Q3 2021 FTC Solar Inc Earnings Call
Today's conference is scheduled to begin momentarily. Please continue to standby and thank you for your patience.
[music].
Okay.
Good day, and thank you for standing by and welcome to the FTC Solar third quarter 2021 earnings Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone as a reminder, the conference is being recorded if you require any further assistance. Please press star Zero I would now like to hand, the conference over to your speaker today Bill <unk>.
Vice President of Investor Relations. Please go ahead.
Thank you and welcome everyone to <unk> third quarter 2021 earnings conference call prior to today's call you've likely had opportunity to review the earnings release and supplemental slide presentation, both of which were posted earlier today, if you've not yet.
We are available on the Investor Relations section of our website FTC solar dot com.
And today by FTC Solar was recently named President and Chief Executive Officer, Sean Hoffler, and Patrick Cooke, the Companys Chief Financial Officer.
Before we begin let me remind everyone that today's discussion contains forward looking statements based on our assumptions and beliefs in the current environment to speak only as of the currency as such these forward looking statements include risks and uncertainties and actual results could differ materially from our current expectations. Please refer to our press release and other SEC filings, including our 10-Q for more information.
On the specific risk factors.
We assume no obligation to update such information, except as required by law and you can expect we will provide both GAAP and non-GAAP financial measures. Today. Please note that the earnings release issued this morning includes a full reconciliation of each non-GAAP financial measure to the nearest applicable GAAP measure. In addition, we'll discuss our executed contract.
Orders in our definition for this metric is also included in our press release with that it is my pleasure to turn the call over to our CEO, Sean I'm sorry.
Thanks, Bill and good morning, everyone I'm excited to be speaking with all of you for the first time in my capacity as CEO of FTC Solar I've had the pleasure of previously working with several members of our board of directors the management team and other FTC solar employees at other companies in the past.
Prior to joining I watched the companys strong growth and progress and admired how it was positioning itself for the future. It's for these reasons that I was so interested and excited to take on this new role FTC solar has so much growth potential I'm also genuinely excited about the role the company plays.
And supporting the transition to renewable energy in short I couldn't be more pleased to join as CEO and spearhead. The next phase of our growth and to work with all of you.
Over the last six weeks in addition to spending a lot of time with employees and visiting sites as well as some suppliers I've spent quite a bit of time with customers with many face to face meetings. It.
It is clear that the long term demand drivers for solar are in place and customers love our products our bookings reflect that at the same time. There is also frankly, a little bit of chaos in the marketplace as developers and suppliers work to navigate things like 80 CVD <unk>.
Holly silicon pricing commodity pricing and logistics challenges.
This is causing some to have uncertainty and push out project timelines. So we're navigating through this environment in the near term, we'd hope to see some of the disruption settle as we enter the new year. Overall I believe we are well positioned have incredible potential as a company and are working to position the company for strong.
Long term growth.
We have a lot to cover today, including third quarter results and our outlook. So let me jump right to that I'll start with a few recent highlights.
<unk> revenue grew approximately 6% sequentially in the quarter, while this was lower than our target range as some tracker production shifted between the third and fourth quarters lower operating expense as well as some corresponding shift and logistics expenses enabled adjusted EBITDA to come in toward the high.
End of our guidance range.
We are pleased to report that FTC solar has continued to see strong growth in our executed contract and awarded orders, which had grown by about 580% on a year to date basis through today with another $267 million added since our last update from August one.
Of note since June <unk>, we've added more revenue to our backlog than we've recorded in the entire history of the company to date, that's really a telling statistic and as another proof point of the growing demand for our products in the industry.
On the domestic customer side of our business. We've recently reached indicative terms on a transaction to supply trackers to multiple projects being developed by a top tier developer, which represents a meaningful portion of pipeline under development by them.
As part of the transaction FTC intends to make a limited amount of development capital available to some of the projects. Each project will have a separate supply agreement with the total transaction expected to reach one seven gigawatts over the next three to four years with the option to upsize if both sides agree.
We've done projects with this developer in the past, but we are proud to report that this represents a healthy expansion of our working relationship. This growth also reflects well on their confidence and FTC store, our team and the good real world experience they've had with our tracker solutions.
