative attainment of target contracted revenue, cost per watt, incremental average selling price, and operating income metrics. In February 2024, the compensation committee certified the achievement of the vesting conditions applicable to the grants, which approximated the maximum level of performance. Accordingly, each participant received one share of common stock for each vested PU granted, net of any tax withholdings.

In March 2022, the compensation committee approved additional grants of PUs for key executive officers. Such grants are expected to be earned over a multi-year performance period ending in December 2024. Vesting of the 2022 grants of PUs is contingent upon the relative attainment of target contracted revenue, cost per watt, and return on capital metrics.

In March 2023, the compensation committee approved additional grants of PUs for key executive officers. Such grants are expected to be earned over a multi-year performance period ending in December 2025. Vesting of the 2023 grants of PUs is contingent upon the relative attainment of target contracted revenue, production, and operating margin metrics.

In March 2024, the compensation committee approved additional grants of PUs for key executive officers. Such grants are expected to be earned over a multi-year performance period ending in December 2026. Vesting of the 2024 grants of PUs is contingent upon the relative attainment of target contracted revenue, production, incremental average selling price, and operating margin metrics.

Vesting of PUs is also contingent upon the employment of program participants through the applicable vesting dates, with limited exceptions in case of death, disability, a qualifying retirement, or a change-in-control of First Solar. Outstanding PUs are included in the computation of diluted net income per share based on the number of shares that would be issuable if the end of the reporting period were the end of the contingency period.

13. Income Taxes

The Inflation Reduction Act. In August 2022, the U.S. President signed into law the IRA, which revised U.S. tax law by, among other things, including a new corporate alternative minimum tax of 15% on certain large corporations, imposing a 1% excise tax on stock buybacks, and providing various incentives to address climate change, including the introduction of the advanced manufacturing production credit under Section 45X of the IRC. The provisions of the IRA are generally effective for tax years beginning after 2022. Certain developments to technical guidance and regulations include the following:

• In May 2023, the U.S. Treasury Department and the IRS issued initial guidance on various sections of the IRC, including Section 45X.

• In December 2023, the U.S. Treasury Department and the IRS issued a notice of proposed rulemaking and public hearing providing initial guidance confirming certain key aspects of the Section 45X credit.

• In March 2024, the U.S. Treasury Department and the IRS issued final regulations on the direct payment election under Section 6417 of the IRC. The final regulations apply to tax years ending on or after March 11, 2024, but taxpayers may choose to apply the rules in the final regulations in taxable years ending before March 11, 2024, provided the final regulations are applied in their entirety and in a consistent manner. The final regulations mostly adopted and confirmed the proposed regulations previously issued in June 2023.

• In April 2024, the U.S. Treasury Department and the IRS issued final regulations on the elective transfer provisions under Section 6418 of the IRC. The final regulations apply to taxable years ending on or after April 30, 2024, but taxpayers may choose to apply the rules in the final regulations in taxable years ending before April 30, 2024, provided the final regulations are applied in their entirety and in a consistent manner. The final regulations mostly adopted and confirmed the proposed regulations previously issued in June 2023.

Given the complexities of the IRA, which is pending additional technical guidance and final regulations from the U.S. Treasury Department and the IRS, we expect to continue to monitor these developments and evaluate their potential future impact to our results of operations.

Foreign tax credit regulations. In November 2022, the U.S. Treasury Department released proposed foreign tax credit (“FTC”) regulations addressing various aspects of the U.S. FTC regime. Among other items, these proposed regulations provide certain exceptions for determining creditable foreign withholding taxes. Taxpayers may rely on these proposed regulations, which apply to tax years beginning on or after December 28, 2021. As a result of these proposed regulations, foreign withholding taxes will continue to be creditable. In July 2023, the U.S. Treasury Department issued Notice 2023-55, which provides temporary relief for taxpayers in determining whether a foreign tax is eligible for a foreign tax credit for taxable years beginning on or after December 28, 2021, and ending before December 31, 2023. In December 2023, the U.S. Treasury Department issued Notice 2023-80, which extends this relief period until future guidance is issued.

Pillar Two. In December 2021, the Organization for Economic Co-operation and Development released model rules for a new global minimum tax framework (“Pillar Two”). Certain governments in countries in which we operate have enacted local Pillar Two legislation, with an effective date from January 1, 2024. We currently do not expect Pillar Two to have a material impact on our 2024 financial statements. As these legislative changes develop and expand, we expect to continue to monitor the changes and evaluate their potential impact to our results of operations.

Our effective tax rate was 7.4% and 4.9% for the six months ended June 30, 2024 and 2023, respectively. The increase in our effective tax rate was primarily driven by lower excess tax benefits associated with share-based compensation. Our provision for income taxes differed from the amount computed by applying the U.S. statutory federal income tax rate of 21% primarily due to the effect of tax law changes associated with the IRA described above.

During the three months ended June 30, 2024, we reversed our position to indefinitely reinvest the accumulated earnings of a foreign subsidiary and recorded discrete tax expense of approximately $6 million. There were no other changes to our indefinite reinvestment assertions during the period.

Our Malaysian subsidiary has been granted a long-term tax holiday that expires in 2027. The tax holiday, which generally provides for a full exemption from Malaysian income tax, is conditional upon our continued compliance with certain employment and investment thresholds, which we are currently in compliance with and expect to continue to comply with through the expiration of the tax holiday in 2027.

