FIRST SOLAR INC

Previous wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Securities Act of 1933, as amended (the “Securities Act”), which are subject to risks, uncertainties, and assumptions that are difficult to predict. All statements in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements. These forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements, among other things, concerning: effects resulting from certain module manufacturing changes; our business strategy, including anticipated trends and developments in and management plans for our business and the markets in which we operate; future financial results, operating results, module volumes produced, module volumes sold, revenues, gross margin, operating expenses, products, projected costs (including estimated future module collection and recycling costs), warranties, solar module technology and cost reduction roadmaps, product reliability, investments, and capital expenditures; our ability to successfully integrate an acquired business; our ability to continue to reduce the cost per watt of our solar modules; the impact of public policies; the potential impact of legislation intended to encourage renewable energy investments through tax credits; our ability to expand manufacturing capacity worldwide, including the construction of new manufacturing facilities in the United States and related increases in manufacturing capacity; the impact of supply chain disruptions, which may affect the procurement of raw materials used in our manufacturing process and the distribution of our modules; R&D programs and our ability to improve the wattage of our solar modules; sales and marketing initiatives; and competition. In some cases, you can identify these statements by forward-looking words, such as “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “seek,” “believe,” “forecast,” “foresee,” “likely,” “may,” “should,” “goal,” “target,” “might,” “will,” “could,” “predict,” “continue,” “contingent,” and the negative or plural of these words, and other comparable terminology.

Current wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Securities Act of 1933, as amended (the “Securities Act”), which are subject to risks, uncertainties, and assumptions that are difficult to predict. All statements in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements. These forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements, among other things, concerning: effects resulting from certain module manufacturing changes; our business strategy, including anticipated trends and developments in and management plans for our business and the markets in which we operate; future financial results, operating results, module volumes produced, module volumes sold, revenues, gross margin, operating expenses, products, projected costs (including estimated future module collection and recycling costs), warranties and anticipated claims thereunder, solar module technology and cost reduction roadmaps, product reliability, investments, and capital expenditures; our ability to successfully integrate an acquired business; our ability to continue to reduce the cost per watt of our solar modules; the impact of public policies; the potential impact of legislation intended to encourage renewable energy investments through tax credits; our ability to expand manufacturing capacity worldwide, including the construction of new manufacturing facilities in the United States and related increases in manufacturing capacity; the impact of supply chain disruptions, which may affect the procurement of raw materials used in our manufacturing process and the distribution of our modules; R&D programs and our ability to improve the wattage of our solar modules; sales and marketing initiatives; and competition. In some cases, you can identify these statements by forward-looking words, such as “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “seek,” “believe,” “forecast,” “foresee,” “likely,” “may,” “should,” “goal,” “target,” “might,” “will,” “could,” “predict,” “continue,” “contingent,” and the negative or plural of these words, and other comparable terminology.

Previous wording

•our ability to incorporate technology improvements into our manufacturing process, including the implementation of our copper replacement program;

Current wording

•our ability to incorporate technology improvements into our manufacturing process, including the implementation of our copper replacement (“CuRe”) program;

Previous wording

We are the world’s largest thin film PV solar module manufacturer and the largest PV solar module manufacturer in the Western Hemisphere. We are in the process of expanding our manufacturing capacity in the United States, which includes our fourth and fifth manufacturing facilities expected to commence operations in the second halves of 2024 and 2025, respectively. With a global footprint that spans the United States, India, Malaysia, and Vietnam, we expect to have an annual manufacturing capacity of over 25 GW by the end of 2026.

Current wording

We are the world’s largest thin film PV solar module manufacturer and the largest PV solar module manufacturer in the Western Hemisphere. We recently commenced operations at our fourth manufacturing facility in the United States and are in the process of expanding our manufacturing capacity, including the construction of our fifth manufacturing facility in the United States, which is expected to commence operations in the second half of 2025. With a global footprint that spans the United States, India, Malaysia, and Vietnam, we expect to have an annual manufacturing capacity of over 25 GW by 2026.

