01—Abstract
Summary
Summary of the 10-K filed February 25, 2009. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc.'s February 25, 2009 10-K filing reveals a company experiencing significant growth, driven by its proprietary thin-film semiconductor technology and a strong backlog of long-term supply contracts.
The company's cost advantage over traditional crystalline silicon solar module manufacturers, with average costs of $1.08a per watt in 2008, is a key differentiator. Despite strong sales growth, driven largely by European demand and substantial manufacturing capacity expansion in Malaysia and Germany, the company faces risks related to customer concentration, as five customers accounted for nearly all its net sales in 2008. Furthermore, the report highlights the company's significant investment in research and development aimed at improving conversion efficiency and reducing per-watt manufacturing costs.
However, investors should be aware of the inherent risks in the rapidly evolving solar industry, including intense competition, dependence on government subsidies, potential supply chain disruptions for critical raw materials like cadmium telluride, and the limited operating history of thin-film technology. The company's substantial international operations also expose it to currency exchange rate fluctuations and geopolitical risks.
02—Key points
Key Highlights
- First Solar utilizes a proprietary thin-film semiconductor technology, achieving significantly lower manufacturing costs ($1.08/watt in 2008) compared to crystalline silicon manufacturers.
- The company has secured long-term supply contracts valued at approximately $5.8 billion (from 2009-2013), providing a substantial sales backlog.
- Net sales experienced substantial growth, increasing by 147% from $504 million in 2007 to $1.25 billion in 2008, primarily due to increased module volume sold.
- Manufacturing capacity has been significantly expanded with 19 production lines operational by the end of 2008 and plans for 24 lines by the end of 2010, increasing global manufacturing capacity to approximately 1145MW.
- The company acquired Turner Renewable Energy, LLC in November 2007, expanding its capabilities into solar power systems and project development in the United States.
- Key risks identified include a high concentration of customers, with five customers accounting for substantially all net sales in 2008, and a significant dependence on government subsidies and economic incentives, particularly in European markets.
- Research and development expenses increased by 122% year-over-year to $33.5 million in 2008, signaling continued investment in technological advancement.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, First Solar, Inc. kept $0.28.
- Revenue$1.25B100.0%
- Cost of revenue−$567.9M45.6%
- Gross profit$678.4M54.4%
- Operating costs−$240.1M19.3%
- Operating income$438.3M35.2%
- Interest, other & tax−$90.0M7.2%
- Net income$348.3M27.9%
Where FY2008 revenue went
$1.25B- Cost of revenue: $567.9M, 46% of revenue
- Net income: $348.3M, 28% of revenue
- SG&A: $174.0M, 14% of revenue
- R&D: $33.5M, 2.7% of revenue
- Other operating costs: $32.5M, 2.6% of revenue
- Interest, other & tax: $90.0M, 7.2% of revenue
Kept 28% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 25, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $1.25B$503.98M | +147.3% |
| Cost of Revenue | $567.91M$252.57M | +124.8% |
| Gross Profit | $678.39M$251.40M | +169.8% |
| R&D Expenses | $33.52M$15.11M | +121.9% |
| SG&A Expenses | $174.04M$82.25M | +111.6% |
| Operating Expenses | $240.05M$114.22M | +110.2% |
| Operating Income | $438.34M$137.18M | +219.5% |
| Interest Expense | $509K$2.29M | −77.8% |
| Net Income | $348.33M$158.35M | +120.0% |
| EPS (Basic) | $4.34$2.12 | +104.7% |
| EPS (Diluted) | $4.24$2.03 | +108.9% |
| Shares Outstanding (Basic) | 80.18M74.70M | +7.3% |
| Shares Outstanding (Diluted) | 82.12M77.97M | +5.3% |
05—Questions
Frequently Asked Questions
What is First Solar's competitive advantage in manufacturing?
First Solar's primary competitive advantage lies in its proprietary thin-film semiconductor technology, which uses cadmium telluride. This technology allows for a continuous, automated manufacturing process that significantly reduces manufacturing costs per watt (averaging $1.08 in 2008) compared to traditional crystalline silicon solar module manufacturers.
How significant are First Solar's long-term supply contracts?
First Solar has secured long-term solar module supply contracts with project developers and system integrators that, in aggregate, allow for approximately $5.8 billion in sales from 2009 to 2013. These contracts provide a substantial sales backlog and visibility into future revenue.
What are the key risks facing First Solar according to this filing?
Key risks include a high customer concentration, with five customers accounting for nearly all net sales in 2008. The company's performance is also heavily influenced by government subsidies and economic incentives, which are subject to change. Other risks include intense competition, potential supply chain disruptions for critical materials like cadmium telluride, the inherent risks of a relatively new technology (thin-film), and currency exchange rate fluctuations due to substantial international operations.
How is First Solar managing its manufacturing capacity?
First Solar is aggressively expanding its manufacturing capacity. By the end of 2008, it operated 19 production lines across its facilities in Ohio, Germany, and Malaysia. The company planned to reach 24 production lines with an annual global manufacturing capacity of approximately 1145MW by the end of 2010, demonstrating a strong commitment to scaling production.
06—Continue