Q2 2023 FTC Solar Inc Earnings Call

August 9, 2023

[music].

Speaker 1: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the FTC SOLAR second quarter 2023 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 at that time, please press star 1 1 on your telephone.

Good day, ladies and gentlemen, and thank you for standing by welcome to the F. T. C. So our second quarter 2023 earnings conference call. At this time all participants are in a listen only mode Outfitters speaker's presentation. There will be a question and answer session to ask a question.

At that time, Please press star one one on your telephone keypad.

Speaker 1: At this time, I would like to turn the conference over to Mr. Bill Michalik, Vice President, Investor Relations. Sir, please.

At this time I would like to turn the conference over to Mr. Bill Michelle <unk>, Vice President Investor Relations Sir please begin.

Speaker 2: Thank you and welcome everyone to FDC Solar's second quarter 2023 earnings conference call.

Thank you and welcome everyone to <unk> second quarter 2023 earnings Conference call.

Speaker 2: Before today's call, you may have reviewed our earnings release, supplemental financial information, and slide presentation, which are posted earlier today. If you have not reviewed these documents, they are available on the investor relations section of our website at ftc solar dot com.

For today's call you may have reviewed our earnings release supplemental financial information and slide presentation, which are posted earlier today.

Not reviewed these documents they're available on the Investor Relations section of our website at FTC Kohler Dot com.

Speaker 2: I'm joined today by Sean Hunkler, SEC Solar's President and Chief Executive Officer, Phelps Morris, the company's Chief Financial Officer, and Patrick Cook, the company's Chief Commercial Officer.

I'm joined today by John Haugh litter, FTC Goldberg, President and Chief Executive Officer, Phelps Morris, the company's Chief Financial Officer, and Patrick Cooke, The company's Chief commercial officer.

Speaker 2: Before we begin, I remind everyone that today's discussion contains forward looking statements based on our assumptions and beliefs in the current environment. It speaks only as of the current date such these forward looking statements include risks and uncertainties and actual results and events. The different material 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 required by law.

Before we begin I remind everyone that today's discussion contains forward looking statements based on our assumptions and beliefs in the current environment. It speaks only as of the current date. 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.

No obligation to update such information, except as required by law.

Speaker 2: As you'd expect, we'll discuss both gap and non- GAAP financial measures today. Please note that earnings release issued this morning includes a full reconciliation of each non- GAAP financial measure to the nearest applicable gap measure. In addition, we'll discuss our backlog and our definition of this metric is also included in our press release.

You would expect we will discuss 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.

Speaker 3: Thanks, Bill, and good morning, everyone. Our earnings announcement today includes a mix of near-term disappointment with project delays impacting revenue, as well as some very positive developments, including a number of significant project wins here in the past few weeks, which will boost our performance as we head into 2024.

Thanks, Bill and good morning, everyone. Our earnings announcement today includes a mix of near term disappointment with project delays impacting revenue as well as some very positive developments, including a number of significant project wins here in the past few weeks, which will boost our performance as we head into 2024.

Speaker 3: Getting right into it, our revenue for the second quarter came in at 32.4 million, which was below our guidance range of 42.5 to 52.5 million.

Getting right into it our revenue for the second quarter came in at $32 4 million, which was below our guidance range of $42 five to $52 5 million for the third quarter. We now expect to see revenue in the $24 million to $34 million range, which while we didn't have a public guidance number out there.

Speaker 3: For the third quarter, we now expect to see revenue in the 24 to 34 million range, which, while we didn't have a public guidance number out there, I can tell you is significantly below our prior internal expectations.

I can tell you is significantly below our prior internal expectations.

Speaker 3: The second quarter shortfall is largely related to contracted revenue being pushed between quarters. Specifically, projects from one customer were delayed to allow for additional planning and review around domestic content, as these projects are looking to take advantage of those incentives in the Inflation Reduction Act, or IRA. The review has now been completed and the approach finalized, but it had the effect of pushing revenue from Q2 to Q4.

The second quarter shortfall is largely related to contracted revenue being pushed between quarters, specifically projects from one customer were delayed to allow for additional planning and review around domestic content. As these projects are looking to take advantage of those incentives in the inflation reduction act or <unk>.

The review has now been completed and the approach finalized, but it had the effect of pushing revenue from Q2 to Q4.

Speaker 3: As it relates to our third quarter expectations, our bidding activity remains very high and we have won a fair amount of new business. But the timing of many projects going to purchase order has been slower or pushed out by customers, whether due to domestic content clarity, module availability or delays in permitting, interconnection, or other issues. Unfortunately, given our current revenue run rate, a small handful of projects can have an outsized impact on our results.

As it relates to our third quarter expectations, our bidding activity remains very high and we have won a fair amount of new business, but the timing of many projects going to purchase order has been slower or pushed out by customers, whether due to domestic content clarity module availability or delays in permitting interconnection.

Other issues. Unfortunately, given our current revenue run rate.

Small handful of projects you can have an outsized impact on our results.

Speaker 3: That will improve as we get back to scale, but it's a problem we need to manage now.

That will improve as we get back to scale, but it is a problem we need to manage now.

Speaker 3: The good news is that we have seen a significant uptick in project activity and wins in the last few weeks, including several notable projects which should position us for a meaningful improvement as we head into 2024. As a result of visibility around these projects, we now expect that we'll return to revenue growth in the fourth quarter and be on an accelerating path as we enter the new year. We expect the fourth quarter will be our highest revenue quarter in 2023.

The good news is that we have seen a significant uptick in project activity and wins in the last few weeks, including several notable projects, which should position us for a meaningful improvement as we head into 2024.

