10-QPeriod: Q2 FY2016

FIRST SOLAR, INC. Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 4, 2016For Securities:FSLR

Summary

First Solar, Inc. (FSLR) reported solid revenue growth in the second quarter of 2016, with net sales increasing by 4% year-over-year to $934.4 million. This growth was primarily driven by an increase in module sales volume to third parties and higher revenue from construction projects. Gross profit also saw a significant improvement, increasing by 2.1 percentage points to 20.5% due to reductions in module cost per watt and better gross margins. The company announced a strategic shift, ending production of crystalline silicon modules to focus on its core cadmium telluride (CdTe) technology and utility-scale PV solar power systems. This transition resulted in an $85.5 million restructuring and asset impairment charge in the quarter. Despite this one-time charge, the company's operational performance, including 100% capacity utilization in manufacturing, indicates strong underlying business momentum.

Financial Highlights

52 data points
Beta

Revenue

$1.02B

17.9% Gross Margin

Net Income

-$11.41M

-1.1% Net Margin

EPS (Diluted)

$-0.11

Total Assets

$7.54B

Cash & Equivalents

$916.66M

Free Cash Flow

-$140.05M

Financial Statements
Beta
Revenue$1.02B
Cost of Revenue$834.37M
Gross Profit$182.05M
R&D Expenses$32.93M
SG&A Expenses$63.78M
Operating Expenses$182.29M
Operating Income-$243K
Interest Expense$7.15M
Net Income-$11.41M
EPS (Basic)$-0.11
EPS (Diluted)$-0.11
Shares Outstanding (Basic)102.29M
Shares Outstanding (Diluted)102.29M

Key Highlights

  • 1Net sales increased 4% to $934.4 million in Q2 2016 compared to Q2 2015, driven by higher module sales volume and systems construction revenue.
  • 2Gross profit margin improved to 20.5% from 18.4% year-over-year, reflecting improved module cost efficiencies and margins.
  • 3The company is strategically shifting focus from crystalline silicon modules to its core CdTe technology, ending production of the former.
  • 4A significant restructuring and asset impairment charge of $85.5 million was recognized due to the strategic shift away from crystalline silicon modules.
  • 5Manufacturing facilities operated at 100% capacity utilization in Q2 2016, a 15-percentage point increase from the prior year's quarter.
  • 6Average module conversion efficiency improved to 16.2% in Q2 2016 from 15.4% in Q2 2015.

Frequently Asked Questions

The primary drivers for the 4% increase in net sales to $934.4 million were a higher volume of solar modules sold to third parties and increased revenue from the construction of systems projects, such as the Desert Stateline, Astoria, and Butler projects.

The company incurred an $85.5 million restructuring and asset impairment charge in Q2 2016 related to the decision to end crystalline silicon module production. This charge negatively impacted operating income but is a strategic move to focus on core CdTe technology. Excluding this one-time charge, the underlying operational performance showed improvement.

The gross profit margin improved by 2.1 percentage points to 20.5% in Q2 2016 compared to 18.4% in the same period of 2015. This improvement is attributed to reductions in the cost per watt of their solar modules and higher gross margins on both third-party module sales and systems business projects.

As of June 30, 2016, First Solar had 30 installed production lines with an annual global manufacturing capacity of approximately 3.2 GW. In Q2 2016, the company achieved 100% capacity utilization, a significant increase from 85% in Q2 2015, indicating strong demand and operational efficiency.