First Solar, Inc. Net Income jumped on 187% while EBITDA Margin decreased on 2.4 pp from 10.0% to 7.6%
02/21/2019 • About First Solar, Inc. (
$FSLR) • By InTwits
First Solar, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- First Solar, Inc. is a company in decline: 2018 revenue growth was -23.7%, 5 years revenue CAGR was -7.5%
- EBITDA Margin is quite volatile: 7.6% in 2018, 10.0% in 2017, -11.6% in 2016, 24.0% in 2015, 19.7% in 2014
- First Solar, Inc. has high CAPEX intensity: 5 year average CAPEX/Revenue was 14.0%. At the same time it's a lot of higher than industry average of 7.6%.
- CAPEX is quite volatile: $740m in 2018, $514m in 2017, $229m in 2016, $166m in 2015, $258m in 2014
- The company has potentially unprofitable business model: ROIC is 0.7%
- It operates with medium-size leverage: Net Debt/EBITDA is -5.5x while industry average is 2.0x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue dropped on 23.7%. Annual revenue decline showed slowdown in 18Q4 - revenue surged on 104%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.4 pp from 10.0% to 7.6% in 2018.
Gross Margin decreased slightly on 1.2 pp from 18.7% to 17.5% in 2018. Gross Margin declined at -2.3 pp per annum in 2014-2018. SG&A as a % of Revenue increased slightly on 0.99 pp from 6.9% to 7.9% in 2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. During 2014-2018 SBC as a % of Revenue bottomed in 2016 at 0.99% and was growing since that time.
Net Income margin jumped on 12.1 pp from -5.6% to 6.4% in 2018. The efficient tax rate was 2.3% in 2018.
Investments (CAPEX, working capital and M&A)
First Solar, Inc.'s CAPEX/Revenue was 33.0% in 2018. CAPEX/Revenue surged on 28.9 pp from 4.0% in 2015 to 33.0% in 2018. It's average CAPEX/Revenue for the last three years was 19.5%. Battling declining revenue First Solar, Inc. made large investments to CAPEX (433% of EBITDA) but that didn't help at least in this year. CAPEX as a % of Revenue stuck to a growing trend at 6.4 pp per annum in 2014-2018.
Accounts receivable as a % of Revenue decreased slightly on 1.5 pp from 7.2% to 5.7% in 2018. Inventories as a % of Revenue surged on 11.4 pp from 5.9% to 17.3% in 2018. Accounts payable as a % of Revenue increased on 7.6 pp from 5.0% to 12.6% in 2018.
Return on investment
The company operates at low ROIC (0.7%) and ROE (2.8%). ROIC decreased on 2.5 pp from 3.2% to 0.71% in 2018. ROE increased on 6.0 pp from -3.2% to 2.8% in 2018.
Leverage (Debt)
Company's Net Debt / EBITDA is -5.5x and Debt / EBITDA is 2.7x. Debt surged on 18.6% while cash dropped on 38.1%.
First Solar, Inc. has questionable short term financial stability: Interest coverage ratio (ICR) is only 1.5x. First Solar, Inc. has no short term refinancing risk: cash is higher than short term debt (25,198.6%).
Average interest expence charged on company's debt was 5.6% in 2018.
Valuation and dividends
The company's trades at EV/EBITDA 26.5x and P/E 37.9x.
Management team
Mark R Widmar is a First Solar, Inc.'s CEO. Mark R Widmar is a founder and has spent 3 years with the company. CEO total compensation was
$7,032,617 in 2018 which included
$875,273 salary. First Solar, Inc.'s CFO Alexander Bradley has spent 2 years with the company.
At the end of financial year the company had 0.66% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 6,400 employees. The number of employees jumped on 56.1%. Average revenue per employee in 2018 was
$350,632 and it dropped on 51.1%.