We've reached agreement on indicative terms for the transaction and expect to execute the definitive agreement in the near future in the meantime, we've already entered into binding tracker supply agreements for two projects totaling 200 megawatts under development by this developer.
Internationally, we've recently seen additional growth in progress, including three more projects in Australia, including our largest there to date as well as our first two projects in Africa, expanding internationally as an important growth driver for FTC solar and I know that adding initial international projects. This year.
<unk> was one of the milestones mentioned at the time of our IPO. We're pleased to report continued progress on that front.
We also sold another contract for our son path performance enhancing software during the quarter. This is the fourth contract sold since launching the product earlier. This year. Some pap essentially provides additional risk free revenue to our customers, while also providing FTC solar women.
An additional high margin software sale opportunity, we continue to be excited about the long term potential of this offering and in software in general as our revenue profitability and value creation driver for the company.
To wrap up our brief review of highlights we continue to see strong sequential revenue growth in the fourth quarter of between 30 and 50%. Despite the challenges of project delays or push outs in the industry <unk>.
Expanding a bit more on the current environment since our last update in mid August steel pricing has continued to remain elevated the global logistics environment has continued to deteriorate with freight near record highs and perhaps the biggest change has been in the module space, where pricing has increased significantly for example, polysilicon.
And pricing is up 40%.
And there has been increasing uncertainty around module availability due to several factors that you are all well aware of including the introduction of the ADC BD complaint and W. Rowe enforcement actions.
As I alluded at the top of the call. We believe this additional module pricing and availability uncertainty on top of the already elevated commodity and logistics pricing is causing an increasing number of developers to reevaluate their construction timelines for certain projects last quarter, we talked about seeing reports.
Indicating that maybe 15% or so of uncontrolled project timelines, we're being pushed out by a quarter or two now were seeing reports estimating that number could be even higher perhaps 50% or more we are closely monitoring the ADC. The issue and are hopeful that it will soon be resolved in a manner.
It limits further disruption for the industry.
During all of this we will not lose sight of the fact that long term demand drivers for solar remain intact and in fact continue to strengthen for example in the U S. We are closely monitoring developments related to the pending build back better act and the incentives for solar energy there in including a proposed <unk>.
<unk> an increase to the ITC, we believe FTC solar is well positioned to successfully navigate through these near term market disruptions, while continuing to position the company for strong long term growth and value creation for our stakeholders. For example in addition.
And to our continued strong backlog growth, our overall project pipeline or the total amount of <unk> projects in the solar energy market to which we have visibility as a potential sale opportunity for our trackers is now at record levels at more than 68 Gigawatts. This is further.
Evidence of the continued and expanding market acceptance and interest in our tracker solutions.
We continue to have a strong balance sheet, which allows us to withstand short term market dislocations.
Our transition to break bulk logistics for international shipment will begin to be realized in the current quarter, providing our customers with price certainty, helping to reduce our overall cost structure and eliminating unexpected price escalations during project execution rigor.
Regarding steel while lead times have extended the relationships, we have with our expanded supplier base have enabled us to secure the entirety of our new project requirements at the time of the project contract as we have done in the past as it relates to the U S. We have had qualified steel supply in the U S. Since two.
19, and have and will continue to enhance that positioning to ensure we are ready to meet any potential request for higher domestic content should the related legislative provision be passed and finally, we have a cost reduction roadmap with a long runway that is just beginning to yield results.
<unk>. This includes our design to value initiatives, which is sharply focused on improving project margin by reducing manufacturing and materials cost initial results from this initiative became evident in Q3 and these improvements are expected to be an increasing contributor to improved profitability in future quarters.
The design to value initiative is also expected to leverage our emerging R&D pipeline, where I see the potential to accelerate certain opportunities.
In summary, while there are a number of external factors impacting the solar market today. The long term demand drivers for solar are firmly in place I believe the underlying fundamentals of the FTC solar business are strong and improving and I see a great deal of opportunity for business growth and value creation.
<unk>, particularly over the medium to long term, we are well positioned in a growth market with differentiated offerings and are seeing rapid customer adoption of our solutions we.
We have strong and expanding customer relationships, which is showing up in the new customers, we are adding including in new international markets as well as in our contracted and awarded orders that have grown rapidly and we believe have outpaced the market. We have a lot of opportunity to continue to operate more efficiently as we.