As a result of visibility around these projects. We now expect that will return to revenue growth in the fourth quarter and beyond an accelerating path as we enter the new year, we expect the fourth quarter will be our highest revenue quarter in 2023.

Speaker 3: While the cadence of our revenue growth is different and we may have hoped a quarter ago, we have a number of bright spots in our business that give us a great deal of confidence in our future. One, we believe our manufacturing cost is now in line with our leading competitors. We are more competitive than ever and we will get better with scale.

While the cadence of our revenue growth is different and we may have hoped a quarter ago. We have a number of bright spots in our business that give us a great deal of confidence in our future. One we believe our manufacturing cost is now in line with our leading competitors, we are more competitive than ever and we will get better with scale to our.

Speaker 3: Two, our average new project margins puts us on track to achieve the gross margin targets we provided in the past.

Average new project margins puts us on track to achieve the gross margin targets. We provided in the past. This includes our target of achieving a gross margin of 12% to 18% at $150 million quarterly run rate and a 20% margin over the longer term, even with lower revenue in the second quarter, we saw.

Speaker 3: This includes our target of achieving a gross margin of 12 to 18 percent at the 150 million dollar quarterly run rate and a 20 plus percent margin over the longer term.

Speaker 3: Even with lower revenue in the second quarter, we saw gross margin expand another 90 basis points.

Gross margin expand another 90 basis points were set up for a strong margin expansion as revenue grows we're confident in our cost structure and we have a lot of margin leverage, but obviously the level of revenue, which drives cost absorption is a key driver of the actual performance.

Speaker 3: We're set up for a strong margin expansion as revenue grows. We're confident in our cost structure, and we have a lot of margin leverage, but obviously the level of revenue which drives cost absorption is the key driver of the actual performance.

Speaker 3: we are now actively in the market with our one piece solution.

We are now actively in the market with our <unk> solution.

Speaker 3: We believe the 1P market has done better in this time of restricted module availability, and we didn't have a solution until more recently. We now have a solution and a growing 1P pipeline. And with a recently received UL certification, we're focused on converting that pipeline to a war.

We believe the <unk> market has done better in this time of restricted module availability and we didn't have a solution until more recently, we now have a solution and a growing one pipeline and with our recently received UL certification. We're focused on converting that pipeline to awards. In fact, we just won our largest.

Speaker 3: In fact, we just won our largest 1p award to date at 140 plus megawatts, so we are on our way. And by the way, that 140 megawatts has part of an overall one gigawatt award that we received in the last few weeks, which includes supplying a large multi-technology renewables project in the Pacific Northwest.

<unk> Award to date at 140, plus megawatts. So we are on our way and by the way that 140 megawatts as part of an overall one gigawatt award that we received in the last few weeks, which includes supplying a large multi technology renewables project in the Pacific Northwest.

Speaker 3: Four, we continue to grow our international business and are gaining traction in new regions.

Four we continue to grow our international business and are gaining traction in new regions.

Speaker 3: A couple of examples over the past few weeks include a new 120 megawatt award in South Africa.

Couple of examples over the past few weeks include a new 120 megawatt award in South Africa, we.

Speaker 3: We also won a new 300 megawatt of work from multiple projects in Italy and Spain, including utility-scale, Agrivoltaic project.

We also won a new 300 megawatt award for multiple projects in Italy, and Spain, including utility scale Agribiz take projects. These will be our first projects in these countries as we continue to expand in Europe and expand our served market. We have now been awarded projects in a dozen countries outside the U S.

Speaker 3: These will be our first projects in these countries as we continue to expand in Europe and expand our serve market. We have now been awarded projects in a dozen countries outside the US.

And with the recent addition of our <unk> pioneer solution, we believe will be even better positioned to continue to grow our international business as well as our business overall.

Speaker 3: And with the recent addition of our 1P Pioneer solution, we believe we'll be even better positioned to continue to grow our international business as well as our business overall.

Speaker 3: Our backlog has now grown to 1.6 billion with 259 million at its since May 10. The recent project awards I've mentioned among others have helped us grow backlog to this new level. Most of these new multi-project awards include projects that we expect will have near term purchase order dates and in some cases beginning initial production on the first projects during the fourth quarter of this year. But final project is expected to run through the end of 2025.

Our backlog has now grown to $1 6 billion with $259 million added since May 10.

The recent project Awards I've mentioned, among others have helped us grow backlog to this new level. Most of these new multi project awards include projects that we expect will have near term purchase order dates and in some cases beginning initial production on the first project during the fourth quarter of this year with final project is expected to run through the end.

2025.

Speaker 3: The majority of the remainder of our backlog is 2P, which we expect will be increasingly constructed as module availability improves.

The majority of the remainder of our backlog is <unk>, which we expect will be increasingly constructed as module availability improves the continued growth of our backlog and the recent additions of certain projects that we expect will include more near term start dates allows us to continue to be cautiously optimistic about 2020.

Speaker 3: The continued growth of our backlog and the recent additions of certain projects that we expect will include more near-term start dates allows us to continue to be cautiously optimistic about 2024 and gives us a nice foundation for future growth. And then sixth and finally, we continue to control our operating ac...

Four and gives us a nice foundation for future growth.

And then six and finally, we continue to control our operating expenses Youll notice that our Q2 Opex came in better than we had guided and that along with the improved margins allowed us to keep adjusted EBITDA flat quarter over quarter. Despite the lower revenue will continue to control costs and look for efficiencies in many places.

Speaker 3: You'll notice that our Q2 op-x came in better than we had guided. And that, along with the improved margins allowed us to keep adjusted EBITDA flat quarter over quarter despite the lower revenue. We'll continue to control costs and look for efficiencies in many places. However, we will invest more in sales and engineering to sport growth and the pipeline conversion...