Our Vietnamese subsidiary has been granted a long-term tax incentive that generally provides a full exemption from Vietnamese income tax through 2023, followed by reduced annual tax rates of 5% through 2032 and 10% through 2036. Such long-term tax incentive is conditional upon our continued compliance with certain revenue and research and development (“R&D”) spending thresholds, which we are currently in compliance with and expect to continue to comply with through the expiration of the tax holiday.

We are subject to audit by federal, state, local, and foreign tax authorities. We are currently under examination in India, Chile, Singapore, the United States, and the State of Georgia. We believe that adequate provisions have been made for any adjustments that may result from tax examinations. However, the outcome of tax examinations cannot be predicted with certainty. If any issues addressed by our tax examinations are not resolved in a manner consistent with our expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs.

14. Net Income per Share

The calculation of basic and diluted net income per share for the three and six months ended June 30, 2024 and 2023 was as follows (in thousands, except per share amounts):

						Three Months Ended June 30,												Six Months Ended June 30,
						2024						2023						2024						2023
Basic net income per share
Numerator:
Net income						$	349,356					$	170,579					$	585,972					$	213,140
Denominator:
Weighted-average common shares outstanding						107,042						106,827						107,011						106,791
Diluted net income per share
Denominator:
Weighted-average common shares outstanding						107,042						106,827						107,011						106,791
Effect of restricted stock and performance units						483						451						491						465
Weighted-average shares used in computing diluted net income per share						107,525						107,278						107,502						107,256
Net income per share:
Basic						$	3.26					$	1.60					$	5.48					$	2.00
Diluted						$	3.25					$	1.59					$	5.45					$	1.99

The following table summarizes the potential shares of common stock that were excluded from the computation of diluted net income per share for the three and six months ended June 30, 2024 and 2023 as such shares would have had an anti-dilutive effect (in thousands):

						Three Months Ended June 30,												Six Months Ended June 30,
						2024						2023						2024						2023
Anti-dilutive shares						—						—						—						24

15. Accumulated Other Comprehensive Loss

The following table presents the changes in accumulated other comprehensive loss, net of tax, for the six months ended June 30, 2024 (in thousands):

						Foreign Currency Translation Adjustment						Unrealized Gain (Loss) on Marketable Securities and Restricted Marketable Securities						Unrealized Gain (Loss) on Derivative Instruments						Total
Balance as of December 31, 2023						$	(118,366)					$	(54,610)					$	(1,155)					$	(174,131)
Other comprehensive loss before reclassifications						(11,477)						(3,332)						(873)						(15,682)
Amounts reclassified from accumulated other comprehensive loss						—						(11)						1,495						1,484
Net tax effect						—						143						(131)						12
Net other comprehensive (loss) income						(11,477)						(3,200)						491						(14,186)
Balance as of June 30, 2024						$	(129,843)					$	(57,810)					$	(664)					$	(188,317)

The following table presents the pretax amounts reclassified from accumulated other comprehensive loss into our condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023 (in thousands):

Comprehensive Income Components						Income Statement Line Item						Three Months Ended June 30,												Six Months Ended June 30,
						2024						2023						2024						2023
Foreign currency translation adjustment:
Foreign currency translation adjustment						Cost of sales						$	—					$	—					$	—					$	146
Foreign currency translation adjustment						Other (expense) income, net						—						—						—						(10)
Total foreign currency translation adjustment												—						—						—						136
Unrealized gain (loss) on marketable securities and restricted marketable securities						Other (expense) income, net						11						(9)						11						(9)
Unrealized loss on derivative instruments:
Commodity swap contracts						Cost of sales						(346)						(1,997)						(1,495)						(4,665)
Total loss reclassified												$	(335)					$	(2,006)					$	(1,484)					$	(4,538)

16. Segment Reporting

Our primary segment is our modules business, which involves the design, manufacture, and sale of cadmium telluride (“CdTe”) solar modules, which convert sunlight into electricity. Third-party customers of our modules segment include system developers, independent power producers, utilities, commercial and industrial companies, and other system owners and operators. Our residual business operations include certain project development activities, O&M services, the results of operations from PV solar power systems we owned and operated in certain international regions, and the sale of such systems to third-party customers.

See Note 21. “Segment and Geographical Information” in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional discussion of our segment reporting.

The following tables provide a reconciliation of certain financial information for our reportable segment to information presented in our condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 and as of June 30, 2024 and December 31, 2023 (in thousands):

						Three Months Ended June 30, 2024																		Three Months Ended June 30, 2023
						Modules						Other						Total						Modules						Other						Total
Net sales						$	1,008,765					$	1,717					$	1,010,482					$	802,237					$	8,436					$	810,673
Gross profit						498,333						556						498,889						301,917						8,503						310,420
Depreciation and amortization expense						86,432						3						86,435						72,587						2						72,589
						Six Months Ended June 30, 2024																		Six Months Ended June 30, 2023
						Modules						Other						Total						Modules						Other						Total
Net sales						$	1,802,199					$	2,391					$	1,804,590					$	1,338,827					$	20,132					$	1,358,959
Gross profit						844,501						391						844,892						408,811						13,660						422,471
Depreciation and amortization expense						167,494						6						167,500						134,170						4						134,174
						June 30, 2024																		December 31, 2023
						Modules						Other						Total						Modules						Other						Total
Goodwill						$	28,834					$	—					$	28,834					$	29,687					$	—					$	29,687