Item 1. Condensed Consolidated Financial Statements (Unaudited)

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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 September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net sales	$	887,668	$	801,090	$	2,692,258	$	2,160,049
Cost of sales	442,357		424,915		1,402,055		1,361,403
Gross profit	445,311		376,175		1,290,203		798,646
Operating expenses:
Selling, general and administrative	46,293		50,172		138,680		140,528
Research and development	50,197		41,190		144,876		108,445
Production start-up	26,822		12,059		69,681		54,930
Litigation loss	—		—		430		35,590
Total operating expenses	123,312		103,421		353,667		339,493
Gain on sales of businesses, net	—		211		1,115		329
Operating income	321,999		272,965		937,651		459,482
Foreign currency loss, net	(5,158)		(987)		(17,665)		(11,586)
Interest income	22,580		23,254		74,424		74,102
Interest expense, net	(9,008)		(3,734)		(27,983)		(5,897)
Other expense, net	(3,071)		(1,033)		(6,435)		(1,492)
Income before taxes	327,342		290,465		959,992		514,609
Income tax expense	(14,386)		(22,067)		(61,064)		(33,071)
Net income	$	312,956	$	268,398	$	898,928	$	481,538

Net income per share:
Basic	$	2.92	$	2.51	$	8.40	$	4.51
Diluted	$	2.91	$	2.50	$	8.36	$	4.49
Weighted-average number of shares used in per share calculations:
Basic	107,049		106,834		107,015		106,795
Diluted	107,562		107,498		107,514		107,326

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income	$	312,956	$	268,398	$	898,928	$	481,538
Other comprehensive income (loss):
Foreign currency translation adjustments	9,775		(4,942)		(1,702)		(7,635)
Unrealized gain (loss) on marketable securities and restricted marketable securities, net of tax of $(464), $340, $(321) and $23	9,683		(8,696)		6,483		(3,045)
Unrealized (loss) gain on derivative instruments, net of tax of $0, $(214), $(131) and $(1,087)	(1)		719		490		3,527
Other comprehensive income (loss)	19,457		(12,919)		5,271		(7,153)
Comprehensive income	$	332,413	$	255,479	$	904,199	$	474,385

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


	September 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	1,005,130	$	1,946,994
Marketable securities	264,691		155,495
Accounts receivable trade, net	762,138		660,776
Government grants receivable, net	6,659		659,745
Inventories	1,250,629		819,899
Other current assets	528,856		391,900
Total current assets	3,818,103		4,634,809
Property, plant and equipment, net	5,326,121		4,397,285
Deferred tax assets, net	237,868		142,819
Restricted marketable securities	211,130		198,310
Government grants receivable	871,745		152,208
Goodwill	29,585		29,687
Intangible assets, net	56,645		64,511
Inventories	269,675		266,899
Other assets	615,766		478,604
Total assets	$	11,436,638	$	10,365,132
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	265,320	$	207,178
Income taxes payable	98,446		22,134
Accrued expenses	520,835		524,829
Current portion of debt	208,261		96,238
Deferred revenue	645,050		413,579
Other current liabilities	44,253		42,200
Total current liabilities	1,782,165		1,306,158
Accrued solar module collection and recycling liability	139,035		135,123
Long-term debt	373,321		464,068
Deferred revenue	1,320,331		1,591,604
Other liabilities	228,138		180,710
Total liabilities	3,842,990		3,677,663
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value per share; 500,000,000 shares authorized; 107,057,732 and 106,847,475 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively	107		107
Additional paid-in capital	2,892,407		2,890,427
Accumulated earnings	4,869,994		3,971,066
Accumulated other comprehensive loss	(168,860)		(174,131)
Total stockholders’ equity	7,593,648		6,687,469
Total liabilities and stockholders’ equity	$	11,436,638	$	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 September 30, 2024
	Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Amount
Balance at June 30, 2024	107,046	$	107	$	2,886,569	$	4,557,038	$	(188,317)	$	7,255,397
Net income	—	—		—		312,956		—		312,956
Other comprehensive income	—	—		—		—		19,457		19,457
Common stock issued for share-based compensation	16	—		—		—		—		—
Tax withholding related to vesting of restricted stock	(4)	—		(996)		—		—		(996)
Share-based compensation expense	—	—		6,834		—		—		6,834
Balance at September 30, 2024	107,058	$	107	$	2,892,407	$	4,869,994	$	(168,860)	$	7,593,648