However, we will invest more in sales and engineering to support growth and the pipeline conversion.

Speaker 3: So in summary, while our cadence of revenue recovery is slower than we would have hoped a quarter ago, we have seen an exceptional spade of winds in the past few weeks, which gives us confidence in a return to growth in the fourth quarter and into 2024.

So in summary, while our cadence of revenue recovery is slower than we would've hoped a quarter ago, we have seen an exceptional spate of wins in the past few weeks, which gives us confidence in a return to growth in the fourth quarter and into 2020 for our international expansion continues and our newly certified <unk> offering will only enhance.

Speaker 3: Our international expansion continues and our newly certified 1P offering will only enhance that growth over time. We are positioned with a product cost structure that will enable our run of gross margin expansion to resume and reach new highs along with that revenue.

That growth over time, we are positioned with our product cost structure that will enable our run of gross margin expansion to resume and reached new highs along with that revenue growth and we will keep a cap on operating expenses, while investing for future growth with that I will turn it over to Phelps.

Speaker 3: And we will keep a cap on operating expenses while investing for future growth. With that, I'll turn it over to FELF.

Speaker 3: Thanks Sean and good morning everyone. I'll provide some additional color on our second core performance in our outlook. So let's begin with the second quarter. As Sean mentioned, product delays in the quarter resulted in revenue coming in below our guidance range of $32.4 million.

Thanks, Sean and good morning, everyone I'll provide some additional color on our second core performance and our outlook.

Let's begin with the second quarter.

Alan mentioned product delays in the quarter resulted in revenue coming in below our guidance range of $32 4 million.

Speaker 1: This level represents a decline of 20.9% relative to the last quarter and an increase of 5.3% relative to the year-go quarter.

This level represents a decline of 29% relative to the last quarter and an increase of five 3% relative to the year ago quarter.

Speaker 1: As we move on to gross profit, as you would expect, the delay in revenue also flow down and cause margin to come in below our expectations.

As we move on to gross profit as you would expect the delay in revenue also flowed down and cause margin to come in below our expectations.

Speaker 1: However, with Project margins continuing to improve, we are still able to expand our gross margin percentage relative to the last quarter, even on lower revenue.

However, with product margins continuing to improve we are still able to expand our gross margin percentage relative to the last quarter, even on lower revenue.

Speaker 1: Specifically, our gap gross profit was $2.2 million or 6.8% of revenue compared to $2 million or 5% of revenue in the prior quarter.

Specifically, our GAAP gross profit was $2 2 million or six 8% of revenue compared to $2 million or 5% of revenue in the prior quarter.

Speaker 1: On a non-gap basis, Gross Profit was $2.6 million or $8.2% of revenue compared to a non-gap gross profit of $3 million or $7.3% in the prior quarter. This represents a 90 basis point improvement quarter over quarter on the non-gap gross margin, our second quarter of positive margins into our IPO, and a 58 percentage point improvement over the past three quarters.

On a non-GAAP basis gross profit was $2 6 million or eight 2% of revenue compared to a non-GAAP gross profit of $3 million or seven 3% in the prior quarter.

This represents a 90 basis point improvement quarter over quarter on the non-GAAP gross margin, our second quarter of positive margin since our IPO and a 58 percentage point improvement over the past three quarters.

Speaker 1: On a year-over-year basis, we delivered improvement to the non-GAAP gross profit of $8 million on less than $2 million increase in revenue. The improvements were driven primarily by improved tracker direct margins, helped by our product cost reduction efforts.

On a year over year basis, we delivered improvement to the non-GAAP gross profit of $8 million on less than $2 million increase in revenue. The improvements were driven primarily by improved tracker direct margins helped by a product cost reduction efforts.

Speaker 1: Moving to OPEX, our gap operand expenses was $12.6 million. On a non-gap basis, excluding stock-based compensation on certain other expenses, our operand expense was $9.7 million compared to $12.4 million in the year ago quarter. This was below or better than our guidance range.

Moving to Opex, our GAAP operating expenses was $12 $6 million on a non-GAAP basis, excluding stock based compensation and certain other expenses. Our operating expense was $9 7 million compared to $12 4 million in the year ago quarter, This was below or better than our guidance range.

Speaker 1: The year-over-year improvement was driven primary by lower RG and personnel related expenses.

The year over year improvement was driven primarily by lower R&D and personnel related expenses.

Speaker 1: Next, gap net loss is $10.4 million or $0.9 per share compared to the loss of $11.8 million or $11 cents per share on the prior quarter and compared to a net loss of $25.7 million in the year-go quarter.

Next GAAP net loss was $10 4 million or <unk> <unk> per share compared to the loss of $11 8 million or <unk> 11 per share in the prior quarter and compared to a net loss of $25 7 million in the year ago quarter.

Speaker 1: are adjusted EBITDA loss, but excludes approximately $3.2 million, including stock-based compensation expense and certain other non-cash items with $7.2 million, which was just above the low end of our guidance range.

Our adjusted EBITDA loss, which excludes approximately $3 2 million, including stock based compensation expense and certain other noncash items was $7 2 million.

Which was just above the low end of our guidance range.

Speaker 1: The result was approximately flat versus the prior quarter and represented an improvement of 10.5 million dollars compared to an adjusted EBITDA loss of 17.7 million dollars in the year between dev &

The result was approximately flat versus the prior quarter and represented an improvement of $10 5 million compared to an adjusted EBIT loss of $17 7 million in the year ago quarter.

Speaker 1: Finally, regarding liquidity, we had an operational use of cash for the quarter, also by usage of the ATM facility for which we received $15.2 million of cash within the quarter. In aggregate, we ended the quarter with $33.8 million of cash on the balance sheet.