Previous wording

•Net sales for the three months ended June 30, 2024 increased by 25% to $1.0 billion compared to $0.8 billion for the same period in 2023. The increase was primarily driven by an increase in the volume of modules sold to third parties and an increase in the average selling price per watt of our modules.

Current wording

•Net sales for the three months ended September 30, 2024 increased by 11% to $0.9 billion compared to $0.8 billion for the same period in 2023. The increase was primarily driven by an increase in the volume of modules sold to third parties and termination payments associated with certain customer contract terminations in the U.S. and India, partially offset by a current period reduction in revenue related to manufacturing issues affecting certain Series 7 modules manufactured in 2023 and 2024. We currently believe the primary causes of the issues have been identified and we have taken actions to address such issues.

Previous wording

•Gross profit as a percentage of net sales for the three months ended June 30, 2024 increased 11.1 percentage points to 49.4% from 38.3% for the same period in 2023. The increase in gross profit was primarily due to a higher sales mix of modules qualifying for the advanced manufacturing production credit under Section 45X of the IRC, higher utilization across our manufacturing plants, and our entitlement to a contract termination payment from one of our European customers that reduced its module demand in the current period.

Current wording

•Gross profit as a percentage of net sales for the three months ended September 30, 2024 increased 3.2 percentage points to 50.2% from 47.0% for the same period in 2023. The increase in gross profit was primarily due to termination payments associated with certain customer contract terminations in the U.S. and India and a higher sales mix of modules qualifying for the advanced manufacturing production credit under Section 45X of the IRC, partially offset by a current period reduction in revenue related to manufacturing issues affecting certain Series 7 modules manufactured in 2023 and 2024 and higher module storage costs.

Previous wording

•As of June 30, 2024, the total installed nameplate production capacity across all our facilities was approximately 17.6 GW. During the three months ended June 30, 2024, we produced 3.7 GW and sold 3.4 GW of solar modules. During 2024, we expect to produce between 15.6 GW and 16.0 GW and sell between 15.6 GW and 16.3 GW of solar modules.

Current wording

•During the three months ended September 30, 2024, we commenced production of Series 7 modules at our first manufacturing facility in Alabama, bringing our total installed nameplate production capacity across all our facilities to approximately 19.4 GW. During the three months ended September 30, 2024, we produced 3.8 GW and sold 3.0 GW of solar modules. During 2024, we expect to produce between 15.6 GW and 15.9 GW and sell between 14.2 GW and 14.6 GW of solar modules.

Previous wording

•During the three months ended June 30, 2024, we completed certain key construction and equipment installation activities at our dedicated R&D innovation center in Ohio, and in July 2024, the facility was formally commissioned. This R&D facility features a high-tech pilot manufacturing line, which is expected to enable the production of full-sized prototypes of thin film and tandem PV modules, supporting the implementation of our technology roadmap.

Current wording

•In July 2024, our dedicated R&D innovation center in Ohio was formally commissioned. This R&D facility features a high-tech pilot manufacturing line, which is expected to enable the production of full-sized prototypes of thin film and tandem PV modules, supporting the implementation of our technology roadmap.

Previous wording

Recently enacted government support programs, such as the IRA, have contributed and are expected to continue to contribute to this momentum by providing solar module manufacturers, project developers, and project owners with certain subsidies and tax incentives to accelerate the ongoing transition to clean energy. Among other things, the IRA (i) reinstates the 30% investment tax credit for qualifying solar projects that meet certain wage and apprenticeship requirements, (ii) extends the production tax credit to include energy generated from solar projects, (iii) provides incremental investment and production tax credits for solar projects that meet certain domestic content and location requirements, and (iv) offers tax credits for solar modules and solar module components manufactured in the United States and sold to third parties.

Current wording

Recently enacted government support programs have contributed and are expected to continue to contribute to this momentum by providing solar module manufacturers, project developers, and project owners with certain subsidies, such as grant funding provided by the U.S. Department of Energy, and tax incentives, such as tax credits available under the IRA, to accelerate the ongoing transition to clean energy. Among other things, the IRA (i) reinstates the 30% investment tax credit for qualifying solar projects that meet certain wage and apprenticeship requirements, (ii) extends the production tax credit to include energy generated from solar projects, (iii) provides incremental investment and production tax credits for solar projects that meet certain domestic content and location requirements, and (iv) offers tax credits for solar modules and solar module components manufactured in the United States and sold to third parties.