	Three Months Ended September 30, 2023
	Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Amount
Balance at June 30, 2023	106,831	$	107	$	2,872,153	$	3,353,429	$	(186,051)	$	6,039,638
Net income	—	—		—		268,398		—		268,398
Other comprehensive loss	—	—		—		—		(12,919)		(12,919)
Common stock issued for share-based compensation	18	—		—		—		—		—
Tax withholding related to vesting of restricted stock	(5)	—		(853)		—		—		(853)
Share-based compensation expense	—	—		8,112		—		—		8,112
Balance at September 30, 2023	106,844	$	107	$	2,879,412	$	3,621,827	$	(198,970)	$	6,302,376

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Nine Months Ended September 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	—	—		—		898,928		—		898,928
Other comprehensive income	—	—		—		—		5,271		5,271
Common stock issued for share-based compensation	338	—		—		—		—		—
Tax withholding related to vesting of restricted stock	(127)	—		(20,144)		—		—		(20,144)
Share-based compensation expense	—	—		22,124		—		—		22,124
Balance at September 30, 2024	107,058	$	107	$	2,892,407	$	4,869,994	$	(168,860)	$	7,593,648

	Nine Months Ended September 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	—	—		—		481,538		—		481,538
Other comprehensive loss	—	—		—		—		(7,153)		(7,153)
Common stock issued for share-based compensation	389	—		—		—		—		—
Tax withholding related to vesting of restricted stock	(154)	—		(31,100)		—		—		(31,100)
Share-based compensation expense	—	—		23,036		—		—		23,036
Balance at September 30, 2023	106,844	$	107	$	2,879,412	$	3,621,827	$	(198,970)	$	6,302,376

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities:
Net income	$	898,928	$	481,538
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, amortization and accretion	299,079		218,303
Share-based compensation	21,987		23,209
Deferred income taxes	(85,343)		(46,053)
Gain on sales of businesses, net	(1,115)		(329)
Other, net	3,238		393
Changes in operating assets and liabilities:
Accounts receivable, trade	(68,823)		(385,046)
Inventories	(434,375)		(262,665)
Government grants receivable	(59,181)		(429,744)
Other assets	(183,127)		(126,073)
Income tax receivable and payable	35,708		(16,809)
Accounts payable and accrued expenses	(8,953)		121,382
Deferred revenue	(13,159)		472,934
Other liabilities	2,139		(9,889)
Net cash provided by operating activities	407,003		41,151
Cash flows from investing activities:
Purchases of property, plant and equipment	(1,212,537)		(1,039,863)
Purchases of marketable securities and restricted marketable securities	(2,014,764)		(3,220,467)
Proceeds from sales and maturities of marketable securities	1,897,997		3,996,439
Acquisitions, net of cash acquired	—		(35,739)
Other investing activities	(12,617)		—
Net cash used in investing activities	(1,341,921)		(299,630)
Cash flows from financing activities:
Proceeds from borrowings under debt arrangements, net of issuance costs	227,654		307,214
Repayment of debt	(205,821)		—
Payments of tax withholdings for restricted shares	(20,144)		(31,100)
Contingent consideration payment and other financing activities	(7,568)		—
Net cash (used in) provided by financing activities	(5,879)		276,114
Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents	(2,805)		(855)
Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	(943,602)		16,780
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	$	1,021,467	$	1,510,242
Supplemental disclosure of noncash investing and financing activities:
Property, plant and equipment acquisitions funded by liabilities	$	264,480	$	185,064
Proceeds to be received from asset-based government grants	$	159,490	$	152,458
Acquisitions funded by contingent consideration	$	11,000	$	18,500

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 nine months ended September 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 September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
Cash and cash equivalents:
Cash	$	602,749	$	841,310
Money market funds	402,381		1,105,684
Total cash and cash equivalents	1,005,130		1,946,994
Marketable securities:
Foreign debt	—		34,895
U.S. debt	8,822		44,089
Time deposits	255,869		76,511
Total marketable securities	264,691		155,495
Total cash, cash equivalents, and marketable securities	$	1,269,821	$	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 September 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	September 30, 2024		December 31, 2023
Cash and cash equivalents	Cash and cash equivalents	$	1,005,130	$	1,946,994
Restricted cash – current	Other current assets	8,262		8,262
Restricted cash – noncurrent	Other assets	3,612		3,621
Restricted cash equivalents – noncurrent	Other assets	4,463		6,192
Total cash, cash equivalents, restricted cash, and restricted cash equivalents		$	1,021,467	$	1,965,069

