01—Abstract
Summary
Summary of the 10-Q filed August 2, 2019. Cited figures are marked; the original filing is the authoritative source.
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 milliona.
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 millionb 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 millionc, 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.
02—Key points
Key Highlights
- Net sales surged by 89% to $585.0 million in Q2 2019 compared to Q2 2018, driven by project sales and increased module sales.
- Gross 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.
- The 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.
- For 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.
- Total 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.
- Cash, cash equivalents, and restricted cash stood at $1.33 billion as of June 30, 2019, indicating a solid liquidity position.
- The 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.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2019, First Solar, Inc. lost $0.03.
- Revenue$585.0M100.0%
- Cost of revenue−$507.8M86.8%
- Gross profit$77.2M13.2%
- Operating costs−$85.8M14.7%
- Operating income−$8.6M1.5%
- Interest, other & tax−$10.0M1.7%
- Net income−$18.5M3.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2019filed August 2, 2019Financial Statements
Q2 FY2019 against Q2 FY2018
| Line item | Q2 FY2019Q2 FY2018 | Change |
|---|---|---|
| Revenue | $584.96M$309.32M | +89.1% |
| Cost of Revenue | $507.77M$317.38M | +60.0% |
| Gross Profit | $77.18M-$8.06M | +1057.8% |
| R&D Expenses | $24.39M$20.37M | +19.8% |
| SG&A Expenses | $50.93M$50.85M | +0.2% |
| Operating Expenses | $85.77M$95.58M | −10.3% |
| Operating Income | -$8.58M-$103.63M | +91.7% |
| Interest Expense | $8.92M$6.07M | +47.1% |
| Net Income | -$18.55M-$48.49M | +61.7% |
| EPS (Basic) | $-0.18$-0.46 | +60.9% |
| EPS (Diluted) | $-0.18$-0.46 | +60.9% |
| Shares Outstanding (Basic) | 105.37M104.78M | +0.6% |
| Shares Outstanding (Diluted) | 105.37M104.78M | +0.6% |
05—Questions
Frequently Asked Questions
What drove the significant increase in net sales in the second quarter of 2019?
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.
How has the company's profitability changed compared to the previous year?
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.
What is the company's current liquidity position, and how is it expected to be used?
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.
What are the main challenges and risks facing First Solar, as indicated in the filing?
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.
06—Continue