Previous wording

Supply and demand. As a result of the market opportunities described above, we are in the process of expanding our manufacturing capacity, including the construction of our fourth and fifth manufacturing facilities in the United States, which are expected to commence operations in the second halves of 2024 and 2025, respectively. We continue to evaluate opportunities for future expansion worldwide. We believe manufacturers of solar cells and modules, particularly those in China, have significant installed production capacity, relative to global demand, and the ability for additional capacity expansion. Accordingly, we believe the solar industry may experience periods of structural imbalance between supply and demand, which could lead to periods of pricing volatility. Further, demand for solar energy in key markets, such as the United States, India, and Europe, may be affected by the nature and extent of commitments to the renewable energy transition at the local and global levels. For example, certain large oil and gas and energy companies have experienced investor pressure to pursue returns commensurate with those currently associated with fossil fuel projects. Notwithstanding these considerations, utility and corporate demand for clean energy, and overall electric load growth, especially as a result of artificial intelligence-driven data center demand, continue to increase. In light of such market realities, we continue to advocate for industrial and trade policies that provide a level playing field for manufacturers of solar cells and modules. We also continue to focus on our strategies and points of differentiation, which include our advanced module technology, our manufacturing process and distributed manufacturing presence, our R&D capabilities, the sustainability advantage of our modules, and our financial stability.

Current wording

Supply and demand. As a result of the market opportunities described above, we recently commenced production of Series 7 modules at our first manufacturing facility in Alabama and are in the process of expanding our manufacturing capacity, including the construction of our fifth manufacturing facility in the United States, which is expected to commence operations in the second half of 2025. We continue to evaluate opportunities for future expansion worldwide. We believe manufacturers of solar cells and modules, particularly those in China, have significant installed production capacity, relative to global demand, and the ability for additional capacity expansion. Accordingly, we believe the solar industry may experience periods of structural imbalance between supply and demand, which could lead to periods of pricing volatility. Further, demand for solar energy in key markets, such as the United States, India, and Europe, may be affected by the nature and extent of commitments to the renewable energy transition at the local and global levels. For example, certain large oil and gas and energy companies have experienced investor pressure to pursue returns commensurate with those currently associated with fossil fuel projects. Notwithstanding these considerations, utility and corporate demand for clean energy, and overall electric load growth, especially as a result of artificial intelligence-driven data center demand, continue to increase. In light of such market realities, we continue to advocate for industrial and trade policies that provide a level playing field for manufacturers of solar cells and modules. We also continue to focus on our strategies and points of differentiation, which include our advanced module technology, our manufacturing process and distributed manufacturing presence, our R&D capabilities, the sustainability advantage of our modules, and our financial stability.

Previous wording

•Bifacial. While conventional solar modules are monofacial, meaning their ability to produce energy is a function of direct and diffuse irradiance on their front side, most module manufacturers offer bifacial modules that also capture diffuse irradiance on the back side of a module. Bifaciality compromises nameplate efficiency, but by converting both front and rear side irradiance, such technology may improve the overall energy production of a module relative to nameplate efficiency when applied in certain applications, which could potentially lower the overall levelized cost of electricity (“LCOE”) of a system when compared to systems using monofacial solar modules. We recently began commercial production of bifacial solar modules at certain of our manufacturing facilities in Ohio and, during the three months ended June 30, 2024, delivered our first bifacial modules to customers. Our bifacial module features an innovative transparent back contact which, in addition to converting both front and rear side irradiance, allows infrared light to pass through rather than be absorbed as heat. This design lowers the operational temperature of the module, resulting in a higher energy yield.

