The expectations were high, but First Solar (FSLR) still blew them away. Revenue, EPS, operating margin, and guidance were all strong. The Malaysian plants appear to be progressing well. More ammo for the bulls…
EPS: $0.85 vs. $0.58 consensus (and $0.70 whisper)
Revenue: $267.0 million vs. $216.9 million consensus
Gross Margin: 54.2% vs. 49% consensus
The market loved these results and FSLR immediately approached new highs in after hours trading. After the conference call, the stock was steady and comfortably above $300. Great execution from FSLR.
New Guidance for FY08:
- 470-485MW of shipments
- $1.075-1.225B in sales
- $37M in plant start-up costs
- $60-$62M (20% to COGS) in stock-based comp.
- 31-33% GAAP operating margin , tax rate 27%,
- YE2008 share count remains unchanged 83-84M
- $550M capex
Listen to the webcast here beginning at 4:30PM ET.
LIVE COVERAGE: Conference Call (paraphrased)
Michael Ahearn (CEO), Bruce Sohn (President), and Jens Meyerhoff (CFO) will be on today’s call.
Focus remains unchanged, continue ramp up, develop in Europe, utility
114 MW production, 48MW per line annually, 5% increase over Q1 from efficiency improvements
10.7% effieciency up (.1%)
Cost per watt 1.18 ($0.06 of ramp cost)
Construction ramp well $47.4 million to sales (Maylaysia plant 1), expected completion by end of year
Expect revenue shipments from Plant 2 in 3Q (1 & 2 progressing better than planned)
Plants 3 & 4 progressing well
Germany gained stability from new (lower) FIT [feed-in tariff]
Italy looks promising
Sales growth in France, anticipate to take advantage of possible FIT increase
Spain exposure remains limited
2008 goals in US: pilot projects, establish business relationships (focus on CA), significant progress in US (US goals on schedule)
Jens Meyerhoff (CFO):
Increase in net sales driven by plants 1 & 2
Gross margin 54.2%, favourable foreign exchange, increased efficiency
Cost per watt $1.18, up from $1.14 due to plant ramp up
Plant start-up expenses will increase sequentially
EPS $0.85, tax rate 25.8%
$160 million of capex in Q2
Updated Guidance: 470-485MW, $1.075-1.225B in sales, plant start-up costs $37M, stock-based comp. $60-$62 (20% to COGS), GAAP operating margin 31-33%, tax rate 27%, YE2008 share count remains unchanged 83-84M, capex for year $550M
Lehman: Congrats on great Q, why expand beyond 4 factories in Malaysia?
A: We’re looking at demand, we’ve been able to increase faster than thought, lot more volume, but ongoing effort to identify sites, no timeframe, but continue to look at market demand
Lehman: US Market? ITC dependence?
A: Focus on utilities, build, own, operate (PPP) an option, build and deliver turnkey system (another option), third channel provide turnkey system to unregulated affiliate (any model could make sense), piloting all 3
Merrill: Great Q, what were shipments?
A: 103.2MW for Q
M: ITC not extended, back-up plan?
A: Might get 8-year, could get just 1-year (possibly), if that doesn’t occur, some will go forward independent, continue to serve European market, not huge plans for US right now, focus on Europe
M: Line input 48MW, long-term target?
A: No target, just trying to improve, continuously improving, efforts in Plant 1 are due to incredible team
Deutsche: 10MW US project announced recently with respect to poor gross margins
A: No details regarding economics of pilot projects, just a test, it’s a pilot
UBS: Congrats, revenue run-rate of Plant 1 in Malaysia? How much is larger is plant 1 than German plant?
A: Run-rate will be same as Frankfurt, 48MW, max it in 3Q, see full benefit as 4Q, same revenues as Frankfurt b/c shipments going to same market
Goldman: owning power vs. manufacturing, what kind of returns do you see? adjust it due to different risks?
A: Want 5% EVA spread
Goldman: Advantage vs. competitors on installation side?
A: Start with low-cost of module, then as we expand vertically, make most of money on module, not system integrator, ability to design, optimise all the way through
Citi: Incremental cost per watt out of Malaysia?
