01—Abstract
Summary
Summary of the 10-Q filed October 27, 2017. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. reported strong revenue growth in the third quarter of 2017, with net sales increasing by 60% year-over-year to $1.1 billiona.
This growth was driven by significant project sales and an increase in module volume sold to third parties. Gross profit also saw an improvement, rising by 1.7 percentage points to 26.8%b, attributed to a favorable project mix and a reduction in liabilities, despite lower average selling prices for modules. However, module production decreased by 32% as the company transitions to its next-generation Series 6 manufacturing, impacting overall production volume.
The company ended the period with a robust cash position of $2.7 billionc, an increase from the prior year, supported by project sales and debt financings. Despite significant capital expenditures planned for the Series 6 transition, First Solar believes it has sufficient liquidity for the next 12 months. Management highlighted ongoing competitive pressures in the solar industry, particularly from pricing competition, and the company's strategic focus on cost leadership and utility-scale solar solutions.
02—Key points
Key Highlights
- Q3 2017 net sales surged 60% year-over-year to $1.1 billion, driven by project sales and increased module volume.
- Gross profit margin improved to 26.8% in Q3 2017, up from 25.1% in Q3 2016, due to project mix and liability adjustments.
- Module production decreased by 32% as First Solar shifts towards Series 6 manufacturing, with significant capital investment planned for this transition.
- The company maintained a strong liquidity position, with cash, cash equivalents, and marketable securities totaling $2.7 billion as of September 30, 2017.
- Research and development expenses decreased by 35% in Q3 2017, reflecting cost-saving measures and program terminations.
- Restructuring and asset impairment charges significantly decreased year-over-year, primarily related to the ongoing transition to Series 6 manufacturing.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2017, First Solar, Inc. kept $0.19.
- Revenue$1.09B100.0%
- Cost of revenue−$795.2M73.2%
- Gross profit$291.8M26.8%
- Operating costs−$84.8M7.8%
- Operating income$207.0M19.0%
- Interest, other & tax−$1.2M0.1%
- Net income$205.7M18.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2017filed October 27, 2017Financial Statements
Q3 FY2017 against Q3 FY2016
| Line item | Q3 FY2017Q3 FY2016 | Change |
|---|---|---|
| Revenue | $1.09B$681.28M | +59.6% |
| Cost of Revenue | $795.23M$510.37M | +55.8% |
| Gross Profit | $291.80M$170.91M | +70.7% |
| R&D Expenses | $20.85M$32.17M | −35.2% |
| SG&A Expenses | $50.55M$60.34M | −16.2% |
| Operating Expenses | $84.81M$97.58M | −13.1% |
| Operating Income | $206.99M$73.32M | +182.3% |
| Interest Expense | $4.15M$5.56M | −25.4% |
| Net Income | $205.75M$150.46M | +36.7% |
| EPS (Basic) | $1.97$1.46 | +34.9% |
| EPS (Diluted) | $1.95$1.45 | +34.5% |
| Shares Outstanding (Basic) | 104.43M103.34M | +1.1% |
| Shares Outstanding (Diluted) | 105.66M103.68M | +1.9% |
05—Questions
Frequently Asked Questions
What is driving the significant increase in First Solar's net sales in Q3 2017?
The substantial 60% increase in net sales to $1.1 billion for the three months ended September 30, 2017, was primarily driven by the sale of the California Flats and Cuyama projects, along with an increase in the volume of solar modules sold to third parties. This was partially offset by the completion of construction activities on several large projects in 2016.
Why did First Solar's module production decrease, and what is the company doing about it?
Module production decreased by 32% year-over-year in Q3 2017 because First Solar is in the process of ramping down production of its Series 4 modules and transitioning to its next-generation Series 6 module manufacturing. This transition involves significant capital investment and is expected to continue through 2019, with new manufacturing lines being established in facilities in Ohio, Malaysia, and Vietnam.
How is First Solar managing its financial health given the planned capital expenditures for Series 6 manufacturing and competitive market pressures?
First Solar ended Q3 2017 with $2.7 billion in cash, cash equivalents, and marketable securities, providing a strong liquidity position. The company believes this, combined with operating cash flows and access to capital markets, will be sufficient for its needs over the next 12 months. Management is focused on cost reduction initiatives and leveraging its technology leadership, particularly with the Series 6 transition, to maintain competitiveness in a challenging pricing environment.
06—Continue