01—Abstract
Summary
Summary of the 10-Q filed August 6, 2014. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. (FSLR) reported its second quarter 2014 financial results, showing a modest increase in net sales for both the three-month and six-month periods ending June 30, 2014, compared to the prior year.
The company's performance was primarily driven by higher revenues from its systems business, offsetting a decline in net sales to third-party module customers due to lower average selling prices. However, the company experienced a significant decrease in gross profit margins for the quarter and a slight decrease for the six-month period, primarily attributed to a less favorable project mix, lower module selling prices, and increased costs in the systems segment.
Despite these margin pressures, First Solar continues to invest in research and development, announcing a new record for CdTe cell efficiency. The company's liquidity remains robust, supported by substantial cash and marketable securities, though operating cash flow turned negative for the six-month period.
02—Key points
Key Highlights
- Net sales increased by 5% to $544.4 million for Q2 2014 compared to Q2 2013, driven by the systems business.
- Gross profit margin decreased to 17.0% in Q2 2014 from 27.0% in Q2 2013, reflecting project mix and pricing pressures.
- Operating cash flow for the first six months of 2014 was negative at $(199.8) million, a significant decrease from positive $288.8 million in the same period of 2013.
- The company announced a new world record for CdTe cell efficiency at 21.0%.
- Module shipments were 0.4 GW DC for Q2 2014, and new bookings were 0.8 GW DC between April and August 2014.
- Total assets stood at $6.61 billion as of June 30, 2014, with cash and cash equivalents of $851.3 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2014, First Solar, Inc. kept $0.01.
- Revenue$544.4M100.0%
- Cost of revenue−$451.6M83.0%
- Gross profit$92.7M17.0%
- Operating costs−$90.8M16.7%
- Operating income$1.9M0.4%
- Interest, other & tax$2.6M0.5%
- Net income$4.5M0.8%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2014filed August 6, 2014Financial Statements
Q2 FY2014 against Q2 FY2013
| Line item | Q2 FY2014Q2 FY2013 | Change |
|---|---|---|
| Revenue | $544.35M$519.76M | +4.7% |
| Cost of Revenue | $451.63M$379.66M | +19.0% |
| Gross Profit | $92.72M$140.10M | −33.8% |
| R&D Expenses | $32.66M$30.96M | +5.5% |
| SG&A Expenses | $57.67M$66.27M | −13.0% |
| Operating Expenses | $90.82M$101.00M | −10.1% |
| Operating Income | $1.91M$39.10M | −95.1% |
| Interest Expense | $930K$875K | +6.3% |
| Net Income | $4.53M$33.60M | −86.5% |
| EPS (Basic) | $0.05$0.38 | −86.8% |
| EPS (Diluted) | $0.04$0.37 | −89.2% |
| Shares Outstanding (Basic) | 100.15M89.20M | +12.3% |
| Shares Outstanding (Diluted) | 101.81M91.14M | +11.7% |
05—Questions
Frequently Asked Questions
What is the primary driver behind the increase in net sales?
The increase in net sales for both the three and six months ended June 30, 2014, was primarily driven by higher revenues from the company's systems business, which includes project development, EPC services, and operations and maintenance. This growth offset a decline in net sales from the components business (solar modules sold to third parties) due to lower average selling prices.
Why did the gross profit margin decrease significantly in Q2 2014?
The significant decrease in gross profit margin in the second quarter of 2014 was primarily due to a less favorable mix of projects sold and under construction, lower average selling prices for solar modules, and higher costs within the systems segment. These factors outweighed improvements in capacity utilization and manufacturing cost reductions in the components segment.
How is First Solar managing its cash flow and liquidity?
First Solar maintained a strong liquidity position with $851.3 million in cash and cash equivalents and $497.5 million in marketable securities as of June 30, 2014. While operating cash flow was negative for the first six months of 2014, the company believes its existing cash, marketable securities, and availability under its Revolving Credit Facility are sufficient to meet its needs for at least the next 12 months. They are managing capital expenditures and production levels to align with market demand.
What is the significance of the new CdTe cell efficiency record?
The new world record for CdTe cell efficiency at 21.0% is significant as it demonstrates First Solar's continued technological leadership and commitment to innovation in its core thin-film technology. This ongoing improvement in module efficiency is crucial for maintaining competitiveness by potentially lowering Balance of System (BoS) costs and the Levelized Cost of Electricity (LCOE) for systems using their modules.
06—Continue