FTC Solar Inc. Q1 2023 Earnings Call
Good day, and thank you for standing by and welcome to the F. T. C. Solar first quarter 2023 earnings conference call. At this time, all participants are in a listen only mode.
The presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone number 10 here and message and by senior hand this race.
Can we talk a question simply press star one again and be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker build Mccallum Vice President Investor Relations.
Thank you and welcome everyone to <unk> first quarter 2023 earnings conference call before today's call.
That's likely to review the earnings release supplemental financial information and slide presentation, which was posted earlier today.
If you've not yet reviewed these documents they're available on the Investor Relations section of our website at <unk> Dot com.
I'm joined today by John Hoffler, FTC, Silvers, President and Chief Executive Officer, Philip Morris, The Companys, Chief Financial Officer, and Patrick The company's Chief Commercial officer before we begin I'll remind everyone that today's discussion contains forward looking statements based on our assumptions and beliefs in the current environment as we can.
Only as of the current date as such these forward looking statements include risks and uncertainties and actual results and events could differ materially from our current expectations.
Please refer to our press release and other SEC filings for more information on the specific risk factors, we assume no obligation to update such information, except as required by law.
As you would expect will be discussing 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 will discuss our backlog and our definition of this metric is also included in our press release with that I'll turn the call over to Sean.
Thanks, Bill and good morning, everyone I'm very pleased to be speaking with you today not only because we are reporting another quarter of results at the high end of our expectations, but because I believe we are at a significant inflection point in our history as a company.
As we prepare to emerge from a module supply driven downturn, we do so with a stronger and broader product offering strengthening team and a much lower product cost structure, a cost structure that not only allowed us to post our first positive gross margins since our IPO, but a gross margin that is 14 points.
Today than it was in the fourth quarter of 2021 on two five times the revenue.
I believe we are much better positioned to win than ever before and I'm very excited about our opportunity, particularly as we look to the back half of 2023 and into 'twenty four.
So let's jump into it I will start today with a brief market update.
We're beginning to see more projects that have modules, our visibility to modules show up in our funnel in fact, I would say we're seeing the most traction on that front since the start of the ADC CVD and <unk> module constraint period, leading us to believe the worst of <unk> may be behind us.
While lead times, one allow for our Q2 revenue benefit it's an encouraging sign as we look ahead to the back half of 2023 and into 'twenty four.
We believe the inflation reduction act or irate will also help to increase demand over the long term.
We're hearing the guidance from Treasury may be received by the end of Q2.
While our market outlook is becoming increasingly optimistic as we've discussed over the past couple of quarters. Our goal has been to set the company up to improve our financial results in any market environment.
Let me briefly summarize some of the exciting results the team has achieved.
And perhaps most significantly we improved our cost structure, eliminating more than 20% of the steel content from our trackers. This along with launching a higher margin distributed generation business has supported the significant gross margin expansion that is underway.
More about that in a moment.
Second we expanded our product line, adding a new cost effective solution to our Voyager line to support first solar modules first purchase orders for this solution came in Q4.
We also announced a new and differentiated <unk> tracker called pioneer.
Pioneer includes features from Voyager and incorporate key customer feedback and our pipeline for this product has grown quickly.
Last quarter, we noted that the first shipments for pioneer would be in the second half of the year. However, I am pleased to report that we have since received our first <unk> in the U S and Australia and are shipping product in the second quarter ahead of the prior schedule.
Collectively these new products should give us more opportunities to win projects, including where there is a preference or benefit for <unk> customer engagement and excitement are quite high.
Third we have improved our geographic positioning in the U S. We announced a joint venture with a leading manufacturer to support customers, who we'd like domestic content as well as allow us and our customers to benefit from IRA incentives we.
We continue to expect the facility to be online around mid year and as a reminder, we have not incorporated any incremental margin benefit from IRA into our internal models at this point, although we believe there is upside potential.
We have also improved internationally as we entered last year ahead of ADC BD in the U S. Modular issues. Our sales were essentially all in the U S and our pipeline was mostly U S to date, we now have been awarded projects in 10 countries outside the U S and in 2020% to 20% of our revenue was international.
