First Solar reports solid Q1 results; CEO Hughes to step down

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First Solar is fond of dropping big news on the day of its financial results. The company continued this tradition today, announcing that its CEO of the last four years, Jim Hughes, will be stepping down on June 30. Hughes will replaced by Chief Financial Officer (CFO) Mark Widmer.

This is first big management shake-up that First Solar has had for several years, and Hughes will remain in an advisory capacity during the transition, as well as remaining on First Solar’s board. Alex Bradley, who was instrumental in setting up yieldco 8point3 Energy Partners, will step in to take over as interim CFO.

This news does not appear to be an attempt to overshadow First Solar’s financial results, which were strong. The company’s revenues increased 81% year-over-year to $848 million, at a 19% operating margin. And while revenues for companies which build and sell large solar projects tend to be highly uneven from quarter-to-quarter, First Solar has shown strong growth and healthy profitability over the last year.

More significantly, First Solar ran at 100% capacity utilization during the quarter, producing 774 MW of modules. Due to aggressive module technology improvements, First Solar has increased its average module efficiency to 16.2%, with its lead lines running at 16.4%.

This is only marginally better than the previous quarter, however over the last year First Solar has brought its average module efficiency up from 14.7%, to the point where it is now competitive with crystalline silicon.

While First Solar did not provide a breakdown between its project business and its module-only sales, the company shipped around 800 MW during the quarter and booked another 600. In early April the company announced an additional 230 MW deal to supply modules to Silicon Ranch for U.S. projects.

One slim detail from the company’s project business is that it plans to sell an additional 15% of its Stateline solar project to Southern Company. The remaining share will then be dropped down into 8point3 Energy Partners, the joint yieldco which it shares with SunPower.

While most of First Solar’s business appears to remain in the United States, the company has a strong presence in the rapidly growing Indian market, and during the quarter First Solar reached 1 GW of cumulative module shipments into the nation.

First Solar has identified 23.3 GW of “booking opportunities”, most of which it says are in the later stage, and nearly half of which are in the United States. The company notes that it sees growing possibilities in both U.S. and multiple international markets, and made special note of opportunities in states in the Southern and Southeastern U.S.

In the near-term future, First Solar is readying to switch over to production of its Series 5 modules, which essentially comprise three Series 4 modules mounted on twin steel rails. The company says that this allows for “essentially the same form factor as crystalline silicon”, although at 1.2 meters the modules are slightly wider than the typical 72-cell crystalline silicon module.

As such the series 5 will involve an additional production step, but will not require existing tools to be replaced on the production floor. This also allows First Solar to phase in the Series 5 at an adjustable pace depending on market response.

“There are a lot of complicated decisions that we need to make around the production platform,” notes CEO Jim Hughes. “We are trying to ensure that we are thoughtful and detailed about how we proceed.” The company expects capital expenditures of $130 million over the course of 2016 related to the launch of the Series 5.

First Solar’s 2016 revenue guidance of $3.8-4.0 billion remains unchanged; however the company has increased its net income expectations to $300-$370 million, which will result in a 7-10% operating margin. Over the course of 2016 First Solar expects to ship 2.9-3.0 GW of modules.