And finally regarding liquidity, we had an operational use of cash for the quarter offset by usage of the ATM facility for which we received $15 $2 million of cash within the quarter.

In aggregate, we ended the quarter with $33 $8 million of cash on the balance sheet.

We continue to hold no debt on the balance sheet, we have an undrawn credit revolver as well as $76 million remaining under the ATM program at quarter end.

Speaker 1: We continue to hold note down on the battery. We have an undrawn credit revolver, as well as 76 million dollars remaining are to the 18-program at quarter end. So with that, let's-

So with that let's turn our focus to the outlook.

Speaker 1: Based upon our current view, which includes the project Salay Shant mentioned, we expect a third quarter revenue to be flat as to down relative to the second quarter.

Based upon our current view, which includes the project delay as Sean mentioned, we expect the third quarter revenue to be flattish to down relative to the second quarter.

Speaker 1: A gross margin performance will be based on how revenue comes in. If the revenue is down, the lower cost of the option will be to margins coming in lower sequentially. However, if revenue is flat or slightly up, then we could see margins come in higher than the second quarter.

Our gross margin performance will be based on how revenue comes in if the revenue was down the lower cost absorption will lead to margins coming in lower sequentially. However, if revenue is flat or slightly up then we could see margins come in higher than the second quarter.

Speaker 1: We expect this to be filed in the fourth quarter by a resumption in revenue growth and margin expansion as the recent project wins are expected to begin production. Specifically, our targets for the third quarter call for the following.

We expect this to be filed in the fourth quarter by resumption of revenue growth and margin expansion as the recent project wins are expected to begin production specifically our targets for the third quarter call for the following <unk>.

Speaker 1: First, revenue between $24 and $34 million. Next, non-gab gross margins between $0.7 million and $3.1 million, or between 3 and 9% of revenue. Next, non-gab operating expenses between $10 and $11 million. And finally, adjusted EBITDA loss between $10.3 million and $6.9 million.

First revenue between 24% and $34 million.

Next non-GAAP gross margins between zero point $7 million and $3 $1 million.

Or between 3% and 9% of revenue.

non-GAAP operating expenses between 10, and $11 million and finally, adjusted EBITDA loss between $10 3 million and $6 $9 million.

Speaker 1: Looking forward, the recent optician project grants give us increased confidence that the revenue ramp expected the fourth quarter should continue into 2024.

Looking forward the recent uptick in project wins gives us increased confidence that the revenue ramp expected in the fourth quarter should continue into 2024.

Speaker 1: So in closing, the actions we take in the strength in the company, broadening our product offerings, refocusing our sales efforts, and improving our cost structure will benefit greatly moving forward. These efforts coupled with $1.6 billion in backlog have positioned us to not only grow, but to grow profitably.

So in closing the actions we've taken to strengthen the company broadening our product offerings refocusing, our sales efforts and improving our cost structure will benefit greatly moving forward.

These efforts, coupled with $1 $6 billion in backlog and positions us to not only grow but to grow profitably.

Speaker 1: With that, we conclude up prepared remarks and I'll turn it over to the operator for any questions. Operator?

With that we conclude our prepared remarks, and I'll turn it over to the operator for any questions operator.

Speaker 4: Ladies and gentlemen, if you have a question or comment at this time, please press star 11 on your telephone keypad.

Ladies and gentlemen, if you have a question or comment at this time. Please press star one one on your telephone keypad.

Speaker 1: If your question has been answered or you wish to remove yourself from the queue, please press star 11 again.

If your question has been answered or you wish to remove yourself from the queue. Please press star one one again.

Speaker 1: Again, if you have a question or comment at this time, please press star 111.

Again, if you have a question or comment at this time. Please press star one one.

Our first question or comment comes from the line of download Schafer from Northern capital markets. Mr. Schafer. Your line is open.

Speaker 1: Our first question or comment comes from the line of Donald Schaeffer from Northern Capital Markis. Mr. Schaeffer, your line is up.

Speaker 5: Hi guys, thanks for taking the questions. So I first want to ask about the backlog. Every time we meet, it seems like you guys have either just come from meeting with customers or right after you're rushing out the door to go meet with some more. So it's pretty clear to me that you're hustling and really kind of doing everything you can to generate sales and we see this in the growing backlog.

Hi, guys. Thanks for taking the questions. So.

I first wanted to ask about the backlog.

Every time, we meet it seems like you guys have either.

Just come from meeting with customers or right. After the rushing out the door to go meet with some more so it's pretty clear to me that you are hustling and really kind of doing everything we can to generate sales and we see this in the growing backlog.

Speaker 5: But if we look at the backlog you have versus the backlog of some of your peers, you know, it's comparably large in size, but it hasn't really slowed through or hit the financials yet.

But if we look at the backlog you have versus the backlog of some of your peers comparably large in size, but it hasn't really flowed through the financials yet.

Speaker 5: So I'm wondering if, and you know, you've given appropriate kind of reasons and explanations for all of that, but is there anything additional color you can give us in the backlog that?

So I'm wondering if you've given appropriate kind of reasons and explanations for all of that but is there anything additional color you can give us on the backlog that given that we haven't seen it in the financials yet.

Speaker 5: Given that we haven't seen it in the financials yet, can give us additional kind of assurances around there. Things like, can you talk about the extent to which it has the ECAs that some peers have been using the how prevalent deposits are or is it significant to the size? Really just anything to give us a better sense of kind of having peace to or staying power to this backlog, that would be great.

Give us additional kind of assurances around things like can you talk about.

The extent to which that has <unk>.

Some peers have been using.

The how prevalent deposits are or is the significance of the size really just anything to give us a better sense of kind of having piece too.

Or staying power to this backlog that would be great.

