01—Abstract
Summary
Summary of the 10-Q filed October 28, 2020. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. reported strong top-line growth in the third quarter of 2020, with net sales increasing by 70% year-over-year to $927.6 milliona.
This growth was driven by significant increases in both module sales volume and systems segment revenue, largely due to the sale of several projects and higher module shipments. The company also demonstrated improved profitability, with gross profit margin expanding to 31.6% from 25.3% in the prior year's quarter, attributed to a favorable sales mix, manufacturing efficiencies from the ramp-up of Series 6 production, and a reduction in its module collection and recycling liability. Financially, First Solar maintained a solid liquidity position with over $1.6 billionb in cash, cash equivalents, and marketable securities.
Despite a net cash outflow from operating activities, the company reported a substantial net income of $155 millionc for the quarter, or $1.45 per diluted share, showcasing a significant recovery from the previous year's performance. The company also successfully resolved a major class-action lawsuit, contributing to a more stable financial and operational outlook.
02—Key points
Key Highlights
- Net sales surged by 70% year-over-year to $927.6 million in Q3 2020, driven by increased module sales volume and systems segment revenue, including project sales.
- Gross profit margin improved significantly to 31.6% from 25.3% in Q3 2019, benefiting from higher-margin projects, manufacturing efficiencies, and a reduction in liabilities.
- The company reported a net income of $155 million, a substantial improvement from $30.6 million in the prior year's quarter, translating to $1.45 diluted EPS.
- First Solar resolved a significant class-action lawsuit with a $350 million settlement, a portion of which was accrued in 2019 and the remainder recognized in 2020.
- Total assets decreased to $7.0 billion from $7.5 billion at the end of 2019, while total liabilities also decreased significantly, indicating a strengthened balance sheet.
- The company maintained a strong liquidity position with $1.63 billion in cash, cash equivalents, and marketable securities as of September 30, 2020.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2020, First Solar, Inc. kept $0.17.
- Revenue$927.6M100.0%
- Cost of revenue−$634.5M68.4%
- Gross profit$293.0M31.6%
- Operating costs−$85.9M9.3%
- Operating income$207.2M22.3%
- Interest, other & tax−$52.1M5.6%
- Net income$155.0M16.7%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2020filed October 28, 2020Financial Statements
Q3 FY2020 against Q3 FY2019
| Line item | Q3 FY2020Q3 FY2019 | Change |
|---|---|---|
| Revenue | $927.57M$546.81M | +69.6% |
| Cost of Revenue | $634.55M$408.44M | +55.4% |
| Gross Profit | $293.01M$138.36M | +111.8% |
| R&D Expenses | $22.97M$24.91M | −7.8% |
| SG&A Expenses | $49.86M$53.54M | −6.9% |
| Operating Expenses | $85.85M$97.06M | −11.5% |
| Operating Income | $207.16M$41.30M | +401.6% |
| Interest Expense | $10.97M$4.98M | +120.6% |
| Net Income | $155.04M$30.62M | +406.3% |
| EPS (Basic) | $1.46$0.29 | +403.4% |
| EPS (Diluted) | $1.45$0.29 | +400.0% |
| Shares Outstanding (Basic) | 105.97M105.40M | +0.5% |
| Shares Outstanding (Diluted) | 106.75M106.23M | +0.5% |
05—Questions
Frequently Asked Questions
What was the primary driver of First Solar's revenue growth in Q3 2020?
Revenue growth was primarily driven by a 70% increase in net sales, fueled by higher module sales volume and increased revenue from the systems segment, which included significant project sales such as the Ishikawa, Miyagi, Anamizu, Tungabhadra, and Anantapur projects.
How did First Solar's profitability improve in Q3 2020 compared to Q3 2019?
Profitability significantly improved, with gross profit margin expanding from 25.3% in Q3 2019 to 31.6% in Q3 2020. This improvement was attributed to a more favorable mix of higher-margin projects, increased manufacturing throughput from the successful ramp-up of Series 6 production lines, and a reduction in the module collection and recycling liability.
What is the status of the class-action lawsuit mentioned in the filing?
First Solar entered into a Memorandum of Understanding in January 2020 to settle the class-action lawsuit for $350 million. The settlement was finalized and approved by the court in June 2020, with the company having funded the settlement amount. This resolution removes a significant legal contingency.
How has First Solar's financial position changed compared to the end of 2019?
Total assets decreased from $7.5 billion to $7.0 billion, while total liabilities saw a more substantial decrease from $2.4 billion to $1.6 billion. This indicates a strengthening of the balance sheet. The company also maintained a strong liquidity position, with $1.63 billion in cash, cash equivalents, and marketable securities, although this was a decrease from $2.16 billion at the end of 2019, partly due to the class-action settlement payment.
06—Continue