And with the addition of our <unk> solution, we have seen a notable increase in engagement with customers around pipeline.
And finally as it relates to our positioning and value proposition with customers I have never felt better with one P to P and first solar solutions, along with software. We can now engage with our customers as a truly solutions oriented and technology agnostic partner to optimize each.
<unk> project site.
With this solution oriented mindset, our pipeline and backlog continue to grow our overall pipeline has reached a new record high of 134, Gigawatts and backlog has grown to $1 4 billion with another $235 million added since March one.
<unk> all of these actions along with efforts to strengthen our team position us very well for the future in fact, I feel like we are a new and much stronger company as we get closer to what will hopefully be an end to the <unk> related module constraints. Some of the benefits of these actions are already showing up in our results now.
Now and others will play an increasing role moving forward like our new products and additional operational leverage as revenue grows looking.
Looking at the graph at the bottom of page four you can see that our gross margin expansion is already well underway. Even ahead of full <unk> resolution.
In the third quarter of last year, which we have continued to describe as a revenue and margin bottom. We reported non-GAAP gross margin of negative 49, 8% in Q4, we improved to negative three 4% in our last earnings call. We targeted Q1 to turn positive in the 2% to 8% range and we.
We were able to come in at the upper end at seven 3% as we look at that seven 3%. There are a few things I'd call out.
One it represents a 57 point improvement in just two quarters.
It's our first time, achieving a positive gross margin since our IPO and three it's 14 points higher now than it was in fourth quarter 2021, when we had two five times more revenue.
At the same $100 million run rate, we believe that our first quarter gross margin would have been in the 10% to 15% range. This as you may recall is the margin range, we outlined for a revenue level of $100 million in this call one year ago.
It's also another proof point that the actions and incredible hard work of the team are paying off and positioning us for strong and profitable growth and in the last column as Phelps will discuss we are expecting further improvements in second quarter.
So in summary, I feel very good about what we've accomplished and how we strengthen the company. During this period of module constrained as the module environment continues to improve I believe we are positioned with more products and more markets with more customers and more opportunities than ever before and positioned to grow much.
More profitably with that I'll turn it over to <unk>.
Thanks, Sean and good morning, everyone I'll provide some additional color on our performance and our outlook.
The discussion with the first quarter I'm happy to say, we continued our string of solid execution to deliver results at the high end of our guidance range on all metrics for the quarter.
Revenue actually exceeded our targets coming in just a bit above the high end of our guidance range at $49 million.
Compared to last year, which is a pre ADC <unk> environment revenue declined 17, 5% year over year, however, relative to our prior quarter Q4, 2022 revenue increased 56%, which followed the 58% sequential growth. We reported from Q3 to Q4 as we continue to gain momentum off the Q3 2022 loads at the <unk>.
<unk> continues to execute near.
Near term our sales team continues to focus on our strategy of identifying and Thursday, non <unk> impacted projects, which as Sean mentioned is continuing to improve.
As we move on to gross profit we are incredibly pleased to deliver our first positive gross profit since we went public in Q2 2021.
Specifically, our GAAP gross profit of $2 million or 5% of revenue compared to a loss of $1 9 million or seven 3% of revenue in the prior quarter.
On a non-GAAP basis gross profit was $3 million or seven 3% of revenue coming in at the high end of our guidance range and compared to a non-GAAP gross loss of <unk> 9 million or three 4% in the prior quarter.
To put this into perspective in the past few quarters, we've been able to improve our gross profit as a percentage of revenue by 57 percentage points flipping from a negative 49, 8% at the end of Q3 to a positive seven 3% at the end of this quarter. This represents a truly incredible effort by our whole team and we'd like to publicly thank them as they worked tirelessly behind.
<unk> and our design to value and design manufacturing fronts, as well as supply chain optimization as well as the sales team to make this happen. So thank you team.
Next on a year over year basis, we delivered improvements to non-GAAP gross profit of $11 $8 million, even in the face of the lower revenue, which was $48 $9 million this year versus $49 $6 million last year. The year over year improvements were driven primarily by improved tracker and logistics direct margins, including logistics, which returned to positive is.
