10-QPeriod: Q3 FY2015

FIRST SOLAR, INC. Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 9, 2015For Securities:FSLR

Summary

First Solar, Inc. reported a significant increase in net sales for the third quarter of 2015, reaching $1.3 billion, a 43% jump from the same period in the previous year. This growth was primarily driven by substantial project completions and higher revenue from ongoing construction projects. The company also experienced a notable improvement in profitability, with gross profit margin rising to 38.1% in Q3 2015, up from 21.3% in Q3 2014. This expansion in gross profit was attributed to a favorable mix of high-margin projects and a significant reduction in the module collection and recycling liability due to technological advancements. Operating expenses were managed effectively, leading to a strong operating income of $397.8 million. Overall, First Solar demonstrated robust financial performance, marked by increased sales and enhanced profitability, positioning the company favorably in the competitive solar industry.

Financial Highlights

53 data points
Beta

Revenue

$1.27B

38.1% Gross Margin

Net Income

$349.32M

27.5% Net Margin

EPS (Diluted)

$3.41

Total Assets

$7.06B

Cash & Equivalents

$1.19B

Free Cash Flow

-$24.16M

Financial Statements
Beta
Revenue$1.27B
Cost of Revenue$786.88M
Gross Profit$484.37M
R&D Expenses$29.63M
SG&A Expenses$53.72M
Operating Expenses$86.54M
Operating Income$397.82M
Interest Expense$1.77M
Net Income$349.32M
EPS (Basic)$3.46
EPS (Diluted)$3.41
Shares Outstanding (Basic)100.91M
Shares Outstanding (Diluted)102.30M

Key Highlights

  • 1Net sales surged by 43% to $1.3 billion in Q3 2015 compared to Q3 2014, driven by project completions and higher revenue from ongoing projects.
  • 2Gross profit margin improved significantly to 38.1% in Q3 2015 from 21.3% in Q3 2014, attributed to a favorable project mix and reduced module recycling liabilities.
  • 3Operating income reached $397.8 million in Q3 2015, a substantial increase from $83.9 million in Q3 2014, reflecting strong sales growth and improved gross margins.
  • 4Manufacturing capacity utilization increased to approximately 94% in Q3 2015, up from 77% in Q3 2014, indicating efficient operations and strong demand.
  • 5Average module conversion efficiency improved to 15.8% in Q3 2015, up from 14.2% in Q3 2014, showcasing technological advancements.
  • 6The company announced new bookings including a 400 MW DC module supply agreement and several large solar power projects, signaling a healthy future pipeline.
  • 7Cash, cash equivalents, and marketable securities stood at $1.8 billion as of September 30, 2015, indicating a solid liquidity position.

Frequently Asked Questions

The substantial increase in net sales for the third quarter of 2015 was primarily driven by the sale of a majority interest in the partially constructed Desert Stateline project and higher revenue recognized from other large projects like Silver State South, McCoy, and Imperial Energy Center West, which commenced construction in late 2014 and 2015. These projects contributed significantly to the revenue recognition during the period.

The significant improvement in gross profit margin to 38.1% in Q3 2015 was mainly due to a combination of factors. A more favorable mix of higher-gross-profit systems projects being sold and under construction played a key role. Additionally, a substantial reduction in the module collection and recycling obligation, stemming from the implementation of advanced recycling technologies, significantly boosted profitability.

As of September 30, 2015, First Solar maintained a strong liquidity position with $1.8 billion in cash, cash equivalents, and marketable securities. The company indicated that its current cash reserves, projected operating cash flows from its project pipeline, and availability under its revolving credit facility were sufficient to meet its working capital, project investment, and capital expenditure needs for at least the next 12 months. This robust financial footing provides a solid foundation for ongoing operations and future investments.

Yes, the company is revising previously issued financial statements to properly record a liability associated with an uncertain tax position related to foreign subsidiary income, along with corrections for other identified errors in sales taxes, share-based compensation, and miscellaneous items. While these errors were determined not to be material individually to prior periods, their cumulative effect, including the tax position, is considered significant for the full year 2015. The financial information presented has been restated to reflect these corrections.