Current wording

•Bifacial. While conventional solar modules are monofacial, meaning their ability to produce energy is a function of direct and diffuse irradiance on their front side, most module manufacturers offer bifacial modules that also capture diffuse irradiance on the back side of a module. Bifaciality compromises nameplate efficiency, but by converting both front and rear side irradiance, such technology may improve the overall energy production of a module relative to nameplate efficiency when applied in certain applications, which could potentially lower the overall levelized cost of electricity (“LCOE”) of a system when compared to systems using monofacial solar modules. We recently began commercial production of bifacial solar modules at certain of our manufacturing facilities and delivered our first bifacial modules to customers. Our bifacial module features an innovative transparent back contact which, in addition to converting both front and rear side irradiance, allows infrared light to pass through rather than be absorbed as heat. This design lowers the operational temperature of the module, resulting in a higher energy yield.

Previous wording

•CuRe. Our CuRe program is intended to improve our current semiconductor structure by replacing copper with certain other elements that are expected to enhance module performance by improving its bifaciality characteristics, improving its temperature coefficient, and improving its warranted degradation. As a result of these performance improvements, our PV solar modules are expected to produce more energy in real world operating conditions over their estimated useful lives than crystalline silicon modules with the same nameplate capacity. We currently expect to complete the lead line implementation of our CuRe technology in late 2024 and intend to begin replication of the technology across our fleet in late 2025.

Current wording

•CuRe. Our CuRe program is intended to improve our current semiconductor structure by replacing copper with certain other elements that are expected to enhance module performance by improving its bifaciality characteristics, improving its temperature coefficient, and improving its warranted degradation. As a result of these performance improvements, our PV solar modules are expected to produce more energy in real world operating conditions over their estimated useful lives than crystalline silicon modules with the same nameplate capacity. We currently expect to complete the lead line implementation of our CuRe technology in late 2024 and intend to begin a phased replication of the technology across our fleet in late 2025.

Previous wording

•India. In March 2023, the government of India allocated financial incentives under the Production Linked Incentive (“PLI”) scheme to certain PV module manufacturers, including First Solar. The PLI scheme is expected to provide aggregate funding of INR 185 billion ($2.3 billion), of which INR 11.8 billion ($143 million) was allocated to First Solar, to promote the manufacturing of high efficiency solar modules in India and to reduce India’s dependency on foreign imports of solar modules. Under the PLI scheme, manufacturers were selected through a competitive bid process and may be entitled to receive certain cash incentives over a five-year period following the commissioning of their manufacturing facilities. Among other things, such incentives are subject to attaining certain minimum thresholds for module efficiency and temperature coefficient and require that a certain proportion of raw materials be sourced from the domestic market. Such conditions will be evaluated on a quarterly basis from 2026 through 2031. At this time, it is uncertain to what extent we may qualify for such incentives.

Current wording

•India. In March 2023, the government of India allocated financial incentives under the Production Linked Incentive (“PLI”) scheme to certain PV module manufacturers, including First Solar. The PLI scheme is expected to provide aggregate funding of INR 185 billion ($2.2 billion), of which INR 11.8 billion ($141 million) was allocated to First Solar, to promote the manufacturing of high efficiency solar modules in India and to reduce India’s dependency on foreign imports of solar modules. Under the PLI scheme, manufacturers were selected through a competitive bid process and may be entitled to receive certain cash incentives over a five-year period following the commissioning of their manufacturing facilities. Among other things, such incentives are subject to attaining certain minimum thresholds for module efficiency and temperature coefficient and require that a certain proportion of raw materials be sourced from the domestic market. Such conditions will be evaluated on a quarterly basis from 2026 through 2031. At this time, it is uncertain to what extent we may qualify for such incentives.

Previous wording

•United States. The United States currently imposes antidumping and countervailing duties (“AD/CVD”) on certain imported crystalline silicon PV cells and modules from China and Taiwan. Such AD/CVD can change over time pursuant to annual reviews conducted by the U.S. Department of Commerce (“USDOC”), and a decline in duty rates or the USDOC’s failure to fully enforce U.S. AD/CVD laws could have an adverse impact on our operating results. In August 2023, the USDOC issued final affirmative circumvention rulings, finding that solar panels completed in Cambodia, Malaysia, Thailand, and Vietnam using parts and components produced in China circumvent the pre-existing AD/CVD orders on China. Such duties apply to circumventing imports on or after June 6, 2024, as well as any circumventing imports prior to that date that are not used or installed on or before December 3, 2024. Our operating results could be adversely impacted if the USDOC and other U.S. government agencies do not enforce the affirmative circumvention rulings as expected or if pending litigation challenges result in a modification of the rulings. Conversely, effective enforcement could positively impact our operating results.