Scale and take cost out of our products and we have an asset light model the strong balance sheet, which gives us plenty of flexibility and sets us up for a strong future cash flows.
With that I'll turn it over to Patrick Thanks, Sean and good morning, everyone I'll provide some additional detail on the third quarter performance and outlook and as a reminder, our year over year comparisons reflect a significant amount of growth in our personnel and corporate infrastructure ahead of becoming a public company, which occurred in the second quarter of this year.
These items make so year over year comparisons a bit less meaningful.
Beginning with the results for the third quarter total revenue was $53 million, which was below our target range due to shift in production timing and the resulting revenue recognition between quarters. This revenue level represents an increase of five 8% compared to the prior quarter on slightly higher product volume and higher ASP.
And a decrease of approximately 11% compared to the third quarter of 2020 on lower product volumes.
GAAP gross loss was $8 million compared to $16 1 million in the prior quarter, driven primarily by lower stock based compensation relative to our first quarter as a public company and lower logistics expense on fewer deliveries and compared to a profit of $2 9 million in the prior year peer.
With the difference driven primarily by a strong ramp up in employee count and other overhead expenses to support the company's growth trajectory.
Logistics impact of $6 million in the third quarter was lower than the 12% to $15 million indicated in the company's guidance with a portion of that shifting into the fourth quarter along with the shift in production.
GAAP operating expense was $14 $7 million on a non-GAAP basis, excluding stock based compensation and certain other expenses operating expenses were $8 $4 million better than the company's guidance range due to cost controls and timing between quarters, which compares to $5 million and.
The year ago quarter, the year over year increase was driven primarily by the necessary growth in staffing and other public company preparation.
GAAP net loss was $22 9 million or 24 per share compared to a loss of $52 $4 million or <unk> 61 per share in the prior quarter and compared to a net loss of $2 8 million or <unk> a share in the year ago quarter.
And adjusted EBITDA loss, which excludes the $5 4 million impact of stock based compensation certain consulting and legal fees and other noncash items was $16 1 million. This was also better than the midpoint of the company's guidance range due to lower operating and shipping expenses.
This result compares to an adjusted EBITDA loss of $16 7 million in the prior quarter and $2 1 million in the year ago quarter.
We ended the quarter with $141 million in cash and no debt our strong liquidity position continues to differentiate us in the marketplace.
<unk> customers and other stakeholders meaningful confidence in our ability to invest in our growth and positions us well to weather any short term uncertainties.
With that let's turn to our outlook looking ahead, we expect to see strong sequential growth in revenue in the fourth quarter. However, due to an abrupt delay of customer purchase order decisions from the fourth quarter into 2022, driven primarily by module procurement uncertainty and related regulatory factors that Sean discussed.
Earlier, our revenue expectations for the fourth quarter are now lower than our previous target as anticipated revenue pushes into subsequent periods.
Specifically, we had more than $80 million worth of projects pushed from Q4 into 2022. It is important to note that we see this as a delay not a loss in the business.
It is important to note overall, we continue to see strong demand for our project with our overall project pipeline and contract and awarded orders continuing to grow with.
With the implementation of bulk break shipping beginning in the fourth quarter as well as the second quarter of our design to value initiatives. We expect to see continued improvement in profitability relative to the third quarter. So.
So for the fourth quarter. We are currently expect continued progress, including revenue between 70 and $80 million, representing a growth of 30% to 50% over the prior quarter non-GAAP operating expense between nine and $10 million and adjusted EBITDA loss of $12 $516 $5 million.
Sumit and approximate $3 million to $5 million negative impact due to logistics.
This outlook would result in full year revenue between $239 and $249 million, representing annual growth of 27% to 33%.
And without the negative impact to logistics or the revenue push out. We believe we would have been on track to be close to breakeven in the fourth quarter with that I'll turn the call over to the operator, and we're happy to take any questions you may have operator.
Thank you and as a reminder to ask a question you will need to press star one on your telephone to withdraw.
A question. Please press the pound key please standby, while we compile the Q&A roster.
And our first question comes from Kashi Harrison with Piper Sandler Your line is now open.
Yes.
