10-QPeriod: Q1 FY2017

FIRST SOLAR, INC. Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 5, 2017For Securities:FSLR

Summary

First Solar, Inc. (FSLR) reported net sales of $891.8 million 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 million (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 million 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 billion. 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.

Financial Highlights

52 data points
Beta

Revenue

$891.79M

9.4% Gross Margin

Net Income

$9.13M

1.0% Net Margin

EPS (Diluted)

$0.09

Total Assets

$6.60B

Cash & Equivalents

$1.66B

Free Cash Flow

$380.15M

Financial Statements
Beta
Revenue$891.79M
Cost of Revenue$807.61M
Gross Profit$84.18M
R&D Expenses$22.80M
SG&A Expenses$48.20M
Operating Expenses$92.18M
Operating Income-$8.00M
Interest Expense$9.17M
Net Income$9.13M
EPS (Basic)$0.09
EPS (Diluted)$0.09
Shares Outstanding (Basic)104.10M
Shares Outstanding (Diluted)104.41M

Key Highlights

  • 1Net sales increased slightly by 1.8% to $891.8 million year-over-year, demonstrating consistent revenue generation.
  • 2Gross profit margin significantly compressed to 9.4% from 31.7% in the prior year, driven by a less favorable project mix.
  • 3Restructuring and asset impairment charges of $20.0 million were recorded due to the transition to Series 6 module manufacturing.
  • 4Net cash provided by operating activities surged to $493.1 million, a substantial increase from $84.2 million in Q1 2016.
  • 5The company ended the quarter with a strong liquidity position, holding $2.4 billion in cash and marketable securities.
  • 6Average module conversion efficiency improved to 16.6% from 16.2% year-over-year.
  • 7Production ramp-down for Series 4 modules and transition to Series 6 manufacturing led to an 11% decrease in module sales volume to third parties.

Frequently Asked Questions

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.

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.

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.

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.