01—Abstract
Summary
Summary of the 10-Q filed May 1, 2015. Cited figures are marked; the original filing is the authoritative source.
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 milliona, 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 millionb ($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 billionc from $2.0 billion, largely due to investments in ongoing solar projects.
02—Key points
Key Highlights
- Net sales for Q1 2015 decreased significantly by 51% to $469.2 million, driven by lower systems project revenue.
- Gross 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.
- The 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.
- Manufacturing capacity utilization improved to 87% in Q1 2015, up from 82% in Q1 2014, with module conversion efficiency increasing to 14.7%.
- Cash, 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.
- The 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.
- Despite operational improvements and strategic initiatives, the company faced significant revenue and profitability declines compared to the prior year period.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2015, First Solar, Inc. lost $0.13.
- Revenue$469.2M100.0%
- Cost of revenue−$430.2M91.7%
- Gross profit$39.0M8.3%
- Operating costs−$109.1M23.3%
- Operating income−$70.1M14.9%
- Interest, other & tax$9.2M2.0%
- Net income−$60.9M13.0%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2015filed May 1, 2015Financial Statements
Q1 FY2015 against Q1 FY2014
| Line item | Q1 FY2015Q1 FY2014 | Change |
|---|---|---|
| Revenue | $469.21M$950.16M | −50.6% |
| Cost of Revenue | $430.23M$713.45M | −39.7% |
| Gross Profit | $38.98M$236.71M | −83.5% |
| R&D Expenses | $34.76M$38.77M | −10.4% |
| SG&A Expenses | $67.69M$58.66M | +15.4% |
| Operating Expenses | $109.09M$97.44M | +12.0% |
| Operating Income | -$70.11M$139.27M | −150.3% |
| Interest Expense | $194K$410K | −52.7% |
| Net Income | -$60.92M$112.01M | −154.4% |
| EPS (Basic) | $-0.61$1.12 | −154.5% |
| EPS (Diluted) | $-0.61$1.10 | −155.5% |
| Shares Outstanding (Basic) | 100.38M99.59M | +0.8% |
| Shares Outstanding (Diluted) | 100.38M101.82M | −1.4% |
05—Questions
Frequently Asked Questions
What were the primary drivers behind the significant decrease in net sales in the first quarter of 2015?
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.
Why did First Solar report a net loss in the first quarter of 2015 after being profitable in the same period last year?
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.
What is the status of First Solar's liquidity and cash position?
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.
How is First Solar addressing the competitive pressures and pricing challenges in the solar industry?
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.
06—Continue