Shipping has normalized from the pandemic environment.
Our GAAP operating expenses were $14 4 million.
On a non-GAAP basis, excluding stock based compensation charges fees associated with the legal settlement and certain other expenses operating expenses were $10 $1 billion compared to $11 $2 million in the year ago quarter, This was below or better than the midpoint of our guidance range.
This year over year improvement was driven primarily by lower related personnel costs and spending on professional services and continue to keep a keen eye on expenses.
Next GAAP net loss was $11 8 million or <unk> 11 per share compared to a loss of $25 million or <unk> 20 per share in the prior quarter and compared to a net loss of $27 8 million in the year ago quarter.
Collectively the results from our improved margins and continued careful management of operating expenses and overhead flow Dart two our adjusted EBITDA results.
So for the quarter, the adjusted EBITDA loss, which excludes approximately $4 $5 million of certain charges, including stock based compensation expense certain consulting and legal fees severance and other noncash items was $7 2 million.
This was better than the midpoint of our guidance range of $8 5 million.
In addition, these results represented an improvement of $3 $8 million quarter over quarter, when compared to an adjusted EBITDA loss of $11 million in the prior quarter and compared to a $20 million loss in the year ago quarter.
And finally regarding liquidity, we had a small operational use of cash in the quarter offset by a modest usage of the ATM facility for which we received $5 $5 million of cash within the quarter and we ended the quarter with $41 $5 million of cash on the balance sheet.
In terms of the ATM program, while we did not have a direct exposure to Silicon Valley bank, given the volatility and uncertainty in the banking capital markets.
Our board and the management team believes its prudent to tap into this source of liquidity to a small degree of given the lionsgate.
In addition in terms of our overall liquidity, we continue to hold no debt on the balance sheet have an undrawn credit revolver as well of $90 million remaining under the ATM program at quarter end.
So with that let us turn our focus to the outlook.
Based upon our current view, we expect continued albeit modest sequential revenue growth in the second quarter Importantly, we expect our gross margin to show continued and significant improvement quarter over quarter, specifically our targets for the second quarter call for the following.
First revenue between 42, five and <unk> $52 $5 million.
Our non-GAAP gross margins between 4% and $6 5 million or between 9% and 12% of revenue.
non-GAAP operating expenses between 10 and $11 million.
And finally, adjusted EBITDA loss between 7% and $3 5 million.
Looking forward as John mentioned earlier, we are anecdotally starting to hear at the analyst reports Tommy increased module is making it through the U S customs, which is great news.
Now while these improvements were not soon enough to impact your Q2 guidance as these projects move forward to purchase orders that have the potential to lead to a strong ramp in the back half of the year and into 2024.
In closing, we believe FCC has never been better positioned than it is to date and the excitement we are stealing inside the company is palpable.
Broader product offering we have refocused our sales efforts, we have an improved cost structure. We are tireless efforts in the design manufacture and supply chain optimization.
These efforts coupled with our $1 4 billion and backlog has positioned us to not only grow but grow profitably into the future.
So with that we'll conclude our prepared remarks, I'll turn it over to the operator for any questions.
Thank you.
And with that ladies and gentlemen, if you have a question simply press star one one on your telephone to get in the queue.
To withdraw your question just simply press Star one again, one moment for our first question. Please.
And it comes from the line of Mohit <unk> with Credit Suisse. Please go ahead.
Hey, good morning.
And then just on the quarter.
Thanks for the questions here.
So just a question on the bookings could you talk about the bookings growth.
Which markets do you see the bookings growth coming in from.
How do you define that.
Contracted order.
Yes in terms of kind of the geographic regions certainly we are seeing.
Strong bookings in the U S.
Australia Middle East North Africa, the areas in which we've been participating in the last 12 18 24 months, we're really starting to see.
Backlog really grow.
And those regions, which is really exciting for the team spent a lot of effort a lot of time.