Good morning, everyone and thank you for taking my questions on.
The contracted awarded orders for 2022.
How much of the $6 million to $92 million is associated with 2022, and then how much is associated with the 2023.
This is bill at Kashi, so that we've got more than.
$350 million.
Currently set for 2022, and we do have.
Beyond that 2022, given the additional contract as well as we talked about.
Got it and then I wanted to dig a little bit more into the longer term agreement that you guys outlined.
Can you provide some color on how much capital you are providing to the developer on the longer term arrangements.
How to think about the direct return associated with that capital.
How.
How are the asps on these longer dated arrangement structured maybe talk us through some.
Some procurement as well.
Just trying to understand the structure of these new agreements because I think they are a little bit different than what you've done in the past.
So Kashi this is Shawn Han <unk>. So let me let me take a stab at that and then I'll ask Patrick to comment as well. So I'm really excited about this long term agreement because it really locks us into an additional one seven gigawatt with this top tier developer and if you. If you think about it it's going to be for us.
$30 million is the is the fund size that we're setting up for this purpose.
And if you think about the the asps and such so each individual project will have its own agreement and so we will just like we.
We announced that we've got two projects underway at about 200 megawatts, we will have additional projects over the next three to four years to get to the full $1 seven and then we will have the opportunity. If we both decided and things are going well to extend the agreement further so I'm really excited about the opportunity it presents.
Patrick I think the one thing I'd add Kashi is as it relates to the contracts themselves that make up the one seven gigawatts.
These projects are going to be negotiated and individual basis as the product is needed. So we're not fixing price today for a project that is one two and three years out we'll we're going to price those projects similar to what we do with any other project that we have at the time in which the Po is assignment.
Got it got it got it Okay and then you talked to thank for all the color all the market color really appreciate it.
We've now seen projects get.
Ship flipped from 'twenty one into 2022.
When you think about 2022, how do you think about the risk of project further delays into 2023 and do you think that.
The build back better planned may actually.
Unintentionally end up driving project delays.
As well into 2023, just given the ICC expansion.
So where we are.
That's a great question Kashi, we're we're hopeful that things will stabilize a bit that having a resolution on ADC edd having.
The legislation passed.
We're hopeful that that will cause a little bit more stability at obviously as we discussed there has been a there's been a lot of chaos and uncertainty with all of these factors that have caused projects to push forward into 'twenty, two and I guess you could say there is some risk that it would have the reverse effect and because of the ITC pushed some projects.
But I think on balance just having some decisions made on some of these open issues will lend itself to having some more stability in the outlook for projections. So that's our hope is that things stabilize a bit that we see a decision on some of these topics and that that will help us.
Moving forward with our customer base.
That makes sense and then just the last one for me.
I was wondering.
Maybe for Patrick if you could just provide us with an update on the path to profitability.
Indicated you would have been you would have been I think you said you would have been there in Q4, if not for the project delays and so.
Are we thinking profitability in Q2 of next year Q3, just just any.
Any commentary at all would be very helpful and Thats. It for me. Thank you.
No. Thanks for the question.
We're not guiding to 2022 kind of profitability now, but what I will say is.
As it looks at the kind of the three main factors of our cost roadmap initiatives designed to value the high volume manufacturing and the expansion of our supply contract base. Those continued to main remain on track into Q3 and through Q4.
<unk> in magnitude or holding.
We're continuing to see those those efforts muted.
By the increased logistics and increased steel cost, but we are extremely excited about what that what those are going to afford for us in the future when logistics and steel really revert back to what we've seen in the traditional three to five year five year averages. So no change there.
Thank you.
Our next question comes from Philip Shen with Roth Capital Partners. Your line is open.
Hey, guys. Thanks for taking my questions.
First one is I think you guys talked about $80 million from Q4 getting pushed into 2022 can you help us understand how much of that might be in Q1 versus Q2.
Versus possibly in the back half.
Do you expect all of these projects to all.
Somebody get done or is there a chance.
Some of these projects get canceled.
So the slip we're seeing of the push we're seeing is somewhere in the range of 60 to 90 days. So so we're looking at Q1 Q2 for things that are pushed into.
Into next year Phil.