A: Confirm $0.20 guidance
Citi: in ’09, what do you think about total utility market? split revenue utility vs. non-utility
A: Not ready for ’09 guidance
Morgan Stanley: Capacity factor in South Cal., 27%, seems high
A: Haven’t seen 27% reference, I would have said low 20s
MS: 10.7% efficiency, premium efficiency in Malaysia?
A: 10.7% is average, there is a range, Malaysia, is matching other facilities, similar distrbution
Credit Suisse: Pricing in Germany with new FIT?
A: No abrupt shift
CS: colour on receivables
A: Drivers: revenue growth, inventory growth
Cowen: When fully ramped Malaysia could be $0.20 cheaper than Ohio, how does Germany compare?
A: Slightly cheaper than Ohio, will update on final number later
C: Tax rate guidance down
A: Malaysia gives us accelerated depreciate
Lazar: 2009, supply/demand imbalance, ASP dynamics? decline faster in 09?
A: Good % of 09 is locked in by long-term contracts, i don’t see a lot of downward pressure
Oppenheimer: Did you sell any modules into spot market?
A: No, not really a participant in spot market, long-term contracts in Europe and utility projects
Opp: Cost per watt in Malaysia only?
A: $0.06 unfavorable due to Malaysia, no breakout per plant basis
Piper: sourcing of glass in Malaysia? on track?
A: no problem
PacCrest: Great execution, do you expect revenue units in 3Q? Maylaysia will be in production of full production in 4q?
A: No revenue in Q3 from Plant 2, complete ramp by end of year, look at Q109 for revenue
PacCrest: Outperformed on gross margins, by reconcile guidance
A: We stated that dollar impact would be slightly below Frankfurt, ramp was flawless in Malaysia, so absorbed more overhead at factory
Simmons: Market opportunities in Japan?
A: We don’t know, haven’t engaged directly, but high electricity costs could make it work sooner than later w/o subsidies, interesting opportunity for future
Wedbush Morgan: Strong execution, where is extra demand coming from?
A: Key customers, still high concentration in Germany, but spreading out to Italy, France a little bit, leveraging strong customer base, below-market pricing
First Solar (FSLR) reports Q2 earnings after the bell today (Wed, July 30th). The market expects a blowout and strong guidance, and if we don’t get it, the stock will get hammered. We’ll be covering the conference call here LIVE at 4:30pm EST.
- Q2 EPS: $0.58 consensus, $0.70 whisper
- Q2 Revenue: $216.9 million consensus
- Gross Margin: 49% consensus
- 2008 Guidance/Consensus: $975 million to $1.05 billion in revenues ($1.04 billion consensus) 420MW to 460MW of shipments $36 million to $39 million in plant start-up costs $50 million to $52 million stock-based compensation GAAP operating margin of 25% to 30% with a 28% to 30% tax rate 83 million to 84 million fully diluted shares outstanding $500 million in capex EPS: $2.95 consensus
- $975 million to $1.05 billion in revenues ($1.04 billion consensus)
- 420MW to 460MW of shipments
- $36 million to $39 million in plant start-up costs
- $50 million to $52 million stock-based compensation
- GAAP operating margin of 25% to 30% with a 28% to 30% tax rate
- 83 million to 84 million fully diluted shares outstanding
- $500 million in capex
- EPS: $2.95 consensus
- 2009 Consensus EPS: $5.84 consensus Revenue: $1.88 billion consensus
- EPS: $5.84 consensus
- Revenue: $1.88 billion consensus
We’re looking for colour on:
- speed, progress and outlook for the Malaysian plant ramp up
- how much margin pressure there will be in the near-term due to the high costs of ramping up in Malaysia
- strength of the US utility (and possibly residential) market demand with or without ITCs (Investment Tax Credits)
- likelihood of further subsidies around the world and FLSR strategy for taking advantage of them
- efficiency improvements
- possibility of a weaker Euro (the currency FSLR receives a vast majority of their revenue in)
- how they will respond to the increased competition as countless technology companies, from General Electric (GE) to Intel (INTC), take the plunge into solar
And, of course, any reassurances regarding the possible toxicity of their cadmium telluride (CdTe) cells, their supply of Tellurium (a rare element necessary for the production of their CdTe cells), and FSLR’s insider stock sales.