10-QPeriod: Q3 FY2018

FIRST SOLAR, INC. Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 26, 2018For Securities:FSLR

Summary

First Solar, Inc. reported a significant decrease in net sales for the third quarter of 2018 compared to the same period in the prior year, primarily due to project sales in 2017 and a decline in third-party module sales. While gross profit margin also saw a decrease, this was largely attributed to ramp-up costs associated with their new Series 6 manufacturing lines. Despite the revenue decline, the company is actively scaling its Series 6 module production, with new facilities coming online and increased overall module production. The company's balance sheet shows a notable decrease in cash and cash equivalents, alongside a significant increase in accounts receivable, unbilled, and retainage, and inventories. This shift in working capital may indicate increased project development and inventory build-up. First Solar continues to manage its investments, notably completing the sale of its interest in 8point3 Operating Company, LLC, which contributed a significant gain. Looking ahead, First Solar remains focused on its core utility-scale solar energy solutions and cost reduction strategies, particularly the transition to Series 6 modules, which is expected to improve manufacturing efficiency and reduce overall system costs. The company anticipates sufficient liquidity for the next 12 months, supported by its cash reserves, operating cash flows, and access to its revolving credit facility.

Financial Highlights

52 data points
Beta

Revenue

$676.22M

19.1% Gross Margin

Net Income

$57.75M

8.5% Net Margin

EPS (Diluted)

$0.54

Total Assets

$7.09B

Cash & Equivalents

$1.43B

Free Cash Flow

-$463.16M

Financial Statements
Beta
Revenue$676.22M
Cost of Revenue$547.09M
Gross Profit$129.13M
R&D Expenses$22.39M
SG&A Expenses$33.54M
Operating Expenses$70.65M
Operating Income$58.48M
Interest Expense$3.20M
Net Income$57.75M
EPS (Basic)$0.55
EPS (Diluted)$0.54
Shares Outstanding (Basic)104.80M
Shares Outstanding (Diluted)106.16M

Key Highlights

  • 1Net sales decreased by 38% year-over-year to $0.7 billion for Q3 2018.
  • 2Gross profit margin declined to 19.1% from 26.8% in the prior year's quarter, impacted by Series 6 manufacturing ramp-up costs and product mix.
  • 3Company is actively ramping Series 6 module production, with total installed annual production capacity reaching 5.2 GW.
  • 4Module production increased by 35% year-over-year, driven by new Series 6 capacity.
  • 5Cash, cash equivalents, and marketable securities decreased to $2.7 billion from $3.0 billion at the end of 2017.
  • 6Completed the sale of its interest in 8point3 Operating Company, LLC, recognizing a $40.3 million gain.
  • 7Company maintains confidence in sufficient liquidity for the next 12 months.

Frequently Asked Questions

The primary reason for the year-over-year decline in net sales for Q3 2018 was the sale of the California Flats project in 2017, which contributed to revenue in 2018 from ongoing construction activities, a decrease in third-party module sales, and the sale of the Cuyama project in 2017. These were partially offset by sales of the Willow Springs and Manildra projects and ongoing construction at other projects.

First Solar experienced higher under-utilization and certain other charges related to the initial ramp of its Series 6 manufacturing lines, which impacted gross profit. The company is focused on continuing to ramp commercial production of Series 6 modules at its facilities in Ohio, Malaysia, and Vietnam to improve efficiency and reduce costs over time.

First Solar believes its current cash, cash equivalents, marketable securities, operating cash flows, project pipeline, and credit facility availability are sufficient to meet its working capital and investment needs for at least the next 12 months. The company is also exploring various tax planning and financing strategies to optimize its global cash availability.