10-QPeriod: Q3 FY2019

FIRST SOLAR, INC. Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 25, 2019For Securities:FSLR

Summary

First Solar, Inc. reported net sales of $546.8 million for the three months ended September 30, 2019, a decrease from $676.2 million in the same period of 2018. This decline was primarily driven by project sales in the prior year and the completion of several projects. However, gross profit saw a significant improvement, increasing to 25.3% from 19.1% year-over-year, largely attributed to a reduction in product warranty liability and improved manufacturing facility utilization. The company's balance sheet shows a decrease in cash and cash equivalents, reflecting investments in property, plant, and equipment, alongside operating expenditures for manufacturing transitions. For the nine months ended September 30, 2019, net sales increased to $1.66 billion from $1.55 billion in the prior year, driven by substantial growth in the modules segment. Conversely, the systems segment experienced a decline in net sales. The company generated a net loss of $55.5 million for the nine-month period, compared to a net income of $92.2 million in the prior year, largely due to the impact of large project sales in 2018. Despite the net loss, the company maintains a strong focus on its module technology, capacity expansion, and cost reduction initiatives, anticipating sufficient liquidity for its near-term operational and investment needs.

Financial Highlights

53 data points
Beta

Revenue

$546.81M

25.3% Gross Margin

Net Income

$30.62M

5.6% Net Margin

EPS (Diluted)

$0.29

Total Assets

$7.05B

Cash & Equivalents

$879.00M

Free Cash Flow

-$500.36M

Financial Statements
Beta
Revenue$546.81M
Cost of Revenue$408.44M
Gross Profit$138.36M
R&D Expenses$24.91M
SG&A Expenses$53.54M
Operating Expenses$97.06M
Operating Income$41.30M
Interest Expense$4.98M
Net Income$30.62M
EPS (Basic)$0.29
EPS (Diluted)$0.29
Shares Outstanding (Basic)105.40M
Shares Outstanding (Diluted)106.23M

Key Highlights

  • 1Net sales for Q3 2019 decreased by 19% to $546.8 million compared to $676.2 million in Q3 2018, primarily due to project sales in the prior year and project completions.
  • 2Gross profit margin improved significantly to 25.3% in Q3 2019 from 19.1% in Q3 2018, driven by reduced warranty liabilities and better manufacturing utilization.
  • 3For the nine months ended September 30, 2019, net sales increased 7% to $1.66 billion, primarily due to a 107% increase in module segment sales.
  • 4The company reported a net loss of $55.5 million for the nine months ended September 30, 2019, a reversal from a net income of $92.2 million in the comparable period of 2018.
  • 5Cash, cash equivalents, and marketable securities decreased to $1.54 billion as of September 30, 2019, from $2.55 billion as of December 31, 2018, reflecting significant capital expenditures and operating expenses.
  • 6First Solar announced a transition from an internal EPC service model in the U.S. to an external model, leveraging third-party EPC services.
  • 7Production start-up expenses increased by 26% in Q3 2019, reflecting investments in new manufacturing facilities and production lines.

Frequently Asked Questions

The decrease in net sales for the three months ended September 30, 2019, to $546.8 million from $676.2 million in the prior year, was primarily due to the sale of the Manildra project in 2018 and the completion of substantially all construction activities at several projects in late 2018 and early 2019. This was partially offset by the sale of the Seabrook project and the completion of the Phoebe project in 2019, along with an increase in third-party module sales.

The gross profit margin increased to 25.3% in the third quarter of 2019 from 19.1% in the same period of 2018. This improvement was primarily driven by a significant reduction in the product warranty liability due to revised module return rates, higher gross profit on third-party module sales, and improved utilization of manufacturing facilities. These positive factors more than offset the impact of a less favorable mix of projects under construction.

First Solar believes its current cash, cash equivalents, marketable securities, operating cash flows, future sales contracts, project pipeline, and credit facility availability are sufficient to meet its working capital, project investment, and capital expenditure needs for at least the next 12 months. The company expects to continue making significant capital investments related to its Series 6 module technology transition and new manufacturing facilities.

In September 2019, First Solar announced its shift from an internal Engineering, Procurement, and Construction (EPC) service model in the U.S. to an external model. This change involves leveraging third-party EPC services for power plant solutions. The transition, expected to conclude by the end of 2019, aligns with the company's international model and is facilitated by its Series 6 module technology, which offers improved Balance of System (BoS) compatibility.