Thursday, November 8, 2007

(FSLR) First Solar Interview; Q3 Earnings Call Transcript

Update:Cramer, CNBC and First Solar (FSLR)
and:First Solar, Inc. Q4 2007 Earnings Call Transcript Highlights (FSLR)

From Reuters:
INTERVIEW-First Solar sets sight on U.S. market
Solar panel maker First Solar Inc (FSLR.O: Quote, Profile, Research) sees earmarking less than one-third of next year's production to the United States' market, its chief executive told Reuters.

The company, which currently sell its product in Europe, is planning to roll out its products to U.S. utilities beginning next year, Chief Executive Michael Ahearn told Reuters at an industry conference in Florida.

The company in July raised its production forecast for 2007 to 170 to 180 megawatts from 165 to 170 megawatts.

Seeking Alpha has the third quarter Earnings call transcript:

...Turning to the market, demand for our products remained robust during the third quarter and we continue to experience market demand in excess of supply. We sold 64.2 megawatts of module at an average sales price of $2.48 per watt resulting in revenue of $159 million.

...We reserve a small portion of our module production to establish new customer relationships and open new markets. During 2007 we made three announcements of expanded volumes under these types of long-term agreement, the most recent this past Monday when we announced 557 megawatts of long-term agreements with Babcock and Brown and Echostream, both under terms comparable to our previously announced long-term contracts.

These newly announced agreements represent approximately $1 billion of revenue through 2012 at an assumed exchange rate of $1.30 per euro. Babcock and Brown is a well-known global investment advisory and development firm that specializes in real estate infrastructure and renewable energy projects.

...Second, and more importantly, First Solar is seeking opportunities to open new markets that are not dependent upon the level of subsidies that traditionally have supported the PV industry.

We do not believe that the subsidy programs currently fueling the PV industry will sustain market growth rates and profit margins at current levels over the long term, but rather are intended to support initial production in market scale leading to lower prices for solar electricity and reduced subsidy dependence.

...Revenues for the third quarter is $159 million, an increase of $81.8 million over the second quarter of 2007, and an increase of $118.2 million compared to the same period of last year.

Gross margin for the third quarter was 51.6%, up from 36.7% in the second quarter of 2007 and up from 39.9% in the same period last year. Gross margin benefited from the rapid capacity ramp at our Frankfurt/Oder plant, effectively eliminating the ramp cost experienced in the second quarter.

Gross margin also benefited from favorable pricing due to a continued strong euro, higher module throughput, and an increased sellable watts per module driven by higher conversion efficiencies.

...We expect to achieve an annual cost-per-watt decline of at least 10% for 2007 over 2006 in line with our goal to achieve 40% to 50% cost reductions by 2012.

...Cash flow from operations during the third quarter of 2007 was $80.9 million due to higher cash-based earnings. We spent $74.1 million in capital expenditures during the third quarter against depreciation of $6.6 million.

...This brings me to our guidance for both 2007 and 2008. For the year 2007, we are increasing our revenue guidance to $480 million to $485 million. We expect total production output for 2007 of approximately 200 megawatts.

Plant startup costs for 2007 are expected at the lower range of our previous guidance of $18 million to $20 million, while stock-based compensation is expected at $39 million to $40 million as a result of further stock price appreciation.

As a result of our 2007 operating margin is expected to be 24% to 25% of sales. With the release of our evaluation allowances, the tax rate for the fourth quarter is expected at 29% to 30%, and the fully diluted year-end share count is expected at approximately 82 million shares. CapEx for 2007 is expected at $280 million above our previous guidance due to the faster capacity ramp.

For 2008, we expect 370 to 390 megawatts of production output, subject to the ramp schedule of our two Malaysian plants. We expect revenues of $760 million to $800 million subject to customer mix and foreign exchange fluctuations.

Revenue in the first half of 2008 is expected to decline sequentially over the fourth quarter of 2007 levels due to our contractual price decline, foreign exchange rate assumptions, and the anticipated timing of incremental capacity contributions from our Malaysia plants....