10-QPeriod: Q1 FY2015

FIRST SOLAR, INC. Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 1, 2015For Securities:FSLR

Summary

First Solar, Inc. (FSLR) reported a significant decline in net sales for the first quarter of 2015, down 51% year-over-year to $469.2 million, primarily due to lower systems project revenue. This was partially offset by an increase in third-party module sales. Gross profit also saw a substantial decrease, falling to 8.3% from 24.9% in the prior year's quarter, reflecting the lower systems business revenue and a less favorable project mix. The company incurred a net loss of $62.3 million ($0.62 per share) compared to a net income of $112.0 million ($1.10 per share) in the first quarter of 2014. This shift from profitability to a loss is largely driven by the decline in sales and gross profit. Despite the operating challenges, First Solar's manufacturing capacity utilization improved to 87% and module conversion efficiency increased to 14.7%, indicating operational progress. The company's cash and marketable securities position decreased to $1.5 billion from $2.0 billion, largely due to investments in ongoing solar projects.

Financial Highlights

53 data points
Beta

Revenue

$469.21M

8.3% Gross Margin

Net Income

-$60.92M

-13.0% Net Margin

EPS (Diluted)

$-0.61

Total Assets

$6.67B

Cash & Equivalents

$779.91M

Free Cash Flow

-$479.96M

Financial Statements
Beta
Revenue$469.21M
Cost of Revenue$430.23M
Gross Profit$38.98M
R&D Expenses$34.76M
SG&A Expenses$67.69M
Operating Expenses$109.09M
Operating Income-$70.11M
Interest Expense$194K
Net Income-$60.92M
EPS (Basic)$-0.61
EPS (Diluted)$-0.61
Shares Outstanding (Basic)100.38M
Shares Outstanding (Diluted)100.38M

Key Highlights

  • 1Net sales for Q1 2015 decreased significantly by 51% to $469.2 million, driven by lower systems project revenue.
  • 2Gross profit margin compressed significantly to 8.3% in Q1 2015, down from 24.9% in Q1 2014, due to lower systems project sales and mix.
  • 3The company reported a net loss of $62.3 million ($0.62 per share) in Q1 2015, a reversal from a net income of $112.0 million ($1.10 per share) in Q1 2014.
  • 4Manufacturing capacity utilization improved to 87% in Q1 2015, up from 82% in Q1 2014, with module conversion efficiency increasing to 14.7%.
  • 5Cash, cash equivalents, and marketable securities decreased to $1.5 billion as of March 31, 2015, down from $2.0 billion at December 31, 2014, largely due to project financing.
  • 6The company is progressing with its joint venture for 8point3 Energy Partners LP, a YieldCo vehicle, which aims to own and acquire solar energy generation projects.
  • 7Despite operational improvements and strategic initiatives, the company faced significant revenue and profitability declines compared to the prior year period.

Frequently Asked Questions

The primary driver for the 51% decrease in net sales was lower systems project revenue. This was mainly due to the completion or substantial completion of large projects like Campo Verde, Topaz, and Desert Sunlight in prior periods, although this was partially offset by increased revenue from newer projects such as AGL Nyngan and Copper Mountain 2. Higher third-party module net sales provided some partial offset.

The company reported a net loss of $62.3 million in Q1 2015 compared to a net income of $112.0 million in Q1 2014. This substantial swing is primarily attributable to the significant decrease in net sales and the corresponding drop in gross profit margin, which fell from 24.9% to 8.3%. The lower revenue and profitability from systems projects were the main contributors to this shift from profit to loss.

As of March 31, 2015, First Solar's cash, cash equivalents, and marketable securities stood at $1.5 billion, a decrease from $2.0 billion at the end of 2014. This reduction was primarily due to investments in constructing solar projects. The company believes its current liquidity, combined with operating cash flows and access to its revolving credit facility, is sufficient to meet its obligations for the next 12 months.

First Solar is focusing on its competitive strengths through a vertically-integrated business model and a Long Term Strategic Plan. This includes developing utility-scale PV solar energy solutions in key markets, improving module efficiency and reducing Balance of Systems (BoS) costs, optimizing manufacturing processes, and expanding into new geographic markets. They are also utilizing joint ventures and strategic partnerships to accelerate market penetration and manage costs.