01—Abstract
Summary
Summary of the 10-Q filed April 28, 2016. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. reported strong first-quarter 2016 results, demonstrating a significant turnaround from the prior year.
Net sales more than doubled to $848.5 milliona, driven by a substantial increase in revenue from the systems segment, which benefited from the sale of additional interest in and ongoing construction of large projects. Gross profit margin saw a dramatic improvement, expanding by 22.7 percentage points to 31.0%, attributed to a more favorable project mix with higher gross profit. The company also reported positive net income of $170.6 million, a significant recovery from a net loss of $60.9 million in the same period last year.
This profitability was supported by improved operational efficiency, including full capacity utilization of manufacturing facilities and enhanced module conversion efficiency. The company's strong performance indicates a successful execution of its strategic initiatives and a positive outlook for the remainder of the year.
02—Key points
Key Highlights
- Net sales surged 81% year-over-year to $848.5 million, driven by robust performance in the systems segment.
- Gross profit margin significantly improved by 22.7 percentage points to 31.0%, reflecting a favorable project mix and increased efficiency.
- The company achieved net income of $170.6 million, a substantial reversal from a net loss of $60.9 million in Q1 2015.
- Manufacturing facilities operated at 100% capacity utilization, a 13 percentage point increase from the prior year's quarter.
- Average module conversion efficiency improved to 16.2%, up 1.5 percentage points year-over-year.
- Cash provided by operating activities turned positive at $50.5 million, a significant improvement from $424.6 million used in Q1 2015.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2016, First Solar, Inc. kept $0.22.
- Revenue$876.1M100.0%
- Cost of revenue−$598.5M68.3%
- Gross profit$277.6M31.7%
- Operating costs−$97.7M11.2%
- Operating income$179.9M20.5%
- Interest, other & tax$15.7M1.8%
- Net income$195.6M22.3%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2016filed April 28, 2016Financial Statements
Q1 FY2016 against Q1 FY2015
| Line item | Q1 FY2016Q1 FY2015 | Change |
|---|---|---|
| Revenue | $876.07M$469.21M | +86.7% |
| Cost of Revenue | $598.46M$430.23M | +39.1% |
| Gross Profit | $277.61M$38.98M | +612.2% |
| R&D Expenses | $30.19M$34.76M | −13.1% |
| SG&A Expenses | $67.50M$67.69M | −0.3% |
| Operating Expenses | $97.69M$109.09M | −10.5% |
| Operating Income | $179.92M-$70.11M | +356.6% |
| Interest Expense | $4.64M$194K | +2292.8% |
| Net Income | $195.64M-$60.92M | +421.2% |
| EPS (Basic) | $1.92$-0.61 | +414.8% |
| EPS (Diluted) | $1.90$-0.61 | +411.5% |
| Shares Outstanding (Basic) | 101.85M100.38M | +1.5% |
| Shares Outstanding (Diluted) | 102.92M100.38M | +2.5% |
05—Questions
Frequently Asked Questions
What were the main drivers behind the significant increase in net sales?
The primary driver for the 81% increase in net sales was the strong performance in the systems segment. This was fueled by the sale of an additional interest in and continued construction on large projects like Desert Stateline, Silver State South, and McCoy, as well as the commencement of construction on the Astoria project. These increases were partially offset by lower sales from completed projects like AGL Nyngan and Copper Mountain 2.
How did First Solar achieve such a dramatic improvement in gross profit margin?
The significant increase in gross profit margin, from 8.3% to 31.0%, was primarily due to a more favorable mix of projects being sold and under construction, which carried higher gross profit. Additionally, improved operational efficiencies, including full manufacturing capacity utilization and higher module conversion efficiencies, contributed to cost reductions and margin expansion.
What is the company's outlook and strategic focus moving forward?
First Solar's strategic focus remains on providing utility-scale PV solar energy solutions in key geographic markets where solar can compete with fossil fuels. They are concentrating on their core utility-scale offerings and adapting to market dynamics. The company is also investing in R&D to improve module efficiency and reduce costs. While aware of industry pricing pressures, First Solar believes its technological advantages and vertically integrated model position it well for continued success.
How has the company's cash flow situation improved?
The company demonstrated a significant improvement in its cash flow from operations, moving from a use of $424.6 million in Q1 2015 to a generation of $50.5 million in Q1 2016. This turnaround is attributed to increased net sales in the systems segment, improved collections on accounts receivable, and reduced expenditures for project-related assets funded by working capital.
06—Continue