During the nine months ended September 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 nine months ended September 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 September 30, 2024 and December 31, 2023 (in thousands):


	As of September 30, 2024
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value
U.S. debt	$	10,000	$	—	$	1,178	$	—	$	8,822
Time deposits	255,869		—		—		—		255,869
Total	$	265,869	$	—	$	1,178	$	—	$	264,691


	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 September 30, 2024 were as follows (in thousands):


	Fair Value
Within one year	$	255,869
After one year through five years	4,731
After five years through ten years	4,091
Total	$	264,691

3. Restricted Marketable Securities

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


	September 30, 2024		December 31, 2023
Foreign government obligations	$	52,368	$	51,229
Supranational debt	23,350		15,339
U.S. debt	116,157		113,326
U.S. government obligations	19,255		18,416
Total restricted marketable securities	$	211,130	$	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 September 30, 2024 and December 31, 2023, such custodial accounts also included noncurrent restricted cash and cash equivalents balances of $4.5 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 nine months ended September 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 September 30, 2024 and December 31, 2023 (in thousands):


	As of September 30, 2024
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value
Foreign government obligations	$	65,336	$	—	$	12,968	$	—	$	52,368
Supranational debt	25,405		3		2,058		—		23,350
U.S. debt	145,113		—		28,956		—		116,157
U.S. government obligations	24,391		—		5,136		—		19,255
Total	$	260,245	$	3	$	49,118	$	—	$	211,130


	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 September 30, 2024, the contractual maturities of these securities were between 6 years and 15 years.

4. Consolidated Balance Sheet Details

Accounts receivable trade, net

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


	September 30, 2024		December 31, 2023
Accounts receivable trade, gross	$	762,746	$	662,390
Allowance for credit losses	(608)		(1,614)
Accounts receivable trade, net	$	762,138	$	660,776

Inventories

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


	September 30, 2024		December 31, 2023
Raw materials	$	486,156	$	478,138
Work in process	120,050		78,463
Finished goods	914,098		530,197
Inventories	$	1,520,304	$	1,086,798
Inventories – current	$	1,250,629	$	819,899
Inventories – noncurrent	$	269,675	$	266,899

Other current assets

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


	September 30, 2024		December 31, 2023
Spare maintenance materials and parts	$	201,626	$	148,218
Indirect tax receivables	113,463		65,301
Prepaid expenses	74,986		62,480
Operating supplies	50,636		43,995
Prepaid income taxes	25,077		7,064
Insurance receivable for accrued litigation (1)	21,800		21,800
Restricted cash	8,262		8,262
Derivative instruments (2)	2,228		1,778
Other	30,778		33,002
Other current assets	$	528,856	$	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 September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
Land	$	39,054	$	35,364
Buildings and improvements	1,581,512		1,037,421
Machinery and equipment	4,438,782		3,593,347
Office equipment and furniture	179,766		161,187
Leasehold improvements	40,330		40,084
Construction in progress	1,022,891		1,223,998
Property, plant and equipment, gross	7,302,335		6,091,401
Accumulated depreciation	(1,976,214)		(1,694,116)
Property, plant and equipment, net	$	5,326,121	$	4,397,285

Depreciation of property, plant and equipment was $107.1 million and $287.2 million for the three and nine months ended September 30, 2024, respectively, and $80.7 million and $223.5 million for the three and nine months ended September 30, 2023, respectively.

Other assets

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


	September 30, 2024		December 31, 2023
Advance payments for raw materials	$	257,171	$	204,370
Lease assets (1)	147,669		101,468
Income tax receivables	87,025		68,591
Prepaid expenses	36,076		23,954
Project assets	28,252		28,430
Restricted cash equivalents	4,463		6,192
Restricted cash	3,612		3,621
Other (2)	51,498		41,978
Other assets	$	615,766	$	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.

