First Solar(FSLR) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales in Q1 2019 were $532 million, a decrease of $159 million compared to the prior quarter, primarily due to lower systems projects revenue in the U.S. and Japan [21] - Gross margin was breakeven in Q1 compared to 14% in Q4 2018, with the system segment gross margin at 8% and the module segment gross margin at negative 13% [21][22] - The company recorded a first-quarter loss per share of $0.64 compared to earnings per share of $0.49 in the fourth quarter of 2018 [26] Business Line Data and Key Metrics Changes - The percentage of total quarterly net sales from systems revenue in Q1 was 63%, down from 83% in Q4 2018 [21] - The company experienced ramp-related charges of $36 million in Q1, which accounted for approximately 70% of the midpoint forecast for the full year [22] - Net bookings since the last earnings call were 1.1 gigawatts, with expected future shipments totaling 12.2 gigawatts [16] Market Data and Key Metrics Changes - In the U.S., there is a growing impetus to decarbonize electricity, with several states mandating 100% clean electricity standards [8] - Internationally, Europe is expected to have a record year for PV installations, particularly driven by the utility-scale market resurgence in Spain [10] - North America remains the region with the largest number of opportunities in the mid to late-stage pipeline, totaling 3.9 gigawatts DC [19] Company Strategy and Development Direction - The company is focusing on accelerating growth in the corporate PPA segment and has joined the Board of the Renewable Energy Buyers Alliance [9] - The company is restructuring its EPC organization to address recent challenges in project cost management and has installed new leadership [7] - The company aims to achieve a 30% reduction in Series 6 cost per watt from Q1 to Q4 2019 [14] Management's Comments on Operating Environment and Future Outlook - Management noted that the first quarter was adversely impacted by unanticipated non-Series 6 related costs and challenges in the EPC business [5][6] - The company remains optimistic about the demand for PV, citing numerous catalysts driving global opportunities [72] - Management highlighted the importance of maintaining a technology advantage to capture profit pools that competitors cannot [73] Other Important Information - The company expects to start production at its second Series 6 factory in Ohio in early 2020, with construction on track [15] - The cash balance at the end of Q1 was $2.3 billion, a decrease of approximately $400 million from the prior quarter, primarily due to capital investments [27] - The company raised its net sales forecast for 2019 to a revised range of $3.5 billion to $3.7 billion [31] Q&A Session Summary Question: Can you talk about the bookings side and pricing on new bookings? - Management indicated that bookings for the quarter were 1.1 gigawatts, with steady ASPs and no slowdown in momentum [36][38] Question: How many megawatts of Series 6 modules were shipped in Q1? - Approximately 900 megawatts were shipped in Q1, with a significant ramp expected for Q2 [41] Question: What is the status of the Malaysia factory conversion? - Management stated that the decision on the Malaysia factory conversion will depend on market conditions and the momentum around Safe Harbor [53] Question: How much of the backlog is related to Tampa Electric? - The impact of the Tampa Electric project is nearing completion, with remaining work expected to be finished in the coming months [57] Question: Can you clarify the new gross margin guidance? - Management confirmed that the gross margin headwinds were primarily concentrated in Q1, with no additional significant impacts expected for the remainder of the year [51]