Speaker 6: Yeah, hey, God of Innessy's Sean, thanks for the question. Yeah, let me comment a little bit on the backlog. So if you think about our results, obviously, we're disappointed by our short-term results, but we remain optimistic and excited about the future. And one of the reasons is our backlog. And the team has done a great job continuing to grow the backlog.

Yeah, Hey, Jonathan this is Shawn thanks for the question.

Yes, let me, let me comment a little bit on the backlog. So if you. If you think about our results. Obviously, we're disappointed by our short term results, but we remain optimistic and excited about the future and one of the reasons is our backlog and the team has done a great job continuing to grow the backlog, we talked a little bit about <unk>.

Speaker 6: We talked a little bit about 2p versus 1p. The majority of our backlog is 2p, but we continue to add to it. We talked about our...

<unk> versus <unk>.

Majority of the majority of our backlog is two P. But we continue to add to it we added.

Talked about our.

Speaker 6: One P addition, the new project at 140 megawatts, part of an overall one gigawatt project that we're super excited about.

One P edition, the new project at 140 megawatts part of an overall one gigawatt.

Project that we're super excited about as.

Speaker 3: As we look forward, one of the reasons we're excited is we feel there's momentum and that we're...

As we look forward.

One of the reasons, we're excited as we feel there is momentum and that we are.

Speaker 3: Our expectation is that we'll see backlog conversion really in 2024. With all the momentum we're seeing looking forward to 2024. Let me ask Patrick to comment as well. Yeah, Donald, and thanks for the question. I mean, I'll break it up in two parts. If you look at the 259 million that we booked this quarter, a lot of that is, you know, set to start kind of production in the back half of this year and into 2024. So these are projects that with near term that will carry over multiple quarters. So that conversion time at the backlog is just going to be relatively short.

Our expectation is that we will see backlog conversion really in 2024 with all the momentum we are seeing looking forward to 2024, let me, let me ask Patrick to comment as well, yes, Dom and thanks for the question I mean, I think I'll break it up in two parts. If you look at the $259 million that we booked.

This quarter a lot of that is set to start kind of <unk>.

Production.

The back half of this year and into 2024. So these are projects that with near term that will carry over multiple quarters. So that conversion time and the backlog is going to be relatively short.

Speaker 3: and comparison to some of the projects that we've you know ultimately booked in the past.

Comparison to some of the projects that we.

Ultimately booked in the past.

Speaker 3: But Sean said, as we started, modules had started to get released, you've seen more projects ultimately go through. Our 2P backlog, when we're talking with our customers, is expecting to be unlocked in 2024, as we kind of set the stage of DCs and developers that we've been working with. So seeing progress and really working on those projects now that have been sitting in our backlog for quite some time, we're excited to convert that.

But as Sean said as we started the modules are starting to get released you've seen more projects ultimately go through.

Our <unk> backlog.

When we talk with our customers is expecting to be unlocked in 2024, as we kind of set the stage.

Dcs and developers that we've been that we've been working with so seeing progress in <unk>.

Working on those projects now that have been sitting in our backlog for quite some time and we're excited to convert that.

So to answer your question Don.

Yes.

Speaker 5: Yes, that answered my question. Thank you. As a follow up, for guidance, you guys are still kind of relatively new, growing company and Sean, you've been at the helm for not the whole kind of duration of the company. So with that in mind, I'm curious if you are the guidance process that you go through through internally when you decide.

Yes that answers my question. Thank you.

As a follow up.

For guidance you guys are still kind of relatively new and growing company and Sean you've been at the helm for.

Not the whole kind of duration of the company.

So with that in mind I'm curious if you are.

The guidance process that you go through sort of internally when you decide.

Speaker 5: then what guidance you're gonna kind of put out externally.

Then what guidance youre going to kind of put out externally has that been evolving or changing.

Speaker 5: Has that been evolving or changing? I'm asking because there's kind of a learning curve and figuring things out. And the miss on.

Asking because.

There's kind of a learning curve and Thanksgiving.

Figuring things out and.

The Miss on Q2 guidance coming in lower than what you had guided.

Speaker 5: coming in lower than what you had guided. Obviously, there's a lot going on in the market right now.

Obviously, theres a lot going on in the market right now but.

Speaker 5: But when something like that happens, do you then kind of sharpen your pencil and say, is there something we can do from a processed endpoint or prestigious standpoint?

When something like that happens do you then kind of sharpen your pencil and say is there something we can do from a process standpoint, or a procedure standpoint to get better at putting out our guidance.

Speaker 5: to get better at putting out our guide in.

Speaker 5: Like is it the same process you went through for your third quarter guidance as the process you went to to come to second quarter guidance or are you kind of trying to figure out better ways to do.

Is it the same process you went through for your third quarter guidance as the process you went through to come to second quarter guidance or are you kind of I'm trying to figure out better ways to pin that down.

Speaker 6: You know, Donovan, we like to think of ourselves as a learning company. And like you said, we're a relatively new company, but we spend a lot of time looking at processes and procedures from top to bottom in the company. And we always, we look at anytime there's a defect as an opportunity to improve further. But we spend, we take the guidance quite seriously, and we do spend a lot of time internally as we think through the guidance.

Yes.

Donovan, we like to think of ourselves as a learning company and like you said, we're a relatively new company, but we spend a lot of time looking at processes and procedures from top to bottom in the company and we always we look at anytime Theres a defect that is an opportunity to improve further but we spend.

We take the guidance quite seriously and we do spend a lot of time.

Internally as we think through the guidance.

Speaker 6: You know, as we look at Q2, as we talked about, you know, we saw some project shifts. And unfortunately, you know, as we continue to build, our base isn't quite yet to the point where it can, you know, it's very impactful when we see it a few projects shift out just because our base is still growing.

