10-QPeriod: Q3 FY2017

FIRST SOLAR, INC. Quarterly Report for Q3 Ended Sep 30, 2017

Filed October 27, 2017For Securities:FSLR

Summary

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 billion. 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%, 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 billion, 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.

Financial Highlights

52 data points
Beta

Revenue

$1.09B

26.8% Gross Margin

Net Income

$205.75M

18.9% Net Margin

EPS (Diluted)

$1.95

Total Assets

$7.05B

Cash & Equivalents

$2.02B

Free Cash Flow

$483.75M

Financial Statements
Beta
Revenue$1.09B
Cost of Revenue$795.23M
Gross Profit$291.80M
R&D Expenses$20.85M
SG&A Expenses$50.55M
Operating Expenses$84.81M
Operating Income$206.99M
Interest Expense$4.15M
Net Income$205.75M
EPS (Basic)$1.97
EPS (Diluted)$1.95
Shares Outstanding (Basic)104.43M
Shares Outstanding (Diluted)105.66M

Key Highlights

  • 1Q3 2017 net sales surged 60% year-over-year to $1.1 billion, driven by project sales and increased module volume.
  • 2Gross profit margin improved to 26.8% in Q3 2017, up from 25.1% in Q3 2016, due to project mix and liability adjustments.
  • 3Module production decreased by 32% as First Solar shifts towards Series 6 manufacturing, with significant capital investment planned for this transition.
  • 4The company maintained a strong liquidity position, with cash, cash equivalents, and marketable securities totaling $2.7 billion as of September 30, 2017.
  • 5Research and development expenses decreased by 35% in Q3 2017, reflecting cost-saving measures and program terminations.
  • 6Restructuring and asset impairment charges significantly decreased year-over-year, primarily related to the ongoing transition to Series 6 manufacturing.

Frequently Asked Questions

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.

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.

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.