During 2024, we purchased ownership interests in two subsidiaries of Cleantech for $7.9 million. These subsidiaries own certain of the generation assets that are expected to supply our facility, and we account for our investments in these subsidiaries using the equity method. During the nine months ended September 30, 2024, we recognized $27.3 million of revenue from module sales of 108 megawatts to these subsidiaries. As of September 30, 2024, we had also received advance payments of $1.1 million from one of these subsidiaries for future module sales.

Accrued expenses

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


	September 30, 2024		December 31, 2023
Accrued property, plant and equipment	$	215,984	$	210,233
Accrued freight	91,995		58,494
Product warranty liability (1)	54,245		5,920
Accrued inventory	48,008		101,161
Accrued compensation and benefits	29,618		55,960
Accrued other taxes	28,722		26,781
Accrued interest	3,811		11,011
Other	48,452		55,269
Accrued expenses	$	520,835	$	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 September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
Accrued litigation (1)	$	21,800	$	21,800
Lease liabilities (2)	13,313		10,358
Derivative instruments (3)	3,071		1,744
Contingent consideration (4)	—		7,500
Other	6,069		798
Other current liabilities	$	44,253	$	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 September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
Lease liabilities (1)	$	99,248	$	53,725
Deferred tax liabilities, net	52,937		42,771
Other taxes payable	35,175		39,431
Product warranty liability (2)	16,440		19,571
Contingent consideration (3)	11,000		11,000
Other	13,338		14,212
Other liabilities	$	228,138	$	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 September 30, 2024 and December 31, 2023 (in thousands):


Balance Sheet Line Item	September 30, 2024		December 31, 2023
Property, plant and equipment, net	$	153,668	$	146,348
Other assets	5,822		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 by the end 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 nine months ended September 30, 2024 and 2023 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
Income Statement Line Item	2024		2023		2024		2023
Cost of sales	$	266,501	$	204,623	$	719,508	$	429,744
Research and development	—		—		4,000		—
Production start-up	484		—		484		—

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 nine months ended September 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 September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024
	Other Current Assets		Other Current Liabilities
Derivatives designated as hedging instruments:
Commodity swap contracts	$	—	$	469
Total derivatives designated as hedging instruments	$	—	$	469

Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	$	2,228	$	2,602

Total derivatives not designated as hedging instruments	$	2,228	$	2,602
Total derivative instruments	$	2,228	$	3,071


	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 nine months ended September 30, 2024 and 2023 (in thousands):


	Commodity Swap Contracts
Balance as of December 31, 2023	$	(1,493)
Amounts recognized in other comprehensive income (loss)	(1,094)
Amount reclassified to cost of sales	1,715
Balance as of September 30, 2024	$	(872)

Balance as of December 31, 2022	$	(7,242)
Amounts recognized in other comprehensive income (loss)	(962)
Amount reclassified to cost of sales	5,576
Balance as of September 30, 2023	$	(2,628)

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


		Amount of Gain (Loss) Recognized in Income Statement
		Three Months Ended September 30,				Nine Months Ended September 30,
	Income Statement Line Item	2024		2023		2024		2023
Foreign exchange forward contracts	Foreign currency loss, net	$	12,759	$	4,533	$	(3,049)	$	(9,568)

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 September 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):


	September 30, 2024
Transaction	Currency	Notional Amount	USD Equivalent







Sell	Canadian dollar	CAD 4.2	$3.1




Purchase	Euro	€155.5	$173.6
Sell	Euro	€8.6	$9.6
Purchase	Indian rupee	INR 18,055.0	$215.7
Sell	Indian rupee	INR 83,157.0	$993.3
Purchase	Japanese yen	¥1,464.0	$10.3
Sell	Japanese yen	¥563.6	$4.0
Purchase	Malaysian ringgit	MYR 193.0	$46.8
Sell	Malaysian ringgit	MYR 17.0	$4.1

Sell	Mexican peso	MXN 34.6	$1.8
Purchase	Singapore dollar	SGD 14.1	$11.0
Sell	Singapore dollar	SGD 19.7	$15.4


	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 nine months ended September 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 September 30, 2024, the notional value associated with these contracts was $0.2 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 September 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 September 30, 2024 as we realize the earnings effects of the related forecasted transactions.