So that's basically how it is now the good news is that frankly, we're talking about pushes right. We're not talking about projects that are we getting canceled we're not talking about projects that are being lost this is simply a shift.
And we're seeing a shift and we've talked to many customers over the past several weeks face to face and so with all the uncertainty and chaos, we're seeing it happen, but but again, it's not it's not a cancellation, which is the good news.
Great, Yes that indeed is good news.
As it relates to 'twenty two I know you haven't issued official guidance.
But just think back to the IPO and what your view on 'twenty to 'twenty two revenue was.
And EBITDA was back then.
Then now reflect on your view of 22 now revenue and EBITDA.
Given the wins that you've had offset in part by the increased costs and delays are you incrementally more positive or negative relative to that kind of.
Prior view.
Phil. This is this is Sean hungrier again so.
Frankly speaking.
<unk> had.
Face to face meetings with roughly a dozen or so customers in my first five to six weeks and one thing thats been just incredibly impressive to me is how much our customers like the product and really appreciate how our team stands behind the product in terms of assisting them to achieve things like the.
Factory ability benefit of our of our product and the construct ability benefit of our product and so.
I am feeling optimistic based on what im hearing for our customers and we talked about the opportunity now is up over 68, Gigawatts and so while I havent yet turned my attention specifically to the plan for 'twenty two I have to tell you that I have an overall high level of optimism about the future of our business.
<unk>.
Yes, Phil the one thing I'd add to that is if you think about the contract and awarded we booked $267 million of additional.
Backlog this quarter, an extremely difficult environment. So the highest amount of revenue booked in our history.
An extremely difficult environment.
Optimistic on the future.
Adoption rates of the FTC solar tracker.
Great. Thank you both and one last one for me.
As it relates to the reconciliation Bill, let's say it gets passed as is.
We have the domestic content ITC adder.
You talked about having U S steel relationships from 2019.
What is the timing of when you could actually secure U S steel for the vast majority of your.
Customers are projects could you do it as early as first half 'twenty, two or would it be more like the back half of 'twenty, two or perhaps even 2023.
So we have as you mentioned, Phil we've had deep relationships with U S steel suppliers dating back to 2019 in fact.
Last week, our COO is on the road meeting with with some of those U S. Steel suppliers, we have really good relationships and we have a lot of parts for the product that we are able to source today from from U S steel sources and in terms of the overall domestic content I, but.
By the by the midpoint of next year, we'll be able to source. The vast majority of the parts we need for building the product in the U S under domestic content.
Great. Thanks, Sean.
Sure. Thank you. Thank you for the question Phil.
Sure.
Our next question comes from Mohit <unk> with credit Suisse. Your line is open.
Hey, good morning, Thanks for taking our questions.
Maybe just one quick clarification on the push out yet.
Is it just one customer what are you seeing this.
Our big push out for 60 to 90 days or is it.
Multiple projects and multiple customers.
It's.
Overall concern about the uncertainty around.
Items like the MRO polysilicon pricing ADC DB.
Is pretty much out there in the industry and we've seen multiple customers.
Have.
Basically chosen to pause or push out projects again, not canceling, but just just pausing or pushing out and that being said. We also have customers that are that are moving forward and so.
So we've got a lot of things going on project wise in the U S and as we spoke about on the international front.
Also some some some significant wins there as well so while we are seeing the push out is a common theme among among several of our customers. We're also seeing customers moving forward and so I guess I would say, it's a mixed bag we are seeing both.
Got you.
So you can kind of quantify it this could you talk about how much of these push outs related to shipping.
Issues with us.
More domestic issues in the U S b.
Got it as dermatological.
And then more on the module side and then what I'm trying to understand when could you expect.
The customers to come back once all these near term issues solve and then maybe just to wait for the shipping.
Simpson.
So I'd say it's.
Bit of a mixed bag right because we have.
Refer to the current situation is a bit chaotic right. Because you have so many factors. This perfect storm of the commodity price issues, continuing logistics cost being at record high levels five ex <unk>.
Higher than they were in the past you have all these other.
Externalities like 80, CVD, MRO, and it's hard to kind of segregate what.
What.
How many are related to each of those individual factors frankly.