In those markets and now we're starting to see fruit being born there in terms of contracted and awarded the way. We described it as similar to others in the industry are along the lines of letters of intent.
Sure.
Hurdle letters of intents are assigned a lot of what's in our backlog have multi project multiyear awards, which we're seeing more and more of as we kind of transition into.
In the back half of 'twenty, three and then into 'twenty for a lot of our customers. Both EPC and developers are really looking to FTC to kind of service their needs on a multitude of projects both internationally and domestically.
This is Sean just to add to that I think Patrick is spot on but I think now that we have this extensive portfolio of products, both <unk> and <unk> for solar solution Crystal and solution. We can service. These these large portfolios and we're seeing more and more customers come forward.
With.
The desire to make a deal on a large portfolio as opposed to a one off project, which we're really excited about.
Yes.
Can you talk about.
Bookings in the U S market right now.
Market, especially given some of it is just.
Kind of talked about the slowdown in the U S market, just curious what youre seeing there.
Yes.
Perspective, obviously, we view iras.
Tailwind and we talked about last quarter. There are certain projects that are going to push to the right.
Waiting for IRS guidance, but with the influx of <unk>.
Modules that we've seen quarter on quarter as it relates to <unk>, we actually see a net benefit to what we saw a quarter ago. So we're really excited about the modules that are coming into the market what that brings for the back half of the year and so we've seen really an incremental improvement from Q1 to Q Q.
Q1 to Q2 on this.
Got it and any.
And when do you expect a physician.
Yes.
I mean, we.
Absolutely.
Hope it happens sooner rather than later, but we have confidence and certainty that it's going to happen.
We positioned ourselves I think very very well with our joint venture plant starting up on schedule here in Texas, and so we think we're very well positioned for IRR and <unk>.
Hopefully it happens sooner rather than later I guess, it's a bit anyone's guess right now, but but we are absolutely confident it's going to happen.
I'll jump back into queue. Thanks for the questions.
Thanks.
Thank you for a moment for our next question. Please.
And it comes from the line of.
Shen with Roth.
Please proceed.
Hey, guys. Thanks for taking the questions had a couple of follow ups on bookings.
As it relates to the $235 million in Q1 can you share what percentage was that was from the U S.
Then.
Also can you share how much of that you think is for 'twenty three versus 24, and then finally, how much of it might be multi year. Thanks.
Yes, Bill Thanks for the question I mean in terms of kind of the breakdown U S versus international most of the projects were.
We are in the U S and we continue to kind of see that within that 235.
Several projects that are multi year multi project ultimately awards and so if you look at kind of the dispersion of revenue certainly we will see some in kind of the back half of 'twenty, three which is why we are.
So excited about the growth trajectory that we're seeing but also.
2024.
As well.
Great. Thanks, Patrick and then I think I heard you say that you expect incremental improvement in bookings in.
In Q2 versus Q1, but wanted to confirm that and then also.
Does that suggest that Q2 bookings could.
Surpass Q1, and then how do you expect that trend into Q3 and four.
So we didn't say specifically.
The bookings between Q1 and Q2 I will say, we are seeing more and more projects go.
Through and what we've seen kind of the last time, we spoke in our last earnings call and so that comes from the international side.
<unk>, which is subject to <unk>, but with the module is getting released in the market, we're seeing more and more opportunities for projects.
In the back half of the year the bidding process that we've seen with our sales engineering team has never been higher and that gives us a lot of confidence and excitement.
The back half in our bookings or our own solid form and we'll continue to do well. Phil. This is Sean we really see a positive trajectory this quarter versus last in and you can see that obviously in our results from the bottom in Q3 through the improvements in Q4 and now the positive gross.
Arjun.
In Q1 so.
Feel good frankly about the business right now and and.
That's based on a lot of input from customers around the world.
Great. Thanks, Sean.
You guys have done great on the margin front end.
On that thread.
Yeah.
Can you just talk about margins.
Margins could trend in the back half.
Should we continue to expect.
Margins to tick up and is there any way to quantify I know you haven't given official guidance, but.
Any kind of color would be fantastic. Thank you.
