10-QPeriod: Q1 FY2016

FIRST SOLAR, INC. Quarterly Report for Q1 Ended Mar 31, 2016

Filed April 28, 2016For Securities:FSLR

Summary

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 million, 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.

Financial Highlights

53 data points
Beta

Revenue

$876.07M

31.7% Gross Margin

Net Income

$195.64M

22.3% Net Margin

EPS (Diluted)

$1.90

Total Assets

$7.58B

Cash & Equivalents

$1.09B

Free Cash Flow

$32.46M

Financial Statements
Beta
Revenue$876.07M
Cost of Revenue$598.46M
Gross Profit$277.61M
R&D Expenses$30.19M
SG&A Expenses$67.50M
Operating Expenses$97.69M
Operating Income$179.92M
Interest Expense$4.64M
Net Income$195.64M
EPS (Basic)$1.92
EPS (Diluted)$1.90
Shares Outstanding (Basic)101.85M
Shares Outstanding (Diluted)102.92M

Key Highlights

  • 1Net sales surged 81% year-over-year to $848.5 million, driven by robust performance in the systems segment.
  • 2Gross profit margin significantly improved by 22.7 percentage points to 31.0%, reflecting a favorable project mix and increased efficiency.
  • 3The company achieved net income of $170.6 million, a substantial reversal from a net loss of $60.9 million in Q1 2015.
  • 4Manufacturing facilities operated at 100% capacity utilization, a 13 percentage point increase from the prior year's quarter.
  • 5Average module conversion efficiency improved to 16.2%, up 1.5 percentage points year-over-year.
  • 6Cash provided by operating activities turned positive at $50.5 million, a significant improvement from $424.6 million used in Q1 2015.

Frequently Asked Questions

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.

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.

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.

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.