7. Leases

Our lease arrangements include our corporate and administrative offices, warehouses, 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 nine months ended September 30, 2024 and 2023, and as of September 30, 2024 and December 31, 2023 (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Finance lease cost:
Amortization of right-of-use assets	$	281		$	—		$	517		$	—
Interest on lease liabilities	426			—			910			—
Operating lease cost	3,749			2,980			10,198			8,931
Variable lease cost	776			512			2,208			2,528
Short-term lease cost	208			150			686			318
Total lease cost	$	5,440		$	3,642		$	14,519		$	11,777

Cash paid for amounts included in the measurement of:
Operating lease liabilities							$	10,074		$	8,513
Finance lease liabilities							264			—
Lease assets obtained in exchange for:
Operating lease liabilities							$	41,772		$	1,791
Finance lease liabilities							13,243			—

	September 30, 2024						December 31, 2023
	Operating Leases			Finance Leases			Operating Leases			Finance Leases
Lease assets	$	117,909		$	29,760		$	84,419		$	17,049
Lease liabilities – current	12,101			1,212			10,307			51
Lease liabilities – noncurrent	69,465			29,783			36,662			17,063

Weighted-average remaining lease term	9 years			28 years			5 years			40 years
Weighted-average discount rate	5.5		%	6.6		%	5.2		%	5.4		%

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


	Operating Leases		Finance Leases
Remainder of 2024	$	4,018	$	419
2025	15,640		1,929
2026	14,000		2,798
2027	11,342		2,842
2028	11,083		2,895
2029	9,389		2,976
Thereafter	41,542		55,418
Total future payments	107,014		69,277
Less: interest	(25,448)		(38,282)
Total lease liabilities	$	81,566	$	30,995

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 September 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 September 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 September 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 September 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
	September 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	$	402,381	$	402,381	$	—	$	—
Restricted cash equivalents:
Money market funds	4,463		4,463		—		—
Marketable securities:

U.S. debt	8,822		—		8,822		—
Time deposits	255,869		255,869		—		—
Restricted marketable securities	211,130		—		211,130		—
Derivative assets	2,228		—		2,228		—
Total assets	$	884,893	$	662,713	$	222,180	$	—
Liabilities:
Derivative liabilities	$	3,071	$	—	$	3,071	$	—


			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 September 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):


	September 30, 2024				December 31, 2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Government grants receivable - noncurrent	$	871,745	$	835,068	$	152,208	$	107,111
Liabilities:
Long-term debt, including current maturities (1)	$	464,550	$	448,862	$	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 September 30, 2024 and December 31, 2023 (in thousands):


		Balance (USD)
Loan Agreement	Currency	September 30, 2024		December 31, 2023
Revolving Credit Facility	USD	$	—	$	—
India Credit Facility	USD	464,550		500,000
India JPM Working Capital Facility	INR	29,057		60,827
India HSBC Working Capital Facility	INR	70,474		—
India Citibank Working Capital Facility	INR	17,917		—
Total debt principal		581,998		560,827
Less: unamortized issuance costs		(416)		(521)
Total debt		581,582		560,306
Less: current portion		(208,261)		(96,238)
Noncurrent portion		$	373,321	$	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 September 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 August 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 outstanding balance matures in the first quarter of 2025. The India JPM Working Capital Facility is guaranteed by First Solar, Inc.

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 first quarter of 2025. The India HSBC Working Capital Facility is guaranteed by First Solar, Inc.

India Citibank Working Capital Facility

In August 2024, FSISV entered into a working capital facility agreement (the “India Citibank Working Capital Facility”) with Citibank, N.A., which provides certain working capital loans of up to INR 4.5 billion ($53.8 million). The outstanding balance matures in the first quarter of 2025. The India Citibank Working Capital Facility is guaranteed by First Solar, Inc.