Financial and operational results
FY ended 12/31/2018
First Solar, Inc. ($FSLR) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 3,391 | 4,113 | 2,905 | 2,941 | 2,244 | -23.7% |
| Gross Profit | 825 | 1,133 | 638 | 549 | 392 | -28.6% |
| SG&A | 254 | 255 | 262 | 203 | 177 | -12.7% |
| EBITDA | 668 | 988 | -337 | 293 | 171 | -41.7% |
| EBIT | 422 | 730 | -568 | 178 | 40 | -77.4% |
| Interest expence | 2 | 7 | 21 | 26 | 26 | 0.6% |
| Tax | 31 | 32 | 23 | 372 | 3 | -99.1% |
| Net Income | 396 | 593 | -416 | -166 | 144 | |
| Stock Based Compensation | 44 | 45 | 29 | 35 | 34 | -2.8% |
Balance Sheet
|
|---|
| Cash | 1,482 | 1,127 | 1,347 | 2,269 | 1,404 | -38.1% |
| Accounts Receivable | 135 | 501 | 267 | 212 | 128 | -39.4% |
| Inventory | 505 | 380 | 363 | 172 | 388 | 125.0% |
| Accounts Payable | 215 | 338 | 149 | 120 | 233 | 94.1% |
| Short Term Debt | 51 | 38 | 28 | 13 | 6 | -57.4% |
| Long Term Debt | 162 | 251 | 160 | 380 | 461 | 21.2% |
Cash flow
|
|---|
| Capex | 258 | 166 | 229 | 514 | 740 | 43.8% |
| Acquisitions | 4 | | | | | |
Ratios
|
|---|
| Revenue growth | 2.5% | 21.3% | -29.4% | 1.3% | -23.7% | |
| EBITDA growth | 10.4% | 47.9% | -134.1% | -186.9% | -41.7% | |
|
|---|
| Gross Margin | 24.3% | 27.5% | 22.0% | 18.7% | 17.5% | -1.2% |
| EBITDA Margin | 19.7% | 24.0% | -11.6% | 10.0% | 7.6% | -2.4% |
| EBIT Margin | 12.4% | 17.8% | -19.6% | 6.0% | 1.8% | -4.3% |
| SG&A, % of revenue | 7.5% | 6.2% | 9.0% | 6.9% | 7.9% | 1.0% |
| SBC, % of revenue | 1.3% | 1.1% | 1.0% | 1.2% | 1.5% | 0.3% |
| Net Income Margin | 11.7% | 14.4% | -14.3% | -5.6% | 6.4% | 12.1% |
| CAPEX, % of revenue | 7.6% | 4.0% | 7.9% | 17.5% | 33.0% | 15.5% |
|
|---|
| ROIC | 8.0% | 12.5% | -9.6% | 3.2% | 0.7% | -2.5% |
| ROE | 8.3% | 11.3% | -7.7% | -3.2% | 2.8% | 6.0% |
| Net Debt/EBITDA | -1.9x | -0.8x | | -6.4x | -5.5x | 0.9x |
| Interest expence / Average debt | 0.9% | 2.8% | 8.6% | 8.9% | 5.6% | -3.3% |
People
|
|---|
| Insider ownership | 0.7% | 0.7% | 0.7% | 0.7% | 0.7% | 0.0% |
| Employees | 6,060 | 6,350 | 5,400 | 4,100 | 6,400 | 56.1% |
| Revenue/Employee, th. $ | 560 | 648 | 538 | 717 | 351 | -51.1% |
First Solar, Inc. ($FSLR) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 567 | 309 | 676 | 691 | | -36.4% | -50.4% | -37.8% | 103.8% |
| EBITDA | 99 | -73 | 93 | 53 | | 295.2% | -274.9% | -60.6% | |
| Net Income | 83 | -48 | 58 | 52 | | 808.7% | -193.3% | -71.9% | |
Balance Sheet
|
|---|
| Cash | 1,858 | 2,024 | 1,435 | 1,404 | | 12.2% | 34.1% | -28.9% | -38.1% |
| Short Term Debt | 6 | 8 | 3 | 6 | | -47.5% | -43.0% | -80.5% | -57.4% |
| Long Term Debt | 432 | 449 | 463 | 461 | | 62.4% | 45.9% | 40.4% | 21.2% |
Ratios
|
|---|
| Gross Margin | 30.5% | -2.6% | 19.1% | 14.2% | | 21.0% | -20.4% | -7.7% | -4.1% |
| EBITDA Margin | 17.4% | -23.7% | 13.7% | 7.6% | | 14.6% | -30.4% | -7.9% | 10.3% |
| Net Income Margin | 14.6% | -15.7% | 8.5% | 7.5% | | 13.6% | -24.0% | -10.4% | 135.0% |
Peers in Semiconductors
Below we provide First Solar, Inc. benchmarking against other companies in Semiconductors industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NanoFlex Power Corp ($OPVS) | | | | 72.5% | 354.8% |
| MoSys, Inc. ($MOSY) | | -18.4% | 37.2% | 46.8% | 87.7% |
