01—Abstract
Summary
Summary of the 10-Q filed May 3, 2019. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. reported a net loss of $67.6 milliona for the first quarter of 2019, a significant decline from the $83.0 million net income reported in the same period of 2018.
This downturn was primarily driven by a substantial decrease in gross profit, which fell to effectively zero percent from 30.5%b year-over-year. This margin compression is attributed to a less favorable project mix, costs associated with ramping up Series 6 manufacturing, and the impact of a tax examination settlement. Despite the financial challenges, the company saw a strong increase in solar module production, up 136% year-over-year, signaling progress in its transition to Series 6 technology.
Net sales also experienced a slight decrease of 6%, mainly due to the sale of Indian projects in the prior year and the aforementioned tax settlement. The company ended the quarter with a solid cash and marketable securities position of over $2.1 billionc, providing a buffer against ongoing operational investments, including significant capital expenditures for the Series 6 transition.
02—Key points
Key Highlights
- Reported a net loss of $67.6 million for Q1 2019, compared to a net income of $83.0 million in Q1 2018.
- Gross profit margin significantly declined to 0.0% from 30.5% year-over-year due to unfavorable project mix, Series 6 manufacturing ramp-up costs, and a tax settlement.
- Solar module production increased by 136% year-over-year, reflecting progress in the Series 6 manufacturing transition.
- Net sales decreased by 6% to $532.0 million, impacted by prior year project sales and tax settlement effects.
- Operating expenses saw increases in Selling, General, and Administrative (SG&A) and Research & Development (R&D), while Production Start-up costs decreased significantly.
- The company maintained a strong liquidity position with $2.1 billion in cash, cash equivalents, and marketable securities as of March 31, 2019.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2019, First Solar, Inc. lost $0.13.
- Revenue$532.0M100.0%
- Cost of revenue−$531.9M100.0%
- Gross profit$112,0000.0%
- Operating costs−$76.8M14.4%
- Operating income−$76.6M14.4%
- Interest, other & tax$9.0M1.7%
- Net income−$67.6M12.7%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed May 3, 2019Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Revenue | $531.98M$567.26M | −6.2% |
| Cost of Revenue | $531.87M$394.47M | +34.8% |
| Gross Profit | $112K$172.80M | −99.9% |
| R&D Expenses | $21.88M$20.32M | +7.6% |
| SG&A Expenses | $45.35M$41.13M | +10.3% |
| Operating Expenses | $76.75M$98.53M | −22.1% |
| Operating Income | -$76.64M$74.26M | −203.2% |
| Interest Expense | $10.12M$5.18M | +95.3% |
| Net Income | -$67.60M$82.95M | −181.5% |
| EPS (Basic) | $-0.64$0.79 | −181.0% |
| EPS (Diluted) | $-0.64$0.78 | −182.1% |
| Shares Outstanding (Basic) | 105.05M104.55M | +0.5% |
| Shares Outstanding (Diluted) | 105.05M106.31M | −1.2% |
05—Questions
Frequently Asked Questions
What was the primary driver behind the significant decrease in gross profit?
The primary driver for the substantial decrease in gross profit was a combination of factors including a less favorable mix of projects sold or under construction, higher under-utilization and other charges associated with the initial ramp-up of Series 6 manufacturing lines, and the impact of a tax examination settlement with the state of California. These issues collectively compressed the gross profit margin from 30.5% in Q1 2018 to 0.0% in Q1 2019.
How is the transition to Series 6 manufacturing impacting the company's operations?
The transition to Series 6 manufacturing is a key focus, reflected in a 136% increase in solar module production year-over-year. However, this transition also incurred significant start-up costs and led to lower capacity utilization in the early stages, which negatively impacted the cost of sales and gross profit in the current quarter. The company expects these investments to yield long-term benefits in manufacturing efficiency and cost reduction.
What is the company's outlook on liquidity and future capital needs?
First Solar believes its current cash, cash equivalents, marketable securities, operating cash flow, and access to capital markets are sufficient to meet its needs for at least the next 12 months. However, significant capital expenditures are planned for the Series 6 transition, estimated at approximately $2.0 billion in total, with $500-$600 million expected in the remainder of 2019. The company also highlighted potential needs for raw material procurement and project development, which may temporarily impact liquidity.
06—Continue