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 September 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)	185.4		119.4
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, $9.3 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 and other factors. 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 nine months ended September 30, 2024 and 2023 were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Product warranty liability, beginning of period	$	23,695	$	31,969	$	25,491	$	33,787
Accruals for new warranties issued	1,413		1,310		4,463		3,155
Settlements	(4,578)		(1,326)		(9,922)		(4,519)
Changes in estimate of product warranty liability	50,155		(5,806)		50,653		(6,276)
Product warranty liability, end of period	$	70,685	$	26,147	$	70,685	$	26,147
Current portion of warranty liability	$	54,245	$	7,647	$	54,245	$	7,647
Noncurrent portion of warranty liability	$	16,440	$	18,500	$	16,440	$	18,500

We have identified manufacturing issues affecting certain Series 7 modules manufactured in 2023 and 2024 that may cause the modules to experience premature power loss once installed in the field. The ultimate loss we will incur for these manufacturing issues will depend on the extent of the premature power loss that is experienced in relation to the obligations under our limited product warranties, as well as any additional commitments we may make to remediate the affected modules. Based on currently available information and certain assumptions and estimates, we believe a reasonable estimate of the aggregate losses related to these manufacturing issues will range from approximately $50 million to $100 million. At this time, no individual amount within that range is a better estimate than any other amount. Accordingly, as of September 30, 2024, we increased our product warranty liability by the low end of the range, which we recorded as a reduction to revenue. The estimated range set forth above was based on our evaluation of the currently available information, including select samples of module performance data from several locations, the estimated number of affected modules, and projections of probable costs to remediate the issues. As additional information becomes available to us, our estimate of the aggregate losses related to these manufacturing issues may change, and any change in estimate may also result in a change to our product warranty liability.

During the three months ended September 30, 2023, we revised our warranty estimate based on updated information regarding our warranty claims, which reduced our module warranty liability by $5.7 million. This updated information reflected lower-than-expected warranty claims for our older series of module technology and revisions to projected settlements, resulting in reductions to our projected module return rate.

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 September 30, 2024 and December 31, 2023, we accrued $2.5 million and $3.3 million of current indemnification liabilities, respectively. As of September 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 nine months ended September 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 September 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 $139.0 million and $135.1 million as of September 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. In September 2024, Plaintiff filed a motion seeking a stay of all proceedings for 90 days, claiming health issues. The court granted the motion and issued an additional stay of all proceedings until January 2025. Because all case discovery has been stayed, 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 September 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 September 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 delivery of the modules to the location specified in the terms of the underlying contract. Our customer contracts generally contain provisions that require us to pay the customer liquidated damages if we fail to deliver modules by scheduled dates or 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. Our customer contracts also generally contain provisions that entitle us to a termination payment if the customer defaults on its contractual obligations and we terminate the contract. We account for such terminations as contract modifications in the period in which the contract is terminated. We recognize revenue for bill-and-hold arrangements at the point in time the customer obtains control of the modules when all of the following criteria have been met: (i) the arrangement is substantive, (ii) the modules are segregated and identified separately as belonging to the customer, (iii) the modules are ready for physical transfer to the customer, and (iv) we do not have the ability to use the modules or direct them to another customer.

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


						September 30, 2024						December 31, 2023						Nine Month Change
Deferred revenue						$	1,965,381					$	2,005,183					$	(39,802)					(2)		%

During the nine months ended September 30, 2024, our contract liabilities decreased by $39.8 million primarily due to the recognition of revenue for sales of solar modules for which payment was received in prior years, partially offset by advance payments received in the current year for future sales of solar modules. During the nine months ended September 30, 2024 and 2023, we recognized revenue of $284.0 million and $320.3 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods.

As of September 30, 2024, we had entered into contracts with customers for the future sale of 72.8 GW of solar modules for an aggregate transaction price of $21.7 billion, which we expect to recognize as revenue through 2030 as we transfer control of the modules to the customers. This volume and transaction price exclude contracts with customers in India for which payment has not been fully secured. This transaction price also 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 nine months ended September 30, 2024 and 2023 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Cost of sales	$	505	$	1,238	$	2,920	$	3,513
Selling, general and administrative	5,610		5,905		16,484		16,668
Research and development	677		1,047		2,603		2,959
Production start-up	4		8		(20)		69
Total share-based compensation expense	$	6,796	$	8,198	$	21,987	$	23,209

As of September 30, 2024, we had $35.3 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 1.2 years.