I really I wouldn't be able to even hazard a guess there because when we talk to customers. We typically are talking about the whole the overall market and all and the overall situations. So I wouldn't it would be tough for me to estimate kind of what are the what percentage due to logistics what percentage due to due to the ADC BD et cetera.
Just to sort of mixed bag of things right now and as we mentioned before we're hoping that the.
The decision on <unk> will come out. This this month, we're hoping that things will stabilize a little bit in terms of the power situation in China, that's impacting poly silicon and so we're hoping moving into next year. This is a little bit more stability in some of these factors and on the module front.
Sean talked about when we talk to our customers.
There are projects that we have where our customers are just waiting for the decision on <unk>. So they can go procure the modules for those projects and once they have clarity around that.
Green light for that project to go ahead and go forth. So we expect after the ADC the decision.
For supply our customers to come back to the table once they have the ability or known to purchase modules.
Got it I appreciate that.
Okay.
To put a number to that.
Just last one from me just on the working capital.
This quarter, how should we think about that in Q4 and Q1.
Yes from a working capital perspective, obviously, we continue to focus on liquidity for the company so with improvement.
With.
More known with our customers, we have better better payment terms with our contract manufacturers that we can continue to grow and have payment history with them, we're able to kind of continue to expand those.
That working capital need, but really a huge focus for us.
You've kind of reiterated at every earnings call that we've had our liquidity. We believe provides us with a differentiator in the marketplace and having that strong balance sheet allows us and affords us to do.
Different things, but also allows us to weather any kind of short term dislocation storms without having to go out.
To the market in times, where capital may not be as favorable and we can continue to run off that's been really focus on creating long term value for the shareholders rather than trying to raise capital.
And many of.
This is Shawn I would add to that.
The competitive advantage of a strong balance sheet really manifested itself this quarter in the deal that we struck for the one seven gigawatts. It's the strength of our balance sheet that allows us to do things like that that we think provide a competitive advantage and access to additional additional projects.
Got it thanks.
Thanks, Matt Thank you.
Our next question comes from Ed Kelly with Bank of America Securities. Your line is open.
Hi, Thank you good morning, and thank you so much for taking my question.
Just wanted to understand one thing that you mentioned about the revenue shifts between third quarter and fourth quarter, and maybe semantics, but you mentioned that some of that is due to production shifts. So does it mean any production hiccup that you own it or was it more to do with the customer choosing to live with the order.
From a production no.
It was not a customer driven event it was a production.
At the at the contract manufacturer. So there was no delay or cancellation from the customer's perspective. It was really just a push from Q3 to Q4, yes.
Basically steel.
Got it understood and presumably that would be impacting.
Okay.
Correct that revenue was pushed and will be recognized in Q4.
Alright. Thank you and then just also curious about your South Africa, and Australia projects.
Whats the expected timeline for these projects and how do we relate economics reduce projects compared to U S projects.
So those projects are underway.
Had.
Multiple calls with the EPC and developer in both Australia and in South Africa, and we're really excited about those projects moving forward in particular, the South Africa project as is Agra solar and it's related to a local university. There. So it's really.
The new area for Us and we believe it's going to lead to some other other more significant projects as well in South Africa. As you know we've been in Australia for some time working on projects and and so we're really excited about the increase in the size of some of the more recent projects that have been awarded but but.
Yes, we continue to be excited about the opportunities for FTC solar in the international market.
Got it thank you and with respect to shipping and logistics cost you mentioned that compared to the $12 million to $15 million that you would expecting in third quarter objectives were $6 million and then fourth quarter, you're expecting let's say impact. So could you just elaborate a bit more I know, it's I won't give you debate book, but exactly what are the initiatives that make.
That reduction.
So from.
For Q3, we guided to the 12% to $15 million of logistics impact and which we saw a $6 million impact.
We saw about a $3 million to $5 million impact just due to timing and some of the delays the logistics of that push into Q4.
So it was really just a push.
The costs from Q3 to Q4.
We expect.
A good majority of our.
Great to be on bulk break shipping or is on not expect to be with a limited amount on container based freight and thats consistent with what we've discussed in previous earnings calls with Q.
Q1, and Q2 being on the bulk break shipping method, rather than the container based freight and we're really excited about the opportunity that that gives us because it gives us it gives us and our customers price certainty.