| SMART Global Holdings, Inc. ($SGH) | | | -16.9% | 42.5% | 69.3% |
| Micron Technology, Inc. ($MU) | | -1.0% | -23.4% | 63.9% | 49.5% |
| Adesto Technologies Corporation ($IOTS) | | 4.3% | 1.6% | 27.6% | 48.8% |
| |
|---|
| Median (67 companies) | 54.6% | 8.5% | 5.2% | 11.0% | 5.0% |
|---|
| First Solar, Inc. ($FSLR) | | 21.3% | -29.4% | 1.3% | -23.7% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| CEVA, Inc. ($CEVA) | 90.2% | 90.9% | 91.6% | 92.1% | 89.8% |
| NVE Corporation ($NVEC) | 77.9% | 80.3% | 76.1% | 78.5% | 79.0% |
| Rambus, Inc. ($RMBS) | 85.9% | 84.7% | 80.1% | 79.9% | 76.8% |
| Universal Display Corporation ($OLED) | 76.0% | 64.2% | 83.9% | 80.8% | 75.5% |
| Intermolecular, Inc. ($IMI) | 48.3% | 57.4% | 66.5% | 67.5% | 70.3% |
| |
|---|
| Median (65 companies) | 46.4% | 47.7% | 48.0% | 49.1% | 51.0% |
|---|
| First Solar, Inc. ($FSLR) | 24.3% | 27.5% | 22.0% | 18.7% | 17.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NVE Corporation ($NVEC) | 58.8% | 66.0% | 61.8% | 65.6% | 65.1% |
| Micron Technology, Inc. ($MU) | 31.7% | 35.0% | 25.4% | 47.9% | 65.0% |
| NXP Semiconductors N.V. ($NXPI) | 25.7% | 41.5% | 21.6% | 46.2% | 49.9% |
| Texas Instruments Incorporated ($TXN) | 39.7% | 42.0% | 43.5% | 46.7% | 48.6% |
| Intel Corp ($INTC) | 42.8% | 41.0% | 35.2% | 41.7% | 45.7% |
| |
|---|
| Median (66 companies) | 9.6% | 11.3% | 9.2% | 10.7% | 10.0% |
|---|
| First Solar, Inc. ($FSLR) | 19.7% | 24.0% | -11.6% | 10.0% | 7.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpha and Omega Semiconductor Limited ($AOSL) | 3.0% | 6.6% | 6.5% | 12.2% | 42.2% |
| Renesola Ltd. ($SOL) | 3.5% | 0.0% | 0.0% | 78.0% | 41.7% |
| Sigma Designs Inc ($SIGM) | 11.0% | 6.5% | 6.2% | 14.1% | 29.3% |
| Micron Technology, Inc. ($MU) | 19.0% | 24.8% | 46.9% | 23.3% | 29.2% |
| Sequans Communications S.A. ($SQNS) | 0.0% | 16.9% | 11.8% | 13.3% | 22.9% |
| |
|---|
| Median (66 companies) | 3.6% | 4.0% | 3.6% | 4.7% | 4.4% |
|---|
| First Solar, Inc. ($FSLR) | 7.6% | 4.0% | 7.9% | 17.5% | 33.0% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| SMART Global Holdings, Inc. ($SGH) | | | 2.5% | 21.5% | 51.7% |
| Texas Instruments Incorporated ($TXN) | 25.1% | 29.8% | 34.9% | 43.1% | 47.5% |
| Micron Technology, Inc. ($MU) | 18.8% | 15.8% | 0.8% | 21.5% | 42.9% |
| Applied Materials Inc ($AMAT) | 15.8% | 15.2% | 19.0% | 31.2% | 36.4% |
| NVIDIA Corporation ($NVDA) | 9.2% | 13.3% | 13.1% | 27.3% | 35.3% |
| |
|---|
| Median (73 companies) | 5.0% | 3.8% | 1.7% | 3.2% | 5.2% |
|---|
| First Solar, Inc. ($FSLR) | 8.0% | 12.5% | -9.6% | 3.2% | 0.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| MACOM Technology Solutions Holdings, Inc. ($MTSI) | 25.4x | 3.3x | 3.0x | 7.2x | 98.6x |
| Inphi Corporation ($IPHI) | | -6.4x | 4.5x | 33.7x | 32.2x |
| JinkoSolar Holding Company Limited ($JKS) | 4.2x | 3.3x | 4.1x | 11.0x | 8.2x |
| Lattice Semiconductor Corporation ($LSCC) | -1.8x | | 6.5x | 19.0x | 3.9x |
| Renesola Ltd. ($SOL) | 7.0x | 35.0x | 123.6x | 2.3x | 3.3x |
| |
|---|
| Median (45 companies) | -0.5x | -0.2x | 0.2x | 0.4x | 0.3x |
|---|
| First Solar, Inc. ($FSLR) | -1.9x | -0.8x | | -6.4x | -5.5x |