We look at Q2 as we talked about we saw we saw some projects shift and unfortunately as we continue to build our base isn't quite yet to the point where it can.

Yes.

It's very impactful when we see a few project shift out just because our base is still growing.

Speaker 6: But for all the things that we talk about in the earnings just a few moments ago, we remain very, very optimistic about the future and the opportunities that we have.

But for all the things that we talked about.

In the earnings just a few moments ago, we remain very very optimistic about the future and the opportunities that we have.

Speaker 3: Yeah, the other thing I'd add down is, you know, it is related to the Q2 guidance, obviously, you know, disappointing, but these were projects that we have, you know, ultimately purchase orders for, but given kind of the IRA ambiguity, the customer ultimately elected to push those out into Q4. And so, you know, these were projects that, you know, have orders in hand, but the ultimate delivery and revenue recognition because of IRA, move those out, move those out to the board, make sure I think it can take advantage of the added intent.

The other thing I would add Donovan as it relates to the Q2 guidance obviously.

Disappointing, but these were projects that we have.

Ultimately purchase orders for but given kind of the ambiguity of the customer ultimately.

Elected to push those out into Q4.

So these are projects that have orders in hand.

Delivery and revenue recognition because of IRR.

Move those out.

Those two quarters just to make sure that they could take advantage of the added incentives.

Speaker 5: Okay, thank you. That's very helpful. I'll take the rest of my questions off one.

Okay. Thank you that's very helpful. I'll take the rest of my questions offline.

Thanks.

Yes.

Yeah.

Operator.

Speaker 1: Sorry I was on mute. Our next question to comment comes from the line of Phil Shin from Roth MKM, Mr. Shin, Your Line is on.

Sorry, I was on mute.

A question or comment comes from the line of Phil Shen from Roth.

Mr. Shen Your line is open.

Hi, everyone. Thanks for taking the questions.

Speaker 7: Everyone, thanks for taking the questions. I wanted to dig into the outlook a little bit more. I was wondering if you could talk to some of the Q4 math on revenue. You talked about shibans being pushed out.

Wanted to dig into the outlook a little bit more.

I was wondering if you could talk through some of the Q4.

Math on revenue you talked about shipments being pushed out from Q2 to Q4.

Speaker 7: Do you see any, you know, what can you quantify the push-ups from Q3 as well and how much of that might also be in Q4 and Should we be thinking about Q4 kind of being well above a hundred million? I know you haven't put out exact guidance, but was wondering if you could kind of bracket it

Do you see any.

Can you quantify the push outs from Q3, as well and how much of that might also be in Q4 and should we be thinking about Q4 kind of being well above $100 million. I know you haven't put out exact guidance, but I was wondering if you could kind of bracket it for us in some way. Thanks.

Speaker 3: Yeah, I mean, I think, you know, it relates to the pushouts from Q2 to Q4. You know, a lot of the customers are trying to get, you know, certain, reach a certain kind of completion milestone by the end of the end of the year. So, you know, we're not really anticipating any project pushouts from Q4 to Q1, ultimately at this time because a lot of these projects ultimately need to...

Yes, I mean, I think as it relates to the push outs from Q2 to Q4.

A lot of the customers are trying to get.

Reach a certain kind of completion milestone by the end of by the end of the year. So we're not really anticipating any.

Project push outs from Q4 to Q1.

Ultimately at this time it was a lot of these projects ultimately need to take.

Speaker 3: you know, take the incentive in 2020, in 2023. And so, you know, from the perspective of Q2 to Q4, you know, that the partner that we were working with had the additional time to, you know, optimize their...

Take that take the incentive in 2020, and 2023 and so from the perspective of <unk>.

Q2 to Q4.

The partner that we were working with had the additional time to.

Optimize there.

Speaker 3: You know, kind of incentive structure and still make it under the 1231 deadline.

Kind of incentive structure and still make it under the 12 12 31 deadline.

Thanks, Phelps can you talk about.

Speaker 7: Thanks, Phelps. Can you talk about how much you saw maybe from Q3 to Q4, or maybe into later?

How much you saw maybe from Q3 to Q4 or maybe into later quarters.

Speaker 3: Yeah, I mean, I think Kovall bill, you know, in terms of, you know, pushoff. So we're very comfortable with the 2024, 24 buildout. And when you look at Q3 to Q2, there is also some additional delays. I mean, I think you look at, you know, kind of where we bracketed, you know, I think we said qualitatively since we're not providing people guidance at this point, that the old and the highest quarter that we've delivered to date within the years or expectations for the quarter, there is potential upside there.

Yes, I mean I think overall.

In terms of push out so we are very comfortable with the 2024 24 build out when you look at Q3 to Q2. There is also some additional delays I mean, I think if you look at kind of where we bracket and I think we said qualitatively since we're not providing Q4 guidance at this point that you all will be the highest quarter that we've delivered to date within the.

Here is our expectations for the quarter there is potential upside there.

Speaker 3: you know, basically it's predicated upon how much manufacturing production we can get within the quarter. So it'll be some some depending on the time of the PO that receiving Q3 that will drive the actual high end of the Q4 revenue bill.

Basically predicated upon how much manufacturing.

Production, we can get within the quarter. So it will be some some depending on the timing of the Po that received in Q3 that will drive the actual high end of the Q4 revenue pill and the other part Phil If you look at the contract and the <unk>.

Speaker 3: In the other part, Phil, if you look at the contract or the awards that we got, you know, kind of articulated between South Africa, what we've gotten to U.S. and then Europe and Spain. I mean, these are projects that, you know, have either single, large, single projects or projects that have to find start dates that, you know, we're going to start recognizing revenue in the back after this year and into 20, kind of carries in multiple quarters into 2024.

