01—Abstract
Summary
Summary of the 10-Q filed November 4, 2011. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. (FSLR) reported its third-quarter and nine-month results for 2011, demonstrating robust revenue growth driven significantly by its systems business, which saw a 77%a increase in the third quarter and a 44% increase year-to-date.
Overall net sales grew by 26%b in the third quarter and 8% for the nine-month period. Despite increased sales, the company experienced a decline in gross profit margin due to a 6% decrease in module average selling price (ASP) in Q3 and a 14% decrease for the nine months, largely attributed to competitive pressures and a shift in geographic sales mix. Significant investments in research and development were made, increasing by 78% in the third quarter, aimed at improving module efficiency and manufacturing processes.
The company also reported a substantial increase in production start-up expenses, reflecting ongoing manufacturing capacity expansions in various international locations. Cash flow from operations turned negative for the nine-month period, primarily due to increased payments to suppliers and a decrease in cash received from customers, alongside significant capital expenditures for plant expansions.
02—Key points
Key Highlights
- Net sales increased by 26% year-over-year for the third quarter of 2011, reaching $1,005.8 million, and by 8% for the first nine months to $2,105.9 million.
- The systems business showed substantial growth, with revenue up 77% in Q3 and 44% year-to-date, indicating successful expansion in providing complete solar power systems.
- Gross profit margin decreased from 40.3% to 37.7% for the third quarter and from 45.5% to 39.6% for the nine-month period, primarily due to a decline in module average selling prices (ASP).
- Module ASPs decreased by 6% in Q3 and 14% year-to-date, driven by competitive market conditions and a shift in geographic sales mix.
- Research and development expenses increased significantly by 78% in Q3 and 53% year-to-date, reflecting continued investment in technological advancement and efficiency improvements.
- Cash used in operating activities for the nine months ended September 30, 2011 was $44.2 million, a significant shift from the $355.7 million cash provided in the same period last year, primarily due to increased payments to suppliers and lower cash received from customers.
- The company continued to expand its manufacturing capacity, leading to a substantial increase in production start-up expenses and capital expenditures for plant expansions in Germany, Malaysia, and the US.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2011, First Solar, Inc. kept $0.20.
- Revenue$1.01B100.0%
- Cost of revenue−$626.6M62.3%
- Gross profit$379.2M37.7%
- Operating costs−$156.4M15.6%
- Operating income$222.7M22.1%
- Interest, other & tax−$26.2M2.6%
- Net income$196.5M19.5%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2011filed November 4, 2011Financial Statements
Q3 FY2011 against Q3 FY2010
| Line item | Q3 FY2011Q3 FY2010 | Change |
|---|---|---|
| Revenue | $1.01B$797.90M | +26.1% |
| Cost of Revenue | $626.62M$476.01M | +31.6% |
| Gross Profit | $379.16M$321.89M | +17.8% |
| R&D Expenses | $38.16M$21.47M | +77.7% |
| SG&A Expenses | $112.74M$84.96M | +32.7% |
| Operating Expenses | $156.42M$110.25M | +41.9% |
| Operating Income | $222.74M$211.64M | +5.2% |
| Interest Expense | $0$0 | — |
| Net Income | $196.51M$176.87M | +11.1% |
| EPS (Basic) | $2.28$2.08 | +9.6% |
| EPS (Diluted) | $2.25$2.04 | +10.3% |
| Shares Outstanding (Basic) | 86.34M85.07M | +1.5% |
| Shares Outstanding (Diluted) | 87.15M86.61M | +0.6% |
05—Questions
Frequently Asked Questions
What was First Solar's revenue performance in Q3 2011 compared to the prior year?
First Solar's net sales increased by 26% to $1,005.8 million in the third quarter of 2011 compared to $797.9 million in the third quarter of 2010. This growth was driven by a 77% increase in revenue from its systems business and a 10% increase in the volume of solar modules sold.
What factors led to the decrease in First Solar's gross profit margin?
The gross profit margin declined due to a combination of factors, including a 6% decrease in the average selling price (ASP) of solar modules, increased expenses related to module replacement and repair efforts (exceeding normal warranty obligations), and higher manufacturing excursion expenses. These were partially offset by favorable changes in the segment mix between components and systems businesses.
How is the company investing in its future growth?
First Solar is significantly increasing its investment in research and development, with expenses up 78% year-over-year in Q3 2011, focusing on improving module efficiency and manufacturing processes. The company is also expanding its manufacturing capacity internationally, leading to higher production start-up expenses and capital expenditures for new and existing facilities.
What is the outlook for cash flow from operations?
Cash flow from operating activities turned negative for the first nine months of 2011, showing a significant decrease compared to the same period in 2010. This was primarily due to increased payments to suppliers, a decrease in cash received from customers, and a reduction in cash from excess tax benefits related to share-based compensation. Management believes current liquidity, credit facilities, and capital markets access are sufficient for the next 12 months, but future results could impact this.
06—Continue