10-KPeriod: FY2007

FIRST SOLAR, INC. Annual Report, Year Ended Dec 29, 2007

Filed February 21, 2008For Securities:FSLR

Summary

First Solar, Inc. reported strong revenue growth in 2007, driven by a significant increase in solar module sales volume. The company's proprietary thin-film cadmium telluride technology continues to yield lower manufacturing costs per watt compared to traditional crystalline silicon, positioning it favorably in the growing solar market. Significant expansion of manufacturing capacity is underway with new plants in Malaysia, aiming to meet substantial long-term supply contracts with European project developers, which represent billions in future sales. The company also made a strategic acquisition of Turner Renewable Energy, LLC to bolster its capabilities in the U.S. utility market. Despite strong growth and cost advantages, First Solar faces risks related to manufacturing capacity expansion, reliance on a limited number of key suppliers for critical raw materials like cadmium telluride, and potential adverse impacts from changes in government subsidies and regulations in its key markets, particularly Germany.

Financial Highlights

30 data points
Beta

Revenue

$503.98M

49.9% Gross Margin

Net Income

$158.35M

31.4% Net Margin

EPS (Diluted)

$2.03

Cash & Equivalents

$404.26M

Free Cash Flow

-$36.42M

Financial Statements
Beta
Revenue$503.98M
Cost of Revenue$252.57M
Gross Profit$251.40M
R&D Expenses$15.11M
SG&A Expenses$82.25M
Operating Expenses$114.22M
Operating Income$137.18M
Interest Expense$2.29M
Net Income$158.35M
EPS (Basic)$2.12
EPS (Diluted)$2.03
Shares Outstanding (Basic)74.70M
Shares Outstanding (Diluted)77.97M

Key Highlights

  • 1First Solar's proprietary thin-film technology achieved a manufacturing cost of $1.23 per watt in 2007, significantly lower than competitors.
  • 2The company secured long-term supply contracts valued at approximately $5.9 billion (€4.5 billion) for 3.2 GW of solar modules from 2008 to 2012.
  • 3Manufacturing capacity is being aggressively expanded with new plants under construction in Malaysia, aiming for a global capacity of 1012MW by late 2009.
  • 4Acquisition of Turner Renewable Energy, LLC to expand into the U.S. utility solar market.
  • 5Net sales grew by 273% in 2007, reaching $504 million, primarily due to increased module volume and capacity expansion.
  • 6Germany accounted for 98.8% of net sales in 2007, highlighting significant geographic concentration risk.
  • 7The company proactively addresses environmental concerns with a collection and recycling program for its solar modules.

Frequently Asked Questions

First Solar's primary competitive advantage lies in its proprietary thin-film semiconductor technology, specifically using cadmium telluride. This technology enables them to achieve significantly lower manufacturing costs per watt compared to traditional crystalline silicon solar module manufacturers.

First Solar is expanding its manufacturing capacity by building new plants, particularly at its Malaysian manufacturing center, and adding production lines at existing facilities. This expansion is designed to meet significant demand from long-term supply contracts and to further drive down per-watt manufacturing costs through economies of scale.

Key risks include the company's limited operating history, the technological risks associated with thin-film technology, the potential obsolescence of its products due to rapid technological advancements, the uncertainty of widespread adoption of photovoltaic technology, and challenges in managing its rapid international expansion. Dependence on a limited number of suppliers for critical raw materials and a concentrated customer base are also significant risks. Furthermore, the company is heavily reliant on government subsidies and incentives, and changes to these policies could materially impact demand and profitability.