Yes, so we definitely see a positive trajectory based on everything happening in the front half of the year for the back half of the year and so we feel good about continued improvement but.
But we're not really going to quantify our guide in the back half of the year at this point, but we definitely see a positive trajectory and feel good about things going forward. Yes. It fell itself I think the other thing I'll add there again, we continue to drive incremental.
Space to drive incremental gains on the margins throughout the back half of the year again as Sean said, we're not going to guide at this point, but you can see the guide that we have for Q2 the guidance range on the margins between nine and 12% on.
Solid revenue growth.
Some of these projects come to fruition in the back half we will continue to get continue to anticipate operating leverage on the business.
Then you could see some additional incremental gains obviously huge gains on our last two quarters, we would love to do that but we're not going to see that but again youll continue to see incremental gains for the next couple of quarters and what we anticipate at this point.
Great. Thanks, I'll pass it on.
Thank you one moment for our next question.
Alright, and our question comes from the line of Donovan Schafer with Northland Capital markets. Please proceed.
Hey, guys. Thanks for taking my questions.
So I believe I think we've gone over this before but I think you. The extreme damping approach you do the Voyager that allows horizontal so with no personal galloping youre, implying that the pioneer as well correct me, if I'm wrong on that but.
So.
Why don't you talk about now that that's <unk> being applied in a <unk> context, I think that gives you more of an apples to apples comparison in terms of.
Other <unk> designs and to compare steel content versus other won key designs. So curious to know.
Does that do you see yourselves coming in kind of consistently below competitors and still content.
<unk> inhibition and any or have you started to get any kind of customer feedback how are they how are they responding to that approach to their like it are skeptical about it to their worried if those two little steel or do they see it as gosh that seems like a really elegant design why doesn't everyone do it this way.
Hey, Jonathan this is Shawn thanks for the question. So we believe our first product the Voyager <unk> product is the best engineered <unk> solution in the world.
We get that feedback very consistently for our from our customer base I mean, they are like all aspects of it like for example, the construct the ability and the fact that we have a reduce component count and it requires fewer hours.
Construction, which in this market environment or this labor environment is a real positive. So as we started with a clean sheet of paper on our one P. We did we knew the market didn't need just another me too one Pete we wanted to design a product that had in it a lot of the advantages that we see in the Voyager.
And in fact, we got customer feedback, while we were still on paper.
So we didn't wait until we had.
Product that were out there selling but we went to some of our very close customers and said Hey, what is your current <unk> solution lack and what do you like about the Voyager to P. So we can design our pioneer one P to solve the problems that you see in the market today with <unk> and really have a <unk> solution that brings with it all of the.
Great advantages that you see in our two P Voyager and bring that to market in our <unk>. So we have this great construct ability advantage, we use a really interesting and it's really a cool proprietary technology called Python clips.
Mounting modules and and it's something that we get tons of positive feedback about youre right. We have the same scope strategy on our pioneer product that we have in our Voyager product and our customers like that they really do see this as an elegant solution that that carries with it many of the advantages that our <unk> solution.
Offers over the competition.
I never want to speak poorly competitors, so I don't necessarily want to talk about a comparison, but we're getting a lot of really positive feedback.
And as we mentioned we also sold our first our shipping our first solution Skus me in in the quarter in the U S and in Australia.
For one peak and I think the other part.
Talk to customers as Sean alluded to and talked about we really engage with our customers early on and that is informed by the 500 megawatt agreement that we signed kind of ask the launch of our pioneer product that was a customer that was really deeply engaged with us. The other part is really exciting is we're able to sit down with our customers and really kind of offer.
Our solution based approach, whether it's a <unk> or <unk>, where really configuring to the site specific.
That is really kind of create a distinct competitive advantage for us in the market with our customers and one that they really enjoy we're not selling what we have we're selling a solution and we're agnostic whether it's a <unk> we've got a product that both of our customers, but all of our customers want.
Okay, great. Thanks, that's helpful and then.
And my follow up question with the pioneer is.
Well I guess first would be what.
Can you share kind of the mix of DG or even maybe more broadly like how you see that playing in.