Current wording

•United States. The United States currently imposes antidumping and countervailing duties (“AD/CVDs”) on certain imported crystalline silicon PV cells and modules from China and Taiwan. Such AD/CVDs can change over time pursuant to annual reviews conducted by the U.S. Department of Commerce (“USDOC”), and a decline in duty rates or the USDOC’s failure to fully enforce U.S. AD/CVD laws could have an adverse impact on our operating results. In August 2023, the USDOC issued final affirmative circumvention rulings, finding that solar panels completed in Cambodia, Malaysia, Thailand, and Vietnam using parts and components produced in China circumvent the pre-existing AD/CVD orders on China. Such duties apply to circumventing imports on or after June 6, 2024, as well as any circumventing imports prior to that date that are not used or installed on or before December 3, 2024. Our operating results could be adversely impacted if the USDOC and other U.S. government agencies do not enforce the affirmative circumvention rulings as expected or if pending litigation challenges result in a modification of the rulings. Conversely, effective enforcement could positively impact our operating results.

Previous wording

•United States. In October 2023, a coalition of U.S. aluminum extruders and a labor union filed AD/CVD petitions with the USDOC and the U.S. International Trade Commission (“USITC”) related to aluminum extrusions from 15 countries. The USDOC and USITC have initiated investigations based on the petitions. We import certain items that appear to be within the scope of the investigations. Our operating results could be adversely impacted if the USDOC imposes duties on such imports. The USITC issued affirmative preliminary AD/CVD determinations in November 2023, and the USDOC issued preliminary antidumping determinations in May 2024, which found that our Malaysian supplier of aluminum extrusions was not dumping. The USDOC’s and USITC’s final determinations are expected to be announced in September 2024 and October 2024, respectively.

Current wording

•United States. In October 2023, a coalition of U.S. aluminum extruders and a labor union filed AD/CVD petitions with the USDOC and the U.S. International Trade Commission (“USITC”) related to aluminum extrusions from 15 countries. The USDOC and USITC have initiated investigations based on the petitions. We import certain items that appear to be within the scope of the investigations. The USITC issued affirmative preliminary AD/CVD determinations in November 2023, and its final AD/CVD determinations are expected to be announced on October 30, 2024. The USDOC issued preliminary and final AD determinations in May and September 2024, respectively, both of which found that our Malaysian supplier of aluminum extrusions was not dumping.

Previous wording

•United States. In April 2024, the American Alliance for Solar Manufacturing Trade Committee, which includes First Solar, filed a set of AD/CVD petitions with the USDOC and the USITC to impose duties on certain unfairly traded solar products from Cambodia, Malaysia, Thailand, and Vietnam. The investigations could potentially lead to the imposition of AD/CVD orders on such solar products. In June 2024, the USITC issued affirmative preliminary determinations. The USDOC is expected to announce preliminary determinations in the CVD and AD investigations in October 2024 and November 2024, respectively.

Current wording

•United States. In April 2024, the American Alliance for Solar Manufacturing Trade Committee, which includes First Solar, filed a set of AD/CVD petitions with the USDOC and the USITC to impose duties on certain unfairly traded solar products from Cambodia, Malaysia, Thailand, and Vietnam. The investigations could potentially lead to the imposition of AD/CVD orders on such solar products. In June 2024, the USITC issued affirmative preliminary determinations. In early October 2024, the USDOC announced preliminary affirmative determinations in the CVD investigations, finding that silicon solar cells and panels from Cambodia, Malaysia, Thailand, and Vietnam are unfairly subsidized at rates ranging fromde minimis to nearly 300%, depending on the particular foreign producer. The USDOC has imposed provisional CVDs accordingly. The USDOC is expected to announce preliminary determinations in the AD investigations in November 2024.

