01—Abstract
Summary
Summary of the 10-Q filed May 5, 2017. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. (FSLR) reported net sales of $891.8 milliona for the three months ended March 31, 2017, a slight increase of 1.8% compared to $876.1 million in the same period of the prior year.
However, gross profit significantly declined to $84.2 millionb (9.4% of net sales) from $277.6 million (31.7% of net sales) in Q1 2016. This decrease in profitability was primarily attributed to a less favorable mix of projects sold and under construction during the period, impacting the systems segment more significantly. The company also incurred $20.0 million in restructuring and asset impairment charges related to the transition to its new Series 6 module manufacturing technology.
Despite the lower profitability, the company demonstrated strong cash flow generation, with net cash provided by operating activities significantly increasing to $493.1 millionc from $84.2 million in the prior year. This improvement was largely due to the sale of the Moapa project and collections on accounts receivable.
The company ended the quarter with a healthy cash and marketable securities balance of $2.4 billiond. First Solar is in the midst of a strategic transition to its Series 6 modules, which is expected to improve cost structure and product attributes, but has led to increased restructuring costs and a temporary ramp-down in production, impacting near-term profitability.
02—Key points
Key Highlights
- Net sales increased slightly by 1.8% to $891.8 million year-over-year, demonstrating consistent revenue generation.
- Gross profit margin significantly compressed to 9.4% from 31.7% in the prior year, driven by a less favorable project mix.
- Restructuring and asset impairment charges of $20.0 million were recorded due to the transition to Series 6 module manufacturing.
- Net cash provided by operating activities surged to $493.1 million, a substantial increase from $84.2 million in Q1 2016.
- The company ended the quarter with a strong liquidity position, holding $2.4 billion in cash and marketable securities.
- Average module conversion efficiency improved to 16.6% from 16.2% year-over-year.
- Production ramp-down for Series 4 modules and transition to Series 6 manufacturing led to an 11% decrease in module sales volume to third parties.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2017, First Solar, Inc. kept $0.01.
- Revenue$891.8M100.0%
- Cost of revenue−$807.6M90.6%
- Gross profit$84.2M9.4%
- Operating costs−$92.2M10.3%
- Operating income−$8.0M0.9%
- Interest, other & tax$17.1M1.9%
- Net income$9.1M1.0%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2017filed May 5, 2017Financial Statements
Q1 FY2017 against Q1 FY2016
| Line item | Q1 FY2017Q1 FY2016 | Change |
|---|---|---|
| Revenue | $891.79M$876.07M | +1.8% |
| Cost of Revenue | $807.61M$598.46M | +34.9% |
| Gross Profit | $84.18M$277.61M | −69.7% |
| R&D Expenses | $22.80M$30.19M | −24.5% |
| SG&A Expenses | $48.20M$67.50M | −28.6% |
| Operating Expenses | $92.18M$97.69M | −5.6% |
| Operating Income | -$8.00M$179.92M | −104.4% |
| Interest Expense | $9.17M$4.64M | +97.5% |
| Net Income | $9.13M$195.64M | −95.3% |
| EPS (Basic) | $0.09$1.92 | −95.3% |
| EPS (Diluted) | $0.09$1.90 | −95.3% |
| Shares Outstanding (Basic) | 104.10M101.85M | +2.2% |
| Shares Outstanding (Diluted) | 104.41M102.92M | +1.4% |
05—Questions
Frequently Asked Questions
What is the primary reason for the significant drop in gross profit margin?
The significant decline in gross profit margin from 31.7% in Q1 2016 to 9.4% in Q1 2017 is primarily attributed to a less favorable mix of projects sold and under construction during the period. The systems segment, in particular, was affected by projects with lower gross profit contributions.
How is the transition to Series 6 module manufacturing impacting the company's financials?
The transition to Series 6 module manufacturing is a key strategic initiative expected to improve cost structure and product attributes. However, in the short term, it has led to increased restructuring and asset impairment charges totaling $20.0 million, a ramp-down in Series 4 module production, and a focus on manufacturing upgrades, which has impacted production volumes and near-term profitability.
What is the company's liquidity situation and outlook?
First Solar maintains a strong liquidity position, with $2.4 billion in cash and marketable securities as of March 31, 2017. The company believes its current cash position, operating cash flows, and access to credit facilities are sufficient to meet its obligations for at least the next 12 months. The significant increase in operating cash flow is a positive indicator for future liquidity.
What are the key drivers behind the increase in net cash provided by operating activities?
The substantial increase in net cash provided by operating activities to $493.1 million was primarily driven by the sale of the Moapa project and improved collections on accounts receivable from projects sold in prior periods. These factors more than offset expenditures related to the construction of project assets.
06—Continue