Yeah, a lot of the conversation like you talked about being able to do more comprehensive design solution and coming in yes, I think the DG inherently involves more shipping these types of kits and you're probably in that case are you partnering with someone.
Not doing as much maybe the partner's doing more of the design work for these smaller projects.
So kind of what what mix kind of contributing now or likely to contribute kind of how you see the DG part.
Contributing but then also is that as the pioneer and important part of that because we've talked about smaller sites and assets, sometimes better for <unk>, but of course, a lot of people a preference for one P and sometimes it's just ideology bias whatever.
So do you see the pioneer driving.
Yes drew.
Driving uptick or improvement in DG in the DG channel.
Is it available now in the DG channel is there additional kind of work yet to do to put that into kits.
Hey, Thanks for the question Donovan, Yes, we are extremely excited about the DG business that we launched.
And where the business. The team is doing a great job, we're really seeing growth in that business.
And we're very excited about it yes.
Our intention to have the DG business to be a mix of both our one P pioneer solution and our <unk> Voyager solution and we are working with a partner and and Thats going very very well quite frankly, but we're extremely excited about the DG business and the prospect of growing it further I'll, let Patrick comment.
More as well, yes, I think promote <unk> versus to be from a BD perspective sure. There are customers that have kind of a lumpy lumpy bias, but now we're able to offer to them, but also we're able to operate in areas that you may have certain type restrictions. So it really opens up our our Tam and our competitive advantage ultimately too.
Our customers as Sean talked about we have a partner out in the market that we that we would engage with but we also have an internal DG.
<unk> channel that we that we operate within the services customers. So.
We were taking kind of multiple paths.
Approach to the DG market, we certainly are very excited about the opportunity and the inbound inquiries that we've gotten.
As it relates to that business and the partnerships that.
We formed and are looking to form.
Okay, great. Thanks, guys I'll take the rest offline.
Thank you for a moment our next question please.
And it comes from the line of Amit Dayal with H C. Wainwright. Please proceed.
Thank you and good morning, everyone.
Most of my questions have been asked but just with respect to the international markets.
How will your operating cost structure change as you continue to grow in markets abroad.
So if you think about the markets in which we operate I mean, they really focus in on kind of the construct ability advantage that both pioneer and voyage or ultimately offer so we participate in markets where.
We're able to realize margins in line with our objectives of being 20% plus and so we're not looking at margins our projects that have lower margins. It's really focused on where can we create value in the areas like the U S, Australia Middle East North Africa Europe .
Et cetera are areas, where we feel like we have a distinct advantage in order to maintain and grow our margins.
Understood.
Then just.
A follow up on the BG side was there any contribution from DG in this quarter.
Absolutely, yes, theres contribution from the DG business, we launched the DG business and.
Obviously several months ago, and we're seeing great response, and absolutely there was there.
<unk> revenue contribution from DG in the in the quarter, we disclosed.
Alright, guys Thats all I have for now I'm, taking my other questions I'll say, thank you so much.
Thank you. Thank you. Thank you.
Our next question please.
And it comes from the line of Jeff Osborne with CEB talent. Please proceed.
Yes. Thank you just a couple of questions on my side I was wondering if you could touch on them I think WEC. When they reported you acquired the Sampson solar project from <unk> highlighted some damage to the facility from wind in early March. So just curious if you have any exposure. If there is any language about that in your 10-Q I haven't had a chance to review that if it.
<unk>.
Hey, Jeff.
No. We haven't had any claims on our on our tracker products in the area.
Yes.
Got it and then you mentioned the.
The lead times.
What are those.
Order as the panels have started coming in.
Is that a $10 15 week process can you just give us an update there.
Obviously mentioned Q2 doesn't have some of the benefit that I'm just trying to think of as we see the important data coming.
Improving is that a tailwind for Q3 or our lead times stretched out to Q4, just given the steel supplier constraints that you might have.
Yes, we do see things improving quite frankly, Jeff and obviously the lead time depends on the particular project and the complexity and the location and we're resourcing to steal from but our.