Awards that we got kind of articulated between South Africa.

We've got in the U S and then Europe .

Spain I mean these are projects that have either single large single projects are projects that have defined start dates.

We're going to start recognizing revenue in the back half of this year and into 2020 kind of carries in multiple quarters into 2024.

Great. Okay. Thanks, Patrick can follow ups.

Speaker 7: In terms of the backlog, 1.6 billion, it's a...

In terms of the backlog $1 6 billion.

A big number.

Speaker 7: much higher than what you had quarterly revenue run rate with the test. You talked about in your prepared remarks, meaningful growth in 2024, consensus revenue has you close to 500 million of revenue.

Much higher.

Quarterly revenue run rate would suggest.

You talked about in your prepared remarks meaningful growth in 2024 consensus revenue has close to $500 million of revenue in 'twenty four can you share what part of your backlog.

Speaker 7: When you share what part of your backlog is designated for 20...

For 2024.

Speaker 3: You know, I don't think, you know, we're not sharing how much of our back vlog is, you know,

I don't think we're not sharing how much of our backlog is.

Speaker 3: broken out into 2024. I guess I've lead kind of with 2.1. As we looked at the historical backlog and the continued pushouts with lack of module availability, we're now working with those developers for anticipated start dates in 2024. In terms of the 2024 and consensus numbers, really not looking to reset expectations at this time at all.

Broken out into 2024, I guess I believe kind of a 2.1.

We looked at kind of a historical backlog and the continued push outs with lack of module availability. We're now working with those developers for kind of start anticipated start dates in 2024.

In terms of.

You know kind of the 2024 and consensus numbers really not looking to reset expectations.

At this time at all.

Okay, great. Thanks, guys I'll pass it on.

Speaker 6: Yep, thanks Bill. Thank you. Our next question to comment comes from the line of Cassie Harrison from Piper Sandler. Your line is now open.

Thanks Bill.

Thank you. Our next question or comment comes from the line of Kashi Harrison from Piper Sandler. Your line is now open.

Question.

Speaker 8: Just one for me as my other questions were asked. So, you know, you guys used North of $20 million of cash into Q organically, which as you indicated was funded with the ATM.

Just one just one for me.

My other questions were asked.

So.

Hughes' north of $20 million of cash into key organically, which as you indicated was funded with the ATM.

Speaker 5: I was just wondering if you could speak to your expectations surrounding cash flow from ops in the second half of the year. You know, is it?

I was just wondering if you could speak to your expectations surrounding cash flow from ops in the second half of the year.

Is it.

Speaker 5: and then working capital as well, just trying to get a sense of cash needs in 2H 2023.

And then working capital as well just trying to get a sense of.

Cash needs into 2023, and that's it that's it for me.

Speaker 9: Hey gosh, it's felt so thanks for the question. You know, I think if you look at the cute spray, right, the guide is a, you know, an even a burn for the quarter, but you know, what we see is potential offset is, you know, we anticipate the current forecast that delivered some of the AR this quarter with some chunky collections that were anticipating to come in that will offset some of that.

Hey, guys. It's felt so thanks for the question, Yes, I think if you look at Q3 right the guidance.

And EBITDA burn for the quarter, but what we see is central offset.

We anticipate the current forecasted deleverage some of the ASR this quarter with some.

Chunky collections that were anticipated to come in that will offset some of that.

Speaker 6: And then in addition, you know, as these new projects hit within the quarter, you're going to get some additional deposits and down payments.

And then in addition, as these new projects hit within the quarter or are you going to get some additional deposits and down payments that would offset some of that potential operational burn as you build up the revenue base.

Speaker 6: That would all set some of that potential, you know, operational burn as you build up the revenue base.

Okay.

Speaker 10: Got it. Thank you. Thank you. Thanks for the question.

Got it thank you.

Thanks for the question.

Thank you. Our next question or comment comes from the line of Jeff Osborne from TD Cowen Mr. Osborne. Your line is now open.

Speaker 1: Thank you. Our next question to comment comes from the line of Jeff Osborne from TV Cowan. Mr. Osborne, your line is now open.

Yeah.

Speaker 10: for a... Hi Jeff. Be doing that for that horse. But can we just talk about the linearity in the quarter? Was this a problem that came up late in the quarter? Would be part A of the question and B. He has sort of a long list of issues between module availability interconnections, permits, etc. Is there a way of rank quarter?

Hi, Jeff.

Using that to a dead horse, but can we just talk about the linearity in the quarter was this problem.

Problems that came up late in the quarter would be part of the question and B you had sort of a laundry list of issues between module availability interconnection permits et cetera is there a way of rank ordering notes.

Speaker 11: Jeff, I would, this is Sean. I would say, as we mentioned in the remarks, you know, our biggest single issue was the shift of projects related to the domestic content, the customer basically finalizing their strategy. So that was that accounted for the line share of the miss. And was that something that developed?

Jeff This is Sean I would say as we mentioned in the remarks our biggest.

Single issue was the shift of projects related to the domestic content that customer basically finalizing their strategy. So that was that accounted for the lion's share of the Miss.

Okay.

Was that something that developed late in the quarter.

Versus expectation.

Yes, it was.

Speaker 6: So, you know, we had a contract mentioned earlier, Jeff, we had the POs. They made a shift in terms of their strategy mid quarter to once, you know, some of the IRA information came out as a consequence. That's where it pushed out to the later quarters.

So.

Patrick mentioned earlier, Jeff we had the <unk>.

They made a shift in terms of their strategy mid quarter or two once some of the IRI information came out as a consequence, that's where and pushed out into later quarters.

