10-QPeriod: Q2 FY2009

FIRST SOLAR, INC. Quarterly Report for Q2 Ended Apr 30, 2009

Filed May 1, 2009For Securities:FSLR

Summary

First Solar, Inc. (FSLR) demonstrated robust financial performance in the first quarter of 2009, with net sales nearly doubling year-over-year to $418.2 million, driven by a significant increase in solar module volume sold. This strong revenue growth, coupled with improved gross profit margins which rose to 56.3% from 53.0% in the prior year period, indicates effective scaling of operations and cost management. The company's net income also saw a substantial increase, reaching $164.6 million, or $1.99 per diluted share, up from $46.6 million, or $0.57 per diluted share, in the first quarter of 2008. This performance reflects First Solar's successful execution in expanding manufacturing capacity, particularly in Malaysia, and its ability to navigate a competitive market characterized by declining average selling prices and growing demand. The company maintains a strong liquidity position with over $811 million in cash and marketable securities, positioning it well to fund its ongoing operations and capital expenditures.

Financial Highlights

53 data points
Beta

Revenue

$525.88M

56.7% Gross Margin

Net Income

$180.58M

34.3% Net Margin

EPS (Diluted)

$2.11

Total Assets

$2.91B

Cash & Equivalents

$429.16M

Free Cash Flow

-$40.49M

Financial Statements
Beta
Revenue$525.88M
Cost of Revenue$227.78M
Gross Profit$298.10M
R&D Expenses$18.61M
SG&A Expenses$72.93M
Operating Expenses$94.06M
Operating Income$204.04M
Interest Expense$3.83M
Net Income$180.58M
EPS (Basic)$2.16
EPS (Diluted)$2.11
Shares Outstanding (Basic)83.72M
Shares Outstanding (Diluted)85.67M

Key Highlights

  • 1Net sales surged by 112% to $418.2 million in Q1 2009 compared to Q1 2008, driven by a 147% increase in MW volume of solar modules sold.
  • 2Gross profit increased significantly by 126% to $235.3 million, with gross profit margin expanding to 56.3% from 53.0% year-over-year.
  • 3Net income more than tripled to $164.6 million ($1.99 per diluted share) from $46.6 million ($0.57 per diluted share) in the same period last year.
  • 4Manufacturing cost per watt decreased by 18% to $0.93, reflecting operational efficiencies and economies of scale, especially from the Malaysian facility.
  • 5The company maintained a strong liquidity position, with cash, cash equivalents, and marketable securities totaling $811.6 million at the end of the quarter.
  • 6Research and development expenses nearly doubled to $11.7 million, indicating continued investment in technology and efficiency improvements.
  • 7Production start-up expenses decreased significantly by 51% to $6.2 million, suggesting a transition towards more stable, scaled operations.

Frequently Asked Questions

First Solar's net sales increased by 112% to $418.2 million in Q1 2009 compared to Q1 2008. This growth was primarily driven by a substantial 147% increase in the volume of solar modules sold (measured in MW), fueled by the full production ramp-up of its Malaysian manufacturing center and continued improvements in manufacturing processes. The average number of sellable watts per solar module also increased.

First Solar is significantly exposed to foreign currency exchange rate fluctuations, particularly between the U.S. dollar and the euro, as 93.3% of its net sales in Q1 2009 were denominated in euros. While a 13% decrease in average selling price was partly due to an 8% annual contractual price decline, a 5% adverse impact was also attributed to the unfavorable euro exchange rate. The company uses derivative instruments like foreign exchange forward contracts to hedge these risks, but currency volatility can still impact gross and net profit margins and cash flows.

First Solar is actively managing its manufacturing costs, as evidenced by a decline in its average manufacturing cost per watt by 18% to $0.93 in Q1 2009. This reduction is attributed to the scalability of its Malaysian manufacturing center, operational efficiencies, and economies of scale. The company expects cost of sales per watt to continue decreasing in the coming years due to increased output, geographic diversification, and more efficient absorption of fixed costs. First Solar's proprietary thin-film technology, which uses less semiconductor material than crystalline silicon modules, also contributes to its cost competitiveness.

First Solar maintains a strong financial position, with $811.6 million in cash, cash equivalents, and marketable securities as of March 28, 2009. The company believes these resources, combined with operating cash flows and debt financings, are sufficient to meet its working capital and capital expenditure needs for at least the next 12 months. The company is monitoring the credit markets but has not experienced material adverse impacts on its liquidity due to the ongoing credit disruption.