Our.
Our virtual supply chain, so to speak really allows us to minimize lead times and support our customers, but we're definitely seeing some improvement in lead times looking forward.
Got it and the last question I had is.
Just around diversification I think the 10-K talked about 50% of receivables give or take was with one customer last year I think it was 20% to 30% of revenue with one customer I Didnt know with just the growth in backlog here.
The pipeline is diversified.
Yes, the way I looked at it Jeff.
We as we grow.
We get new customers and we grow the share of wallet with existing customers and we've certainly seen that kind of through our pipeline, which informs our backlog, which will ultimately kind of the form or revenue as these kind of convert from intake.
So the actual revenue and so we've seen.
Diversification, both internationally and the U S, but also with our customer base and Youll see that as we.
Kind of get up to the outward quarters of Q3 Q4 in the back and into 2020 for a much broader diversification.
Great to hear that's all I have thank you.
Thanks. Thanks.
One moment for our next question please.
And he comes from the line of Pavel Multichannel with Raymond James. Please proceed.
Yes. Thanks for taking the question can we get an update on what youre seeing in fuel costs.
And how that's flowing through the.
Value chain.
From a steel cost perspective, obviously that we had.
Kind of a large uptick in 2022, we have seen steel prices come down quite dramatically over the last several quarters.
That obviously has an impact on the whole industry and it was really good to see that these input costs were finally, starting to come down from there kind of pre and post Covid post COVID-19.
Yes, the other thing I would I would say Pablo is remember we.
When steel prices were at their peak, we really looked at what can we do in control and Thats why were so proud of what the team has done in terms of reducing 20% of the steel content and so thats helped to make us more robust, but we are seeing a downward trend in steel pricing, yes, I think the other.
Just to reinforce is when we do our pricing we are updating our quotes every two weeks and so we don't want to take the commodity risk on the steel prices going up and so again, that's a continuous process, where we find those pricing just to make sure that were we.
We have a mitigate against any increases in steel content.
Steel prices.
Okay.
Here and secondly, we haven't talked for a little while I think about.
Software.
What's kind of the adoption curve for customer uptake of your software solution.
What's the outlook on that slice of the revenue mix.
So we're really excited about the growth and the opportunity that software presents we have we have several different versions of the software.
That benefit the customer in different areas and so we've seen.
A lot of excitement from the customer base in terms of software we see software. It's still it's still relatively small component of the overall, but definitely definitely a lot of opportunity for growth.
Alright understood. Thank you.
Okay.
One moment for our next question please.
Can you come from the line of healing Demoing Smith with Bank of America. Please proceed.
Hey, good morning team. Thank you guys very much for the time appreciate it nicely done here I just wanted to follow up on the gross margin conversation, obviously doing very nicely here at the start of the year.
If I recall right you guys had kind of a heuristic of 12% to 18% gross margin target against the $100 million to $150 million in revenue can.
Can you talk about what youre scaling looks like on gross margin here I mean, obviously doing very well going back to some of the first question that how do you think about the compounding rate the the weather.
Whether that fixed cost absorption or otherwise.
Into kind.
Kind of a $100 million plus kind of run rate on revenue here.
And I've got a follow up.
Yeah, So hey, Julien itself. So I think if you listen to show on prepared remarks again, if you look at this quarter and kind of scaled back to $100 million range that would fall right into the what we talked about.
This time last year really one year ago today in that 10.
10% to 15% range and so again, we continue going down has been almost call. Phil's question earlier as we incrementally grow revenue and we continue to expect to get some additional uptick in terms of margins as the revenue continues to grow over time, So I think thats, what we talked about last year. It still holds true and we're continue.
Weak too.
As that business grows continue to get some additional operating leverage to get to that point, where we've talked about since the IPO of hitting that 20% gross margin target. We think we're on track to do that.
Hey, Julien do you have another question.
Yes, sorry about that thank you very much just related to domestic concepts. If you can can you.
And kind of discuss what youre seeing actively with your clients.