On the logistics front to whether it takes away the variability and having to discuss additional logistics cost to our customers and to the street.
Thank you and last one for me and then ill pass it on.
Just with respect to the design to value initiatives, you mentioned that it's been shrinking back to third quarter and we've also continued to improve so I'm curious if you think about fourth quarter and gross profit, particularly for the product.
The services, which has the logistics impact should we be expecting a positive gross margin what kind of range are you.
You had in mind.
So we were really happy with the results we've seen from the D TV or design to value initiatives.
We saw several million dollars of benefit in the previous quarter, and we expect to see benefit in in.
In the coming quarter, and so we expect to see continued progress in gross margin.
And <unk>.
Frankly speaking I think we will see.
I am very optimistic about next year as well, but we're seeing very good results from that initiative in terms of looking at every aspect of the product and every opportunity that we have to engineer it.
And engineer out cost, but also engineer a better product. So we're seeing really good results from BTB that R&D, helping us from a gross margin perspective.
Got it thank you.
Thank you. Thank you.
Thank you. Our next question comes from Javier <unk> with Raymond James Your line is open.
Thanks for taking the question at a time when input.
Input costs are obviously problem for everybody thought I would ask about that.
Status of the software solution and what Youre seeing in terms of customer uptake and willingness to pay.
Pay extra for that.
So thanks very much Bob well, that's a great question. This is Sean Humphery again.
So as we mentioned in the in the discussion.
<unk> earlier.
We're very excited about the fact that we signed our fourth contract on the Sunpass software solution. The Sunpower software solution is great for the customer because it will allow them.
To build the project as they plan and see additional yield or it allows them to actually build a smaller project and achieve what's been what's been targeted for output by using the added enhanced efficiency from from Sunpower software solution and so we're seeing a lot of interest in the market in <unk>.
<unk> of Sun path, we have other ideas as well for future software offerings. In addition to Sun path. We think this is a great growth area for the company.
It's really a win win because it offers an advantage to our customers, but it's also it's also great for FTC solar in the future and we see this as a continuing growing area for the company.
Right.
Following up on.
22 again recognizing.
Formal guidance at this stage.
Is it fair to say that the geographic mix.
Your sale next year will be more international than white.
Perhaps you would've expected, let's say six months ago, given the some of the policy variables in the U S.
That are not manifesting themselves overseas.
So we see.
We see great opportunity internationally.
And we believe.
Thinking thinking ahead that youll definitely see.
A significantly high growth rate, because we're obviously starting with a relatively low base in terms of international projects. This year, but definitely youll see youll see an increase in our international projects and we're very excited as we mentioned in what's going on in Australia, what's going on in South Africa.
That's absolutely a fact and you are right in those projects are not necessarily subject to some of the challenges that we face in North America that being said, though the the.
The vast majority of our projects today are here in the U S and next year, that's probably going to be the same way in terms of the vast majority of being here, but youll see.
A significant increase percentage wise in what we're doing internationally as well and there's a lot of good momentum.
In both Australia and.
South Africa, but Theres also some good momentum and the team is doing a great job in the middle East as well and I expect some some good things happening there too.
Very good thank you.
Thanks, Bob and thanks for your questions.
Thank you our.
Our next question comes from Moses Sutton with Barclays. Your line is open.
Hi, Thanks for taking my questions on the large one seven gigawatt multiyear agreement.
How are you quantifying the expected ASP for bookings practices before you know people are you sort of using the first projects and then just using that.
For the booking purpose.
So what we're doing in terms of the <unk> like we said, we booked 200 of megawatts of those as we look outward for the Asps were taking a degradation view, obviously, we expect the.
Asps to come down with logistics and steel prices.
As those things start to fall so when we assess the value of that took a degradation approach based on a forward looking view, where asps will be.
Great that makes a lot of sense and then on that.
Idea of where he sees our next year.
Any chance you can quantify for us how much has been pushed through for let's say the bookings that are less next year versus legacy Asp's call. It six months ago, even anything directional percentage base per watt anything.
So so clearly.
Logistics are still a challenge we're we're using the break bulk method as Patrick talked about and that's starting to yield some great results for us as a way to combat logistics. We also are working very closely in the U S to see what combination of rail.