Previous wording

We generally price and sell our solar modules on a per watt basis. 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 our customers. Such volume includes contracts for the sale of 38.4 GW of solar modules with anticipated price adjustments for future module technology improvements, including enhancements to certain energy related attributes. Based on these potential improvements, the contracted module volume as of June 30, 2024, the expected timing such improvements being incorporated into our manufacturing process, and the expected timing of module deliveries, such adjustments, if realized, could result in additional revenue of up to $0.7 billion, the majority of which would be recognized between 2025 and 2028. In addition to these price adjustments, certain of our contracts with customers may include favorable price adjustments associated with sales freight in excess of defined thresholds and/or favorable or unfavorable price adjustments associated with changes to (i) certain commodity prices, (ii) the module wattage committed for delivery, and (iii) the volume of modules sold that meet certain U.S. domestic content requirements. As a result, the revenue recognized from such contracts may increase or decrease in future periods relative to the original transaction price.

Current wording

We generally price and sell our solar modules on a per watt basis. 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 our customers. This volume and transaction price exclude contracts with customers in India for which payment has not been fully secured. This volume includes contracts for the sale of 37.3 GW of solar modules with anticipated price adjustments for future module technology improvements, including enhancements to certain energy related attributes. Based on these potential improvements, the contracted module volume as of September 30, 2024, the expected timing such improvements being incorporated into our manufacturing process, and the expected timing of module deliveries, such adjustments, if realized, could result in additional revenue of up to $0.7 billion, the majority of which would be recognized between 2026 and 2028. In addition to these price adjustments, certain of our contracts with customers may include favorable price adjustments associated with sales freight in excess of defined thresholds and/or favorable or unfavorable price adjustments associated with changes to (i) certain commodity prices, (ii) the module wattage committed for delivery, and (iii) the volume of modules sold that meet certain U.S. domestic content requirements. As a result, the revenue recognized from such contracts may increase or decrease in future periods relative to the original transaction price.

Previous wording

We continue to increase the nameplate production capacity of our existing manufacturing facilities by improving our production throughput, increasing module wattage, and reducing manufacturing yield losses. Additionally, we are in the process of expanding our manufacturing capacity by approximately 7.6 GW, including the construction of our fourth and fifth manufacturing facilities in the United States, as well as capacity expansion at our existing facilities. This additional capacity, and any other potential investments to add to or otherwise modify our existing manufacturing capacity in response to market demand and competition, may require significant internal and possibly external sources of capital, and may be subject to certain risks and uncertainties described in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

We continue to increase the nameplate production capacity of our existing manufacturing facilities by improving our production throughput, increasing module wattage, and reducing manufacturing yield losses. Additionally, we are in the process of expanding our manufacturing capacity by approximately 5.8 GW, including the construction of our fifth manufacturing facility in the United States, as well as capacity expansion at our existing facilities. This additional capacity, and any other potential investments to add to or otherwise modify our existing manufacturing capacity in response to market demand and competition, may require significant internal and possibly external sources of capital, and may be subject to certain risks and uncertainties described in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

The following table sets forth our condensed consolidated statements of operations as a percentage of net sales for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table sets forth our condensed consolidated statements of operations as a percentage of net sales for the three and nine months ended September 30, 2024 and 2023:

Previous wording

We generally price and sell our solar modules on a per watt basis. During the three and six months ended June 30, 2024, we sold the majority of our solar modules to developers and operators of systems in the United States, and substantially all of our modules business net sales were denominated in U.S. dollars. 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. Net sales from our residual business operations primarily consists of revenue recognized for sales of development projects or completed systems, including any modules installed in such systems and any revenue from energy generated by such systems.

Current wording

We generally price and sell our solar modules on a per watt basis. During the three and nine months ended September 30, 2024, we sold the majority of our solar modules to developers and operators of systems in the United States, and substantially all of our modules business sales were denominated in U.S. dollars. 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. Net sales from our residual business operations primarily consists of revenue recognized for sales of development projects or completed systems, including any modules installed in such systems and any revenue from energy generated by such systems.

