01—Abstract
Summary
Summary of the 10-Q filed August 7, 2020. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. (FSLR) reported a significant turnaround in its financial performance for the six months ended June 30, 2020, compared to the same period in 2019.
The company achieved net income of $127.6 milliona, a substantial improvement from a net loss of $86.1 million in the prior year. This shift was driven by a strong increase in net sales, up 5% to $1.17 billion, coupled with a considerable reduction in the cost of sales by 9%. Gross profit surged by 195% to $227.8 million, leading to an operating income of $52.6 million, a marked recovery from an operating loss of $85.2 million in the prior year.
The company's strong performance was primarily fueled by its modules segment, which saw a substantial 79%b increase in net sales due to higher volume and a slight rise in average selling price. While the systems segment experienced a 41% decline in net sales, the improved profitability in the modules business more than compensated for this.
Management highlighted the successful ramp-up of Series 6 manufacturing lines and improved facility utilization as key drivers for increased gross profit. Despite challenges posed by the COVID-19 pandemic, First Solar maintained a positive outlook, emphasizing its focus on technological advancements and cost competitiveness.
02—Key points
Key Highlights
- Achieved profitability in the first six months of 2020 with a net income of $127.6 million, a significant improvement from a net loss of $86.1 million in the prior year.
- Net sales increased by 5% to $1.17 billion for the six-month period, driven by a substantial 79% growth in the modules segment.
- Gross profit increased significantly by 195% to $227.8 million, with gross margin improving from 6.9% to 19.4% year-over-year.
- Operating income turned positive at $52.6 million, a dramatic improvement from an operating loss of $85.2 million in the prior year.
- Successfully managed the transition to Series 6 module manufacturing, leading to improved facility utilization and cost efficiencies.
- Settled a class action lawsuit for $350 million and an opt-out action for $19 million, impacting cash flow but resolving significant legal contingencies.
- Company expects to have sufficient liquidity for at least the next 12 months, supported by cash on hand, operating cash flows, and future contracts.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2020, First Solar, Inc. kept $0.06.
- Revenue$642.4M100.0%
- Cost of revenue−$505.0M78.6%
- Gross profit$137.5M21.4%
- Operating costs−$86.6M13.5%
- Operating income$50.9M7.9%
- Interest, other & tax−$14.0M2.2%
- Net income$36.9M5.7%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2020filed August 7, 2020Financial Statements
Q2 FY2020 against Q2 FY2019
| Line item | Q2 FY2020Q2 FY2019 | Change |
|---|---|---|
| Revenue | $642.41M$584.96M | +9.8% |
| Cost of Revenue | $504.95M$507.77M | −0.6% |
| Gross Profit | $137.46M$77.18M | +78.1% |
| R&D Expenses | $22.48M$24.39M | −7.8% |
| SG&A Expenses | $51.77M$50.93M | +1.6% |
| Operating Expenses | $86.56M$85.77M | +0.9% |
| Operating Income | $50.90M-$8.58M | +692.9% |
| Interest Expense | $3.25M$8.92M | −63.5% |
| Net Income | $36.91M-$18.55M | +299.0% |
| EPS (Basic) | $0.35$-0.18 | +294.4% |
| EPS (Diluted) | $0.35$-0.18 | +294.4% |
| Shares Outstanding (Basic) | 105.93M105.37M | +0.5% |
| Shares Outstanding (Diluted) | 106.47M105.37M | +1.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of First Solar's improved financial performance in the first six months of 2020?
The primary driver was the strong performance of the modules segment, which experienced a 79% increase in net sales due to higher sales volumes. This growth, combined with improved manufacturing efficiency and cost reductions from the Series 6 ramp-up, led to significantly higher gross profit and a turnaround from the net loss reported in the same period last year.
How did the COVID-19 pandemic affect First Solar's operations during this period?
While the company implemented safety measures and experienced some manufacturing-related charges, the impact on Series 6 manufacturing facilities was limited. Management noted that the pandemic created uncertainty regarding capital markets and could affect demand and pricing, but generally maintained that operations continued. The settlement of legal matters also impacted cash flow during the period.
What is the outlook for First Solar's liquidity and future capital needs?
First Solar believes its current cash, cash equivalents, marketable securities, operating cash flows, and future contracts provide sufficient liquidity for at least the next 12 months. The company expects to spend between $450 million to $550 million on capital expenditures, primarily related to manufacturing capacity expansion and technology upgrades.
How did the company's segments perform relative to each other?
The modules segment saw substantial growth in net sales and profitability. Conversely, the systems segment experienced a decline in net sales, largely due to the completion of projects in the prior year and fewer ongoing large-scale projects in the current period. The improved performance in the modules segment more than offset the decline in the systems segment.
06—Continue