Key Takeaways From First Solar’s Q4 Results, 2019 Outlook

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First Solar (NASDAQ:FSLR) published its Q4 2018 results on Thursday, reporting on a quarter that saw the company continue to ramp up production of its next-generation Series 6 modules. While the company’s revenues doubled year-over-year to $691 million, driven by the sale of two projects in Japan, they came in below market expectations, with earnings also falling short of consensus due to some production ramp-related costs. In this note, we provide some of the key takeaways from First Solar’s results and the outlook for the company over 2019.

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First Solar’s Bookings Backlog Is Expanding

First Solar’s shipments backlog (both systems and standalone modules) stood at to 12.1 gigawatts (GW) as of the earnings report. Overall, through 2018, the company noted that it had 5.6 GWdc worth of bookings, translating into a book-to-bill ratio of over 2. Systems projects continued to be a meaningful driver, as the company signed 1.3 gigawatt DC of new PPAs last year, driven partly by strong demand for utility-scale solar from commercial and industrial customers. While the U.S. remains the biggest market for First Solar, international bookings have also been picking up. For instance, bookings from Europe have been on the rise (700 MW through 2018), driven by demand from France and Spain, and also due to the E.U’s 2030 targets of deriving 32% of its energy from renewable sources.

Updates On Series 6 Production

First Solar has been scaling up production of its Series 6 panels, with daily production up by about 65%, compared to October 2018, with the company producing a total of 0.7 GW of modules between its three factories in Malaysia and Ohio and Vietnam. The new panels are important for the company, as they have a significantly higher-rated power capacity compared to legacy Series 4 panels, with manufacturing costs also estimated to be as much as 40% lower. First Solar has noted that run-rate production in these factories stood at about 2 GW at the end of 2018, and the figure is expected to scale up meaningfully over the next few quarters. In January, First Solar started Series 6 production from its second factory in Vietnam, and the company’s second Ohio factory also on track, helping Series 6 capacity to grow to about 5.6 GW by 2020. For 2019, First Solar’s production is expected to stand at between 5.2 GW and 5.5 GW, with 2 GW coming from the legacy Series 4 panels.

2019 Guidance Updates

First Solar provided its updated guidance for 2019, reiterating revenue and EPS guidance of $3.25 billion to $3.45 billion, and $2.25 to $2.75, respectively. However, it noted that gross margins would stand at 19.5% to 20.5%, lower by about 0.5% from previous guidance, on account of an expected increase in ramp costs.

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