In March 2020 and May 2021, the compensation committee of our board of directors approved grants of performance units (“PU” or “PUs”) for key executive officers to be earned over multi-year performance periods, which ended in December 2022 and December 2023, respectively. Vesting of the 2020 and 2021 grants of PUs was contingent upon the specific attainment targets of each grant, which targets include metrics such as contracted revenue, module wattage, return on capital, cost per watt, incremental average selling price, and operating income metrics. In March 2023, the compensation committee certified the achievement of the vesting conditions applicable to the 2020 grants, which approximated the target level of performance. In February 2024, the compensation committee certified the achievement of the vesting conditions applicable to the 2021 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, March 2023, and 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 2024, December 2025, and December 2026, respectively. Vesting of the 2022, 2023, and 2024 grants of PUs is contingent upon the specific attainment targets of each grant, which targets include metrics such as contracted revenue, cost per watt, return on capital, 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 6.4% for the nine months ended September 30, 2024 and 2023. Although the effective tax rate was consistent across both periods, we identified certain primary drivers, which included (i) lower excess tax benefits associated with share-based compensation and (ii) a higher inclusion percentage of Global Intangible Low-Taxed Income, net of the applicable Section 250 deduction, partially offset by (iii) higher income earned in low tax jurisdictions. 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 nine months ended September 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 States of Georgia and Tennessee. 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 nine months ended September 30, 2024 and 2023 was as follows (in thousands, except per share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Basic net income per share
Numerator:
Net income	$	312,956	$	268,398	$	898,928	$	481,538
Denominator:
Weighted-average common shares outstanding	107,049		106,834		107,015		106,795

Diluted net income per share
Denominator:
Weighted-average common shares outstanding	107,049		106,834		107,015		106,795
Effect of restricted stock and performance units	513		664		499		531
Weighted-average shares used in computing diluted net income per share	107,562		107,498		107,514		107,326

Net income per share:
Basic	$	2.92	$	2.51	$	8.40	$	4.51
Diluted	$	2.91	$	2.50	$	8.36	$	4.49

There were no anti-dilutive shares for the three and nine months ended September 30, 2024 and 2023.

15. Accumulated Other Comprehensive Loss

The following table presents the changes in accumulated other comprehensive loss, net of tax, for the nine months ended September 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) income before reclassifications	(2,218)		6,815		(1,094)		3,503
Amounts reclassified from accumulated other comprehensive loss	516		(11)		1,715		2,220
Net tax effect	—		(321)		(131)		(452)
Net other comprehensive (loss) income	(1,702)		6,483		490		5,271
Balance as of September 30, 2024	$	(120,068)	$	(48,127)	$	(665)	$	(168,860)

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


Comprehensive Income Components	Income Statement Line Item	Three Months Ended September 30,				Nine Months Ended September 30,
	2024	2023		2024		2023
Foreign currency translation adjustment:
Foreign currency translation adjustment	Cost of sales	$	—	$	—	$	—	$	146
Foreign currency translation adjustment	Other expense, net	(516)		(1,005)		(516)		(1,015)
Total foreign currency translation adjustment		(516)		(1,005)		(516)		(869)
Unrealized gain (loss) on marketable securities and restricted marketable securities	Other expense, net	—		—		11		(9)
Unrealized loss on derivative instruments:
Commodity swap contracts	Cost of sales	(220)		(911)		(1,715)		(5,576)
Total loss reclassified		$	(736)	$	(1,916)	$	(2,220)	$	(6,454)

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 nine months ended September 30, 2024 and 2023 and as of September 30, 2024 and December 31, 2023 (in thousands):


	Three Months Ended September 30, 2024						Three Months Ended September 30, 2023
	Modules		Other		Total		Modules		Other		Total
Net sales	$	886,655	$	1,013	$	887,668	$	800,393	$	697	$	801,090
Gross profit (loss)	448,381		(3,070)		445,311		367,359		8,816		376,175
Depreciation and amortization expense	92,552		3		92,555		76,991		2		76,993

	Nine Months Ended September 30, 2024						Nine Months Ended September 30, 2023
	Modules		Other		Total		Modules		Other		Total
Net sales	$	2,688,854	$	3,404	$	2,692,258	$	2,139,220	$	20,829	$	2,160,049
Gross profit (loss)	1,292,882		(2,679)		1,290,203		776,170		22,476		798,646
Depreciation and amortization expense	260,046		9		260,055		211,161		6		211,167

	September 30, 2024						December 31, 2023
	Modules		Other		Total		Modules		Other		Total
Goodwill	$	29,585	$	—	$	29,585	$	29,687	$	—	$	29,687

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