Previous wording

The following table shows net sales by reportable segment for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table shows net sales by reportable segment for the three and nine months ended September 30, 2024 and 2023:

Previous wording

The following table shows cost of sales by reportable segment for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table shows cost of sales by reportable segment for the three and nine months ended September 30, 2024 and 2023:

Previous wording

Cost of sales increased $11.3 million, or 2%, and decreased 11.1 percentage points as a percent of net sales for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase in cost of sales was driven by a $10.1 million increase in our modules segment cost of sales primarily due to (i) higher costs of $128.6 million due to an increase in the volume of modules sold, partially offset by (ii) a higher sales mix of modules qualifying for the advanced manufacturing production credit under Section 45X of the IRC, which decreased cost of sales by $103.6 million compared to the prior period, (iii) lower ramp costs at our newest Ohio and our Indian manufacturing facilities of $23.1 million, and (iv) lower sales freight of $13.7 million due to a reduction in rates.

Current wording

Cost of sales increased $17.4 million, or 4%, and decreased 3.2 percentage points as a percent of net sales for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase in cost of sales was driven by a $5.2 million increase in our modules segment cost of sales primarily due to (i) higher costs of $47.3 million due to an increase in the volume of modules sold and (ii) higher module storage costs of $22.6 million. These increases were partially offset by (iii) a higher sales mix of modules qualifying for the advanced manufacturing production credit under Section 45X of the IRC, which decreased cost of sales by $60.4 million. The increase in cost of sales was also driven by (iv) a $12.2 million increase in our residual business operations’ cost of sales primarily due to a favorable prior period settlement with a former supplier, which resulted in an $8.4 million benefit to cost of sales.

Previous wording

Cost of sales increased $23.2 million, or 2%, and decreased 15.7 percentage points as a percent of net sales for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase in cost of sales was driven by a $27.7 million increase in our modules segment cost of sales primarily due to (i) an increase in the volume of modules sold resulting in higher costs of $304.5 million and (ii) continued module costs reductions of $10.0 million. These increases were partially offset by (iii) the recognition of the above-mentioned advanced manufacturing production credit, which decreased costs by $227.9 million, (iv) lower sales freight of $70.3 million, and (v) lower production ramp costs of $29.7 million. The overall increase in cost of sales was partially offset by a $4.5 million decrease in our residual business operations cost of sales as our residual business operations continue to wind down.

Current wording

Cost of sales increased $40.7 million, or 3%, and decreased 10.9 percentage points as a percent of net sales for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase in cost of sales was driven by a $32.9 million increase in our modules segment cost of sales primarily due to (i) higher costs of $309.9 million due to an increase in the volume of modules sold and (ii) higher module storage costs of $66.5 million. These increases were partially offset by (iii) the recognition of the above-mentioned advanced manufacturing production credit, which decreased cost of sales by $288.3 million, (iv) lower sales freight of $36.1 million, and (v) lower production ramp costs of $30.0 million. The increase in cost of sales was also driven by (vi) a $7.7 million increase in our residual business operations’ cost of sales as operations continue to wind down.

Previous wording

The following table shows gross profit for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table shows gross profit for the three and nine months ended September 30, 2024 and 2023:

Previous wording

Gross profit as a percentage of net sales increased 15.7 percentage points to 46.8% during the six months ended June 30, 2024 from 31.1% during the six months ended June 30, 2023 primarily due to (i) a higher sales mix of modules qualifying for the advanced manufacturing production credit described above, (ii) higher utilization across our manufacturing facilities, (iii) an increase in the volume of modules sold, and (iv) lower sales freight.

Current wording

Gross profit as a percentage of net sales increased 10.9 percentage points to 47.9% during the nine months ended September 30, 2024 from 37.0% during the nine months ended September 30, 2023 primarily due to (i) a higher sales mix of modules qualifying for the advanced manufacturing production credit described above, (ii) the customer contract termination payments described above, and (iii) an increase in the volume of modules sold. These increases were partially offset by (iv) higher module storage costs and (v) a current period reduction in revenue related to the previously described manufacturing issues affecting certain Series 7 modules manufactured in 2023 and 2024.

