01—Abstract
Summary
Summary of the 10-Q filed May 8, 2020. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. reported largely stable net sales of $532.1 milliona for the first quarter of 2020, comparable to the $532.0 million in the prior year period.
The company achieved a significant turnaround in profitability, with gross profit increasing to $90.3 millionb (17.0% of net sales) from a negligible $112 in the prior year quarter. This improvement was driven by higher gross profits on third-party module sales and better manufacturing facility utilization due to the successful ramp-up of Series 6 module production lines. Net income for the quarter was $90.7 million, a substantial increase from a net loss of $67.6 million in Q1 2019, with diluted EPS of $0.85.
The company's strong financial performance in the quarter was bolstered by a significant discrete tax benefit related to the CARES Act. Despite the improved profitability, the company's operating cash flow turned negative, showing a net cash used of $504.9 millionc, a substantial increase from $303.4 million in Q1 2019. This was largely due to a $350 million settlement payment for a class action lawsuit.
The company ended the quarter with $929.4 milliond in cash and cash equivalents, a decrease from $1.35 billion at the end of 2019, reflecting the lawsuit settlement and other working capital changes. First Solar continues to navigate a competitive market characterized by pricing pressure, though its technology and cost structure remain competitive advantages.
02—Key points
Key Highlights
- Net sales remained stable at $532.1 million, with a significant shift in segment performance: modules segment sales increased by 98% while systems segment sales decreased by 58%.
- Gross profit dramatically improved to $90.3 million (17.0% of net sales) from $0.1 million (0.0% of net sales) in the prior year, driven by higher module sales profitability and improved manufacturing utilization.
- Net income turned positive at $90.7 million ($0.85 diluted EPS), a significant rebound from a net loss of $67.6 million ($0.64 diluted EPS) in Q1 2019.
- Operating cash flow significantly worsened, with net cash used increasing to $504.9 million from $303.4 million, largely due to a $350 million settlement payment for a class action lawsuit.
- Cash and cash equivalents decreased to $929.4 million from $1.35 billion year-over-year, primarily impacted by the lawsuit settlement and other working capital needs.
- Research and development expenses increased by 17% to $25.6 million, reflecting continued investment in technology improvements.
- The company is actively managing its module manufacturing capacity, with Series 6 production increasing and plans to transition legacy facilities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2020, First Solar, Inc. kept $0.17.
- Revenue$532.1M100.0%
- Cost of revenue−$441.8M83.0%
- Gross profit$90.3M17.0%
- Operating costs−$88.7M16.7%
- Operating income$1.7M0.3%
- Interest, other & tax$89.0M16.7%
- Net income$90.7M17.0%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed May 8, 2020Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $532.12M$531.98M | 0.0% |
| Cost of Revenue | $441.79M$531.87M | −16.9% |
| Gross Profit | $90.34M$112K | +80558.9% |
| R&D Expenses | $25.61M$21.88M | +17.1% |
| SG&A Expenses | $58.59M$45.35M | +29.2% |
| Operating Expenses | $88.68M$76.75M | +15.5% |
| Operating Income | $1.66M-$76.64M | +102.2% |
| Interest Expense | $6.79M$10.12M | −32.9% |
| Net Income | $90.70M-$67.60M | +234.2% |
| EPS (Basic) | $0.86$-0.64 | +234.4% |
| EPS (Diluted) | $0.85$-0.64 | +232.8% |
| Shares Outstanding (Basic) | 105.59M105.05M | +0.5% |
| Shares Outstanding (Diluted) | 106.39M105.05M | +1.3% |
05—Questions
Frequently Asked Questions
What was First Solar's financial performance in Q1 2020 compared to Q1 2019?
First Solar saw stable net sales of $532.1 million in Q1 2020 compared to $532.0 million in Q1 2019. However, profitability improved significantly, with gross profit reaching $90.3 million (17.0% of net sales) compared to $0.1 million (0.0% of net sales) in the prior year. This led to a net income of $90.7 million, a strong turnaround from a net loss of $67.6 million in Q1 2019.
What are the key drivers behind the improved gross profit in Q1 2020?
The substantial improvement in gross profit was primarily driven by higher profitability on third-party module sales and improved utilization of manufacturing facilities due to the successful ramp-up of Series 6 module production lines. This offset the lower gross profit from systems projects under construction during the period.
How did the COVID-19 pandemic impact First Solar's operations in Q1 2020?
The company reported that as of the filing date, the limitations imposed due to COVID-19 had a limited effect on its manufacturing facilities. However, it acknowledges the uncertainty and potential future impacts on demand, supply chains, and its ability to continue operations, with many employees working remotely.
What is the status of the class action lawsuit settlement?
First Solar entered into a Memorandum of Understanding (MOU) to settle a class action lawsuit for $350 million. The company made this payment in February 2020 to a settlement escrow agent, and the settlement is subject to court approval, with a final approval hearing scheduled for June 30, 2020.
06—Continue