01—Abstract
Summary
Summary of the 10-K filed February 22, 2019. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. (FSLR) in its 2018 10-K filing highlights its position as a leading global provider of PV solar energy solutions, utilizing advanced thin-film semiconductor technology (CdTe).
The company emphasizes its vertically integrated business model, from module manufacturing to system development and operations & maintenance (O&M), as a key differentiator. Significant R&D efforts are focused on module and system-level innovations, with particular attention on the Series 6 module technology, which is expected to enhance cost advantages over crystalline silicon competitors. The company reported a decrease in net sales for 2018 compared to 2017, primarily due to project sales in the prior year and a temporary reduction in production capacity during the transition to Series 6 manufacturing.
However, module production increased year-over-year. First Solar faces intense competition and pricing pressure within the solar industry, driven by overcapacity and declining average selling prices. Despite these challenges, the company maintains financial viability and is strategically focused on markets where solar energy is a least-cost, best-fit solution, particularly in regions with high solar resources and significant electricity demand.
02—Key points
Key Highlights
- First Solar is a leading global provider of PV solar energy solutions using advanced thin-film CdTe semiconductor technology.
- The company operates a vertically integrated business model, encompassing module manufacturing, system development, EPC services, and O&M.
- A strategic focus is placed on the Series 6 module technology, aimed at improving cost competitiveness against crystalline silicon modules.
- Net sales decreased in 2018 compared to 2017, influenced by project sales in the prior year and a temporary dip in production capacity during the Series 6 transition.
- Module production volume increased in 2018, driven by incremental Series 6 capacity.
- The company operates in a highly competitive market with significant pricing pressure and industry overcapacity.
- The United States represented a substantial portion (66%) of net sales in 2018, highlighting geographic concentration.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, First Solar, Inc. kept $0.06.
- Revenue$2.24B100.0%
- Cost of revenue−$1.85B82.5%
- Gross profit$392.2M17.5%
- Operating costs−$352.1M15.7%
- Operating income$40.1M1.8%
- Interest, other & tax$104.2M4.6%
- Net income$144.3M6.4%
Where FY2018 revenue went
$2.24B- Cost of revenue: $1.85B, 83% of revenue
- Operating income: $40.1M, 1.8% of revenue
- R&D: $84.5M, 3.8% of revenue
- SG&A: $176.9M, 7.9% of revenue
- Other operating costs: $90.7M, 4.0% of revenue
Kept 1.8% as operating incomeOperating income $40.1M · 1.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 22, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $2.24B$2.94B | −23.7% |
| Cost of Revenue | $1.85B$2.39B | −22.6% |
| Gross Profit | $392.18M$548.95M | −28.6% |
| R&D Expenses | $84.47M$88.57M | −4.6% |
| SG&A Expenses | $176.86M$202.70M | −12.7% |
| Operating Expenses | $352.06M$371.10M | −5.1% |
| Operating Income | $40.11M$177.85M | −77.4% |
| Interest Expense | $25.92M$25.77M | +0.6% |
| Net Income | $144.33M-$165.62M | +187.1% |
| EPS (Basic) | $1.38$-1.59 | +186.8% |
| EPS (Diluted) | $1.36$-1.59 | +185.5% |
| Shares Outstanding (Basic) | 104.75M104.33M | +0.4% |
| Shares Outstanding (Diluted) | 106.11M104.33M | +1.7% |
05—Questions
Frequently Asked Questions
What is First Solar's core technology and competitive advantage?
First Solar's core technology is thin-film cadmium telluride (CdTe) semiconductor technology, which they claim offers advantages over traditional crystalline silicon modules, including higher real-world energy yield and better performance in high-temperature and humid environments. Their vertically integrated business model, encompassing the entire solar value chain, and ongoing R&D efforts are also key competitive advantages.
How did First Solar perform financially in 2018 compared to 2017?
In 2018, First Solar reported a decrease in net sales to $2.2 billion from $2.9 billion in 2017. This was primarily attributed to the sale of completed projects in 2017 and ongoing construction activities in 2018, as well as a decrease in third-party module sales. Gross profit margin also slightly decreased due to under-utilization during the Series 6 manufacturing ramp-up.
What are the company's key strategic initiatives and future outlook?
First Solar's key strategic initiative is the transition to its Series 6 module technology, which is expected to improve manufacturing costs and enhance competitiveness. The company is focused on utility-scale PV solar energy solutions in key geographic markets and aims to achieve long-term shareholder value through growth, profitability, and liquidity. The outlook is influenced by ongoing industry pricing pressures and the need to balance manufacturing capacity with market demand.
What are the main risks First Solar faces in its business?
First Solar faces several risks, including intense competition and pricing pressure in the solar market, potential reductions or expirations of government subsidies and incentives, operational risks related to manufacturing capacity and product quality, and macroeconomic factors such as interest rate fluctuations and capital market conditions. Dependence on a few large customers and geographic concentration in the United States also present risks.
06—Continue