Previous wording

The following table shows selling, general and administrative expense for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table shows selling, general and administrative expense for the three and nine months ended September 30, 2024 and 2023:

Previous wording

The following table shows research and development expense for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table shows research and development expense for the three and nine months ended September 30, 2024 and 2023:

Previous wording

Research and development expense for the three and six months ended June 30, 2024 increased compared to the three and six months ended June 30, 2023 primarily due to higher depreciation and maintenance costs resulting from our investments in R&D facilities and equipment and higher employee compensation expense resulting from an increase in headcount.

Current wording

Research and development expense for the three and nine months ended September 30, 2024 increased compared to the three and nine months ended September 30, 2023 primarily due to higher depreciation and maintenance costs resulting from our significant investments in R&D facilities and equipment.

Previous wording

The following table shows production start-up expense for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table shows production start-up expense for the three and nine months ended September 30, 2024 and 2023:

Previous wording

During the three and six months ended June 30, 2024, we incurred production start-up expense primarily for our fourth manufacturing facility in the U.S., which is expected to commence operations in the second half of 2024. During the three and six months ended June 30, 2023, we incurred production start-up expense primarily for our first manufacturing facility in India, which commenced operations during 2023.

Current wording

During the three and nine months ended September 30, 2024, we incurred production start-up expense primarily for our fourth manufacturing facility in the U.S., which commenced operations during the three months ended September 30, 2024. During the three and nine months ended September 30, 2023, we incurred production start-up expense primarily for our first manufacturing facility in India, which commenced operations during 2023.

Previous wording

The following table shows foreign currency loss, net for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table shows foreign currency loss, net for the three and nine months ended September 30, 2024 and 2023:

Previous wording

Foreign currency loss, net for the three and six months ended June 30, 2024 increased compared to the three and six months ended June 30, 2023 largely due to higher costs associated with hedging activities related to our subsidiaries in India.

Current wording

Foreign currency loss, net for the three and nine months ended September 30, 2024 increased compared to the three and nine months ended September 30, 2023 largely due to higher costs associated with hedging activities related to our subsidiaries in India and certain other subsidiaries with exposure to the Euro.

Previous wording

The following table shows interest income for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table shows interest income for the three and nine months ended September 30, 2024 and 2023:

Previous wording

Selling, general and administrative expense for the three and six months ended June 30, 2024 was consistent with the three and six months ended June 30, 2023.

Current wording

Interest income for the three and nine months ended September 30, 2024 was consistent with the three and nine months ended September 30, 2023.

Previous wording

The following table shows interest expense, net for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table shows interest expense, net for the three and nine months ended September 30, 2024 and 2023:

Previous wording

Interest expense, net for the three and six months ended June 30, 2024 increased compared to the three and six months ended June 30, 2023 primarily due to additional borrowing under various arrangements in India.

Current wording

Interest expense, net for the three and nine months ended September 30, 2024 increased compared to the three and nine months ended September 30, 2023 primarily due to additional borrowing under various arrangements in India.

Previous wording

Other (expense) income, net is primarily comprised of miscellaneous items and realized gains and losses on the sale of marketable securities and restricted marketable securities.

Current wording

Other expense, net is primarily comprised of miscellaneous items and realized gains and losses on the sale of marketable securities and restricted marketable securities.

Previous wording

The following table shows other (expense) income, net for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table shows other expense, net for the three and nine months ended September 30, 2024 and 2023:

Previous wording

Other (expense) income, net for the three and six months ended June 30, 2024 decreased compared to the three and six months ended June 30, 2023 primarily due to commitment fees on our Revolving Credit Facility.

Current wording

Other expense, net for the three and nine months ended September 30, 2024 increased compared to the three and nine months ended September 30, 2023 primarily due to commitment fees on our Revolving Credit Facility and costs associated with the liquidation of certain inactive legal entities.

Previous wording

The following table shows income tax expense for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table shows income tax expense for the three and nine months ended September 30, 2024 and 2023: