10-QPeriod: Q3 FY2010

FIRST SOLAR, INC. Quarterly Report for Q3 Ended Sep 25, 2010

Filed November 1, 2010For Securities:FSLR

Summary

First Solar, Inc. (FSLR) reported strong financial performance for the nine months ended September 25, 2010, demonstrating significant growth in net sales and profitability compared to the same period in the prior year. Net sales increased by 37% to $1.95 billion, driven by robust demand, particularly in Europe and North America, and expansion of manufacturing capacity. Net income also saw a healthy increase, reflecting operational efficiencies and the company's leading position in the solar module manufacturing cost per watt. The company's strategic focus on cost reduction and technological advancement continues to yield positive results, with a further decrease in manufacturing cost per watt. First Solar's integrated business model, combining its components segment (solar modules) with its systems segment (project development, EPC, O&M), appears to be effectively driving module throughput and market penetration. The company's balance sheet remains strong, with substantial cash and marketable securities, providing ample liquidity for ongoing operations and future expansion plans, including new manufacturing facilities in the U.S. and Vietnam.

Financial Highlights

56 data points
Beta

Revenue

$797.90M

40.3% Gross Margin

Net Income

$176.87M

22.2% Net Margin

EPS (Diluted)

$2.04

Total Assets

$4.20B

Cash & Equivalents

$621.22M

Free Cash Flow

$110.44M

Financial Statements
Beta
Revenue$797.90M
Cost of Revenue$476.01M
Gross Profit$321.89M
R&D Expenses$21.47M
SG&A Expenses$84.96M
Operating Expenses$110.25M
Operating Income$211.64M
Interest Expense$0
Net Income$176.87M
EPS (Basic)$2.08
EPS (Diluted)$2.04
Shares Outstanding (Basic)85.07M
Shares Outstanding (Diluted)86.61M

Key Highlights

  • 1Net sales for the first nine months of 2010 increased by 37% to $1.95 billion compared to the prior year, driven by strong demand and increased production volumes.
  • 2Gross profit margin decreased to 45.5% from 54.6% year-over-year, primarily due to a decline in module average selling prices and a shift in product mix favoring the lower-margin systems business.
  • 3The acquisition of NextLight Renewable Power on July 12, 2010, significantly expanded First Solar's project development pipeline in the U.S. utility-scale market.
  • 4Manufacturing cost per watt continued to decline, reaching $0.77 for the nine-month period, reinforcing the company's cost leadership in the industry.
  • 5The company's balance sheet remains strong, with cash, cash equivalents, and marketable securities totaling $997 million as of September 25, 2010.
  • 6First Solar announced plans for two new manufacturing plants in the United States and Vietnam, expected to be completed in 2012, more than doubling its production capacity.
  • 7The systems segment experienced substantial growth in net sales, increasing from $5 million to $348 million year-over-year, reflecting successful project execution.

Frequently Asked Questions

First Solar's revenue growth was primarily driven by strong demand for solar modules, particularly from German customers anticipating feed-in tariff reductions, coupled with increased production volumes due to manufacturing expansions in Malaysia and Ohio, and growth in the systems business from utility-scale solar power projects in North America and Europe.

The decrease in gross profit margin, despite higher net sales, was primarily due to a decline in average solar module selling prices, driven by market price reductions and European feed-in tariff changes. Additionally, a shift in product mix towards the systems business, which generally has a lower gross profit margin, also contributed to the decline.

First Solar continues to focus on reducing its manufacturing cost per watt through technological advancements, increased production scale, and operational efficiencies. The average manufacturing cost per watt decreased to $0.77 for the first nine months of 2010. While this cost reduction is a key competitive advantage, the declining average selling prices for modules have offset some of the margin benefits, leading to a lower overall gross profit margin.

First Solar announced plans to build two new manufacturing plants in the U.S. and Vietnam, expected to be completed by 2012. These expansions, along with existing projects, are anticipated to increase total production capacity from approximately 1.4 GW in 2010 to over 2.7 GW by the end of 2012. This expansion is a strategic move to meet growing global demand and maintain its market leadership.