10-QPeriod: Q2 FY2014

FIRST SOLAR, INC. Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 6, 2014For Securities:FSLR

Summary

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.

Financial Highlights

55 data points
Beta

Revenue

$544.35M

17.0% Gross Margin

Net Income

$4.53M

0.8% Net Margin

EPS (Diluted)

$0.04

Total Assets

$6.61B

Cash & Equivalents

$851.35M

Free Cash Flow

$55.97M

Financial Statements
Beta
Revenue$544.35M
Cost of Revenue$451.63M
Gross Profit$92.72M
R&D Expenses$32.66M
SG&A Expenses$57.67M
Operating Expenses$90.82M
Operating Income$1.91M
Interest Expense$930K
Net Income$4.53M
EPS (Basic)$0.05
EPS (Diluted)$0.04
Shares Outstanding (Basic)100.15M
Shares Outstanding (Diluted)101.81M

Key Highlights

  • 1Net sales increased by 5% to $544.4 million for Q2 2014 compared to Q2 2013, driven by the systems business.
  • 2Gross profit margin decreased to 17.0% in Q2 2014 from 27.0% in Q2 2013, reflecting project mix and pricing pressures.
  • 3Operating 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.
  • 4The company announced a new world record for CdTe cell efficiency at 21.0%.
  • 5Module shipments were 0.4 GW DC for Q2 2014, and new bookings were 0.8 GW DC between April and August 2014.
  • 6Total assets stood at $6.61 billion as of June 30, 2014, with cash and cash equivalents of $851.3 million.

Frequently Asked Questions

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.

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.

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.

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.