<unk>.
Trucking makes the most sense for domestic products or we're trying to do our very best to sort of optimize our performance given the given the challenges.
In steel.
You see that internationally. If you look at some of the metrics associated with steel pricing steel pricing it seems to be turning from its peak internationally, it's still going up in the U S. So it's going up at a decreased rate from where it was before so we're hopeful that next year, we will see some.
More stability and more normalized.
Performance from these factors that contribute to our costs.
But it's hard to predict but we're doing everything we can by expanding the number of steel suppliers, we have where we're looking closely with logistics, what's the landed cost of steel to a project in the U S and where does it make the most sense to source from but it's it's hard to predict exactly what's going to happen next year.
Year, but hopefully some of the signs we're seeing will lead to some more normal circumstance in those areas.
Thanks, and just reframe that one a bit how has pricing actually changed in connected care, that's really what I'm getting at so we've moved because it's a good environment over the recent months, especially since the IPO.
We've heard about some competitors raising prices just curious on where next year's bookings are on.
No.
What basis on a unit basis relative to what your pricing was.
Six to nine months ago.
Yes, I mean from a pricing perspective asps obviously.
Increased with the cost of logistics and the cost of steel.
I think it's a good reminder, we're bidding projects out six or nine months.
Specifically.
Into 2022 with indicative pricing and based on how we engage with the customer.
Changing the price of that project or the cost of that project on a week to week basis. So we're not locking in price.
Six or nine months into the future, we're giving indicative bids in pricing and as the market changes.
Our able to update our price accordingly, so that we're not held.
On underwater projects.
Great Great and last one for me.
If you could share how many megawatts just Australia project.
Yes, Sandy projects.
About 40 megawatt.
Excellent. Thank you.
Thank you thanks Mark.
As a reminder to ask a question Thats Star One our next question comes from Jeff Osborne with Cowen <unk> Company. Your line is open.
Yeah. Thanks for squeezing me in a couple of questions. One maybe following up on <unk> question around pricing can you give us a sense of perspective of the $350 million Bill that you referenced for 'twenty two that's in the backlog how much of that has fixed pricing that you've locked down versus the flexible approach that you just alluded to.
Most of it.
Our customers are very understanding of this difficult market. So.
For the most part with our customers we're working through this in and using a model that that.
It helps us recognize the dynamic situation and how pricing continues to increase so so most of our customers are quite.
Soon with the situation and are working with US right and if you think about it kind of goes back to the comment I made.
<unk>.
The projects that are fixed those are with really kind of assigned signed purchase orders.
And anything else would be available to be moved.
Got it and then two other ones on the push outs that you referenced I'm. Just curious is it projects that were already under construction that are just pausing midway or is this all sort of new development that maybe folks that hadn't locked in panels are experiencing issues and just procuring them.
So for the most part. These are these are projects that are not yet underway.
That are being pushed out projects, where the panels have been secured those continue to progress.
The type of projects that are getting pushed out or are basically projects that haven't yet begun construction.
Makes sense.
Question I, probably missed this but the 30 million that youre committing is associated with a one.
<unk> seven Gigawatts. It was unclear to me how are you can actually recoup that capital back is it as they take delivery, they're sort of overpaying and in essence rewarding you back for providing that development capital to begin with.
That's correct structurally we get a lien on the project they are using it for kind of middle to late stage development prior to construction and our capital gets taken out with with construction financings. So these are all projects that have a PPA have interconnection have land.
Associated with them and we're kind of coming in and providing some of that middle to late stage capital.
For the project and ultimately get taken out with construction financing so very kind of short duration. If you think about kind of the cycle times of these projects.
Got it Thats helpful. Thats, all I had thank you.
Thanks, Jeff.
And I'm currently showing no further questions at this time I'd like to turn the call back over to management for any closing comments.
Great.
Sean Hunk, Larry again, and I'd like to say, thank you all for joining us today and your interest in FTC solar I'm very excited about the long term prospects of FTC solar and the progress, we're making including the significant growth in demand for our trackers in the marketplace as evidenced by our backlog our international expansion.
And our cost reduction program that is just getting started and I look forward to keeping you all updated on our progress in the quarters ahead. Thank you very much.
This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
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