10-QPeriod: Q1 FY2019

FIRST SOLAR, INC. Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 3, 2019For Securities:FSLR

Summary

First Solar, Inc. reported a net loss of $67.6 million 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% 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 billion, providing a buffer against ongoing operational investments, including significant capital expenditures for the Series 6 transition.

Financial Highlights

53 data points
Beta

Revenue

$531.98M

0.0% Gross Margin

Net Income

-$67.60M

-12.7% Net Margin

EPS (Diluted)

$-0.64

Total Assets

$7.26B

Cash & Equivalents

$1.01B

Free Cash Flow

-$452.61M

Financial Statements
Beta
Revenue$531.98M
Cost of Revenue$531.87M
Gross Profit$112K
R&D Expenses$21.88M
SG&A Expenses$45.35M
Operating Expenses$76.75M
Operating Income-$76.64M
Interest Expense$10.12M
Net Income-$67.60M
EPS (Basic)$-0.64
EPS (Diluted)$-0.64
Shares Outstanding (Basic)105.05M
Shares Outstanding (Diluted)105.05M

Key Highlights

  • 1Reported a net loss of $67.6 million for Q1 2019, compared to a net income of $83.0 million in Q1 2018.
  • 2Gross 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.
  • 3Solar module production increased by 136% year-over-year, reflecting progress in the Series 6 manufacturing transition.
  • 4Net sales decreased by 6% to $532.0 million, impacted by prior year project sales and tax settlement effects.
  • 5Operating expenses saw increases in Selling, General, and Administrative (SG&A) and Research & Development (R&D), while Production Start-up costs decreased significantly.
  • 6The company maintained a strong liquidity position with $2.1 billion in cash, cash equivalents, and marketable securities as of March 31, 2019.

Frequently Asked Questions

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.

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.

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.