Vis vis their willingness to proceed on contracting is there some sort of pent up demand. If you want to call. It that again, you talked about panel availability, but I'll frame it slightly differently in terms of IRA clarity with the lawyers here.
And then ultimately what does that portend, especially if this is one of these gating items in terms of that domestic international split as you look at it 24 here.
Is it 70 30 or more domestic.
No Julian the way I would look at it.
The projects that we're going to get delayed because of iras.
Those were kind of really known in the Q1 timeframe as they look to kind of build out their back half of the year projects. So really nothing incremental in terms of projects that have been delayed or ultimately pushed out that we've seen I think from our perspective with the recent influx of modules over the last kind of six to eight weeks you've seen project.
Is.
That are ultimately moving forward and the big gating item was really around.
The modules.
Rather than IRI, but.
Gauge with the customers.
Real content.
Sorry steel.
<unk> ability as it relates to kind of the U S is a big focus point they liked the joint venture that we announced in Q1, we will be able to kind of really service their needs, but there are.
Good amount of projects that are kind of proceeding forward.
With.
With modules through the back half of the year and so that's what we're really excited about.
Alright fair enough.
Pent up demand is that the way to say it seems like a lot of thats already reflected in your view here.
Yes, yes, yes.
Thank you guys.
Thank you Ed.
One moment for our last question in queue. Please.
And he comes from the line of Mccloskey hiring firms with Piper Sandler. Please proceed.
Hey, good morning, Thanks for taking the question.
So you probably you provided qualitative guidance, indicating you expect strong growth in the second half of the year.
And then attempt to convert qualitative to maybe a little bit more quantitative guidance, maybe you could point to another quarter in the past where you feel like you've delivered.
Strong sequential growth.
We can look and looking through and history to provide some frame of reference.
I think.
We.
Like we said before we really don't want to give annual guidance at this point.
We just.
As I mentioned, we feel a lot of positive momentum, we think that in terms of <unk>, we're seeing a lot of relief and while there's some frustration that that the IRS regs have not yet been published.
Net net we see.
It all is as an overall.
Tailwind to us and so we're feeling positive about it it's really it's really hard for me to go back historically and aligned to a specific quarter because we think at this point the company is a different company.
Really lean things out in terms of the internal operations and.
And streamline so it's hard for me to go back in and align kind of what will the back half of this year as compared to quarters in the past.
Okay Fair enough and then just my follow up question.
Last quarter, you provided a non <unk> backlog.
And I think <unk> been providing that for a few quarters now can you give us a sense of where that is today. Thank you.
Okay.
So we've continued to put emphasis on.
On.
On all the non <unk> opportunities out there you know as we said.
As we said previously we came up very quickly with the with our first solar compatible version of the product. So we could focus there and then we've looked at where.
We've really focused internationally, we've seen that when <unk> was at its worst people tended to bias towards <unk> and so we we ultimately developed and released our one <unk> product I don't know Patrick in terms of the specifics. If you wanted to comment any further yes. If you look at the $235 million that we.
We booked this quarter about $190 million of that is not subject to U S. LTA, so either international or.
Have modules and then if you look at kind of the total backlog in terms of the contract and awarded.
<unk> is about 35% to 40% so I think.
Kind of piggybacking off what Sean said controlling what we can control, we've really had kind of a concerted effort and shift to broadening our reach book with our customers in the U S markets, but also the international markets and have been really able to grow that non <unk>.
Backlog pretty significantly in the short amount of time, which allows us to kind of shorten that intake the PEO.
Process, because we're not waiting around for projects that.
May have modules.
Three to six months from now so.
Really good effort by the team and we expect that to continue to make progress there.
Alright, thanks for that thank you.
Thank you.
And gentlemen, I'll pass it back to management for any final remarks.
So thanks very much for joining our call. We are extremely excited about the business. We are a part of and we are extremely excited about the results that the team has generated we talked last quarter and the quarter before about Q3 being our low point and now we have more proof points that that's.
Absolutely. The case, we're extremely excited about the trajectory moving forward in.
And so we look forward to next quarter and sharing our results with you then thanks very much.
And thank you all for participating you may now disconnect.
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