First Solar, Inc. (NASDAQ:FSLR) announced fourth-quarter 2017 financial results after the market closed on Thursday and gave investors a few surprises. Delayed project sales meant the company missed its own guidance by a wide margin, but that will largely be offset by an increase in guidance for 2018 when those projects will be sold.
Here's a look at the most important highlights for First Solar and what the company expects in 2018.
First Solar, Inc.: The raw numbers
|Metric||Q4 2017||Q4 2016|
|Sales||$339.2 million||$330.8 million|
|Net income||($432.5 million)||($750.8 million)|
|Diluted earnings per share||($4.14)||($7.22)|
What happened with First Solar, Inc. this quarter?
The GAAP figures above include some one-time expenses like an adjustment for the tax law and start-up costs related to the Series 6 upgrade. That and other factors in the quarter are worth noting.
- Adjusted for one-time costs, the company posted a loss of $0.25 per share. For the full year, adjusted earnings per share were $2.59.
- Bookings for 2017 were 7.7 gigawatts (GW) and there have already been 1.3 GW of bookings in 2018. That shows continued momentum for the company after Section 201 tariffs were announced in the U.S., a very positive sign.
- After the delay in project sales and announced sale of 8point3 Energy Partners (NASDAQ: CAFD), First Solar raised 2018 revenue guidance by $150 million to a range of $2.45 billion to $2.65 billion and expected cash balance by $500 million to $2.1 billion to $2.3 billion. But I will note that gross margin guidance was also reduced 50 basis points to 21.5%-22.5%, an indication that project sales aren't the leading margin business for the company. Adjusted earnings per share guidance was increased to $1.50 to $1.90, a $0.20 increase at the midpoint, driven by project sale timing and the sale of 8point3 Energy Partners.
- Solar panel conversion efficiency was unchanged in the quarter at 17%.
- Operating cash flow for the fourth quarter was $434 million and free cash flow was $234.7 million.
What management had to say
A lot of management's focus over the last two years has been on the upgrade from Series 4 solar panels to Series 6, and the fourth quarter was a real turning point for the transition. In the earnings press release, CEO Mark Widmar noted that, "On the technology front we made significant progress preparing multiple factories for Series 6 manufacturing in 2018, including the production of our first complete module late last year."
Over the next three years, First Solar will transition nearly all of its manufacturing facilities to Series 6 production, and it's that product that will make or break the company's business. So far, early runs sound like they're going well, but there's a long ramp ahead to get the first production facility running at full speed later this year.
First Solar's quarterly results were a little disappointing considering the delayed sale of some project assets. But long term, the more important thing is that Series 6 production is on track and customers are still booking the company's products post-tariff announcement in the U.S. I think the 1.3 GW of bookings already made in 2018 is really the biggest number I'll take away from this quarter, but as the year goes on, the focus will be on making Series 6 solar panels at a cost that's competitive with the market, which will drive long-term profitability.