01—Abstract
Summary
Summary of the 10-Q filed July 27, 2018. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. (FSLR) reported a significant decline in net sales for the three months ended June 30, 2018, down 50% year-over-year to $309.3 milliona.
This was driven by lower module sales and the absence of large project sales recorded in the prior year period. Consequently, the company reported a gross loss of $8.1 millionb, a stark contrast to the gross profit of $110.9 million in the same period last year. This gross loss was attributed to higher under-utilization charges related to the ramp-up of new Series 6 manufacturing lines and a less favorable sales mix.
Despite the revenue and profitability challenges in the quarter, the company maintained a strong liquidity position with $3.1 billionc in cash, cash equivalents, and marketable securities as of June 30, 2018. The company also highlighted progress in its transition to Series 6 module manufacturing, commencing commercial production at its Ohio facility and beginning the process in Malaysia and Vietnam. The company reaffirmed its expectation that its current resources will be sufficient to meet its needs for at least the next 12 months.
02—Key points
Key Highlights
- Net sales decreased by 50% to $309.3 million in Q2 2018 compared to $623.3 million in Q2 2017, primarily due to lower module sales and the absence of significant project sales from the prior year.
- The company reported a gross loss of $8.1 million for Q2 2018, a significant deterioration from a gross profit of $110.9 million in Q2 2017, driven by manufacturing under-utilization charges and unfavorable product mix.
- Net loss for Q2 2018 was $(48.5) million, or $(0.46) per share, a shift from a net income of $52.0 million, or $0.50 per share, in the prior year quarter.
- Cash, cash equivalents, and marketable securities remained strong at $3.1 billion as of June 30, 2018.
- Commercial production of Series 6 modules commenced in Ohio, with similar launches expected in Malaysia and Vietnam later in 2018, indicating progress in manufacturing transition.
- The company's advanced-stage project pipeline remained substantial, with projects under sales agreements and projects with executed PPAs, totaling approximately 2.6 GW.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2018, First Solar, Inc. lost $0.16.
- Revenue$309.3M100.0%
- Cost of revenue−$317.4M102.6%
- Gross profit−$8.1M2.6%
- Operating costs−$95.6M30.9%
- Operating income−$103.6M33.5%
- Interest, other & tax$55.1M17.8%
- Net income−$48.5M15.7%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2018filed July 27, 2018Financial Statements
Q2 FY2018 against Q2 FY2017
| Line item | Q2 FY2018Q2 FY2017 | Change |
|---|---|---|
| Revenue | $309.32M$623.33M | −50.4% |
| Cost of Revenue | $317.38M$512.43M | −38.1% |
| Gross Profit | -$8.06M$110.89M | −107.3% |
| R&D Expenses | $20.37M$21.34M | −4.5% |
| SG&A Expenses | $50.85M$48.96M | +3.9% |
| Operating Expenses | $95.58M$96.97M | −1.4% |
| Operating Income | -$103.63M$13.93M | −844.1% |
| Interest Expense | $6.07M$6.37M | −4.8% |
| Net Income | -$48.49M$51.96M | −193.3% |
| EPS (Basic) | $-0.46$0.50 | −192.0% |
| EPS (Diluted) | $-0.46$0.50 | −192.0% |
| Shares Outstanding (Basic) | 104.78M104.34M | +0.4% |
| Shares Outstanding (Diluted) | 104.78M104.61M | +0.2% |
05—Questions
Frequently Asked Questions
What caused the significant decrease in net sales and the shift to a gross loss in the second quarter of 2018?
The significant decrease in net sales was primarily due to lower third-party module sales and the absence of large project sales that were recognized in the second quarter of 2017. The shift to a gross loss was attributed to higher under-utilization charges associated with the ramp-up of new Series 6 manufacturing lines, a less favorable mix of projects sold or under construction, and reductions in average selling prices per watt for modules sold directly to third parties.
How is First Solar managing its liquidity and capital resources given the current financial performance?
First Solar maintained a strong liquidity position with $3.1 billion in cash, cash equivalents, and marketable securities as of June 30, 2018. The company believes its current resources, cash flows from operations, project pipeline, and credit facility availability are sufficient to meet its needs for at least the next 12 months. Significant capital investments are planned for the transition to Series 6 module manufacturing.
What is the status of the Series 6 module manufacturing transition?
First Solar has made progress on its Series 6 module manufacturing transition. Commercial production commenced in Ohio in April 2018. Internal qualification procedures were completed in Malaysia in June 2018, with commercial production expected to begin in July 2018. Commercial production is also expected to commence in Vietnam later in 2018.
What are the key risks and uncertainties facing First Solar moving forward?
Key risks include intense competition in the solar industry leading to price pressure on modules and Power Purchase Agreements (PPAs), potential inability to secure favorable long-term contracts, counterparty credit risk for PPAs, and challenges related to the ongoing upgrade of their enterprise resource planning (ERP) system, which could lead to increased costs and business disruptions.
06—Continue