10-QPeriod: Q2 FY2019

FIRST SOLAR, INC. Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 2, 2019For Securities:FSLR

Summary

First Solar, Inc. reported a significant increase in net sales for the three months ended June 30, 2019, up 89% year-over-year to $585.0 million. This growth was driven by project sales and an increase in third-party module sales, supported by improved gross profit margins to 13.2% from -2.6% in the prior year period. This improvement in profitability is attributed to a favorable project mix, cost reductions in their Series 6 module technology, and better manufacturing facility utilization. Despite the top-line growth and improved margins, the company reported a net loss of $18.5 million for the quarter, a slight improvement from a loss of $48.5 million in the same period last year. The six-month period ended June 30, 2019, also resulted in a net loss of $86.1 million, contrasting with a net income of $34.5 million in the prior year. This shift in profitability for the year-to-date period is influenced by the sale of a significant investment in 2018 and ongoing investments in manufacturing capacity and technology transitions. The company maintained a strong liquidity position with $1.33 billion in cash, cash equivalents, and restricted cash as of June 30, 2019.

Financial Highlights

53 data points
Beta

Revenue

$584.96M

13.2% Gross Margin

Net Income

-$18.55M

-3.2% Net Margin

EPS (Diluted)

$-0.18

Total Assets

$7.14B

Cash & Equivalents

$1.22B

Free Cash Flow

-$165.10M

Financial Statements
Beta
Revenue$584.96M
Cost of Revenue$507.77M
Gross Profit$77.18M
R&D Expenses$24.39M
SG&A Expenses$50.93M
Operating Expenses$85.77M
Operating Income-$8.58M
Interest Expense$8.92M
Net Income-$18.55M
EPS (Basic)$-0.18
EPS (Diluted)$-0.18
Shares Outstanding (Basic)105.37M
Shares Outstanding (Diluted)105.37M

Key Highlights

  • 1Net sales surged by 89% to $585.0 million in Q2 2019 compared to Q2 2018, driven by project sales and increased module sales.
  • 2Gross profit margin improved significantly to 13.2% in Q2 2019 from -2.6% in Q2 2018, attributed to project mix, cost efficiencies from Series 6 modules, and better manufacturing utilization.
  • 3The company reported a net loss of $18.5 million for Q2 2019, an improvement from a net loss of $48.5 million in Q2 2018.
  • 4For the six months ended June 30, 2019, First Solar reported a net loss of $86.1 million, a significant decrease from a net income of $34.5 million in the same period of 2018.
  • 5Total production of solar modules increased by 147% year-over-year in Q2 2019, largely due to the ramp-up of Series 6 production in Malaysia and Vietnam.
  • 6Cash, cash equivalents, and restricted cash stood at $1.33 billion as of June 30, 2019, indicating a solid liquidity position.
  • 7The company continues to invest heavily in capital expenditures, particularly for the transition to Series 6 module technology, with expected total investments of approximately $2.0 billion for this initiative.

Frequently Asked Questions

The substantial increase in net sales to $585.0 million in the second quarter of 2019 was primarily driven by the sale of key projects (Beryl, Cove Mountain, and Muscle Shoals), ongoing construction activities for projects like Phoebe, and an increase in third-party module sales. These factors more than offset completions of other projects.

Profitability has shown mixed results. For the second quarter of 2019, the gross profit margin improved significantly to 13.2% from -2.6% in the prior year's quarter, reflecting better project execution, cost reductions from Series 6 modules, and improved manufacturing efficiency. However, the company still reported a net loss of $18.5 million for the quarter, though it was an improvement from the $48.5 million net loss in the prior year's second quarter. For the first six months of 2019, the company incurred a net loss of $86.1 million compared to a net income of $34.5 million in the same period of 2018, largely due to the sale of a significant investment in 2018 and ongoing investments in manufacturing capacity.

First Solar maintained a strong liquidity position with $1.33 billion in cash, cash equivalents, and restricted cash as of June 30, 2019. The company expects this liquidity, along with operating cash flows, customer contracts, and borrowing capacity, to be sufficient for its working capital, project investments, and capital expenditure needs over the next 12 months. Significant capital expenditures are planned, particularly for the transition to Series 6 module manufacturing, with approximately $2.0 billion projected for this initiative.

Key challenges and risks highlighted include intense pricing competition in the solar industry, potential declines in average selling prices, supply/demand imbalances, and the impact of government policies and incentives. The company also faces risks related to technological advancements by competitors, such as bifacial modules, and potential disruptions from U.S. and international trade policies, tariffs, and safeguard duties. Furthermore, significant ongoing capital investments for manufacturing transitions present a financial commitment.