Speaker 10: Got it. My last question is just, you made the comments on the margins, which are helpful at different revenue rates. Can you just talk about the overall pricing environment, both domestically and internationally?

Got it might just my last question is just you made the comment on the margins, which are helpful. At different revenue rates can you just talk about the overall pricing environment, both domestically and internationally.

Speaker 3: I think from a pricing perspective, with our cost structure that we have, we're able to really price these projects appropriately. We're not seeing kind of a race to the bottom in the geographies, which we're currently engaging with. So.

I mean, I think from a pricing perspective.

With our with our cost structure that we have we're able to.

Really price these projects appropriately we're not seeing.

Kind of a race to the bottom.

And the geographies in which were currently.

Engaging with and so.

Speaker 3: you know in terms of pricing and margins the US continues to be a really good sector for us and you know continues to expand our margins were really excited about you know the 300 megawatts that we're going to be doing with with RE across our 5E across

Terms of pricing and margins in the U S continues to be a really good sector for us and continues to expand our margins we're really excited about.

The 300 megawatts that we're going to be doing with with our E. R <unk> across.

Speaker 3: 11 different projects to large scale utility projects and some distributed generation that's all very, very good and healthy margin. So we're not seeing a lot of pricing pressure. We're seeing the ability for us to compete with our cross structure and deliver, continue to grow our margin based.

11 different projects to large scale utility projects in some distributed generation all at very very good and healthy margin. So we're not seeing.

Lot of pricing pressure, we're seeing the ability for us to compete with our cost structure and deliver.

Continue to grow our margin base.

Thank you that's all I had.

Thanks.

Speaker 1: Thank you. Stand by. Our next question of comment comes from the line, oh, Julian Dumolin-Smith from Bank of America. Your line is open.

Thank you standby our next question or comment comes from the line of Julien Dumoulin Smith from Bank of America. Your line is open.

Speaker 12: Hi, this is actually Morgan Reed for joy in here. Thanks for the comments, this quarter, I guess. If you could kind of elaborate on the Gross Margin inflection that you're expecting.

Hi, This is actually Morgan.

Hi.

Thanks for that comment this quarter I guess, if you could kind of elaborate on the gross margin inflection that you are expecting.

Speaker 12: in the fourth quarter that would be helpful given that this is going to be kind of the record revenue base. Understand that was the previous guidance for QQ that wasn't hit given the revenue issue. I guess you should be expect growth margins maybe in an excess of that sort of two-q type level given the sort of confidence that you have around the four-q guidance on a volume and revenue base.

In the fourth quarter that would be helpful. Given that this is going to be kind of the record revenue they understand the previous guidance.

Thank you.

Given the revenue issue.

I guess should we expect gross margins maybe in excess of that.

<unk> type level, given that sort of confidence that you have around the <unk> guidance.

And revenue base.

Speaker 3: Yeah, hey Morgan, thanks for questions, fellas. So, I think the expectation for Q4 as we said earlier, it's gonna be the highest for the year in terms of expectation.

Yeah, Hey, Martin Thanks for question itself, So I think.

The expectations for Q4 as we as we said earlier, it's going to be the highest for the year in terms of expectations.

Speaker 3: You know, in terms of getting operating leverage on the business, obviously as you grow the top line revenue, your overhead gets some leverage on top of that.

In terms of getting operating leverage on the business, obviously as you grow the topline revenue your overhead get some leverage on top of that we're continuing to see the project margins be very strong individually what youre seeing in Q2 and Q3 from Q1 to Q2. Despite the fact that the revenue came backwards a little bit in Q2, we are still.

Speaker 3: We'll continue to see the project margins be very strong individually. What you're seeing in Q2 and Q3, from Q1 and Q2, just like the fact that the revenue came backwards a little bit in Q2, we're still able to grow the growth margins by 90 basis points, which I think is a good truth point to everybody of the individual project margins.

<unk> product gross margins by 90 basis points, which I think is a good proof point to everybody.

Individual project margins.

Speaker 3: If you look at the very building, the guy in train 33, that's really just driven by the overhead. That is basically the floor, the overhead that's not gonna branch it up one way or the other. So in terms of margin for Q4 again, we haven't guided to that, but again, as you can anticipate, if you look back kind of to the Q2 guidance range at those type of life revenue levels.

If you look at the variability in the guidance range for Q3, that's really just driven by the overhead that is basically the floor and the overhead that's not going to ratchet up one way or the other so in terms of margin for Q4 again, we havent guided to that but but again as you can anticipate if you look back kind of to the Q2 guidance range at those type of.

What revenue level, that's where we would anticipate margins to be at this point based upon getting the operating leverage on the overhead as well as the project margins at preceding the pipeline.

Speaker 3: That's where we'd anticipate margins to be at this point, based upon getting the operating leverage on the overhead, as well as the project margins that were shooting the pipeline.

Got it that's helpful. And then last one from me in terms of the project pipeline or the backlog that you've outlined you talked about.

Speaker 12: Got it, that's helpful. And then last one for me, in terms of the project pipeline or the backlog that you've outlined, you talked about kind of a...

Speaker 12: what between 1 p and 2 p, where 2 p is currently the lion's share of the backlog, but it sounds like based on your prepared remarks that the 2 p projects are particularly delayed in terms of their ability to hold the tree because of the module availability concern. I guess what's the confidence that the lion's share of that backlog then flows through, given that it sounds like most of those projects are tied to 2 p projects, which are most acutely exposed to the module availability concerns that you've had.

Split between one and two P to P is currently the lion's share of the backlog.

But it sounds like based on your prepared remarks that the <unk> projects are kind of particularly delayed in terms of that currently the opportunity because of module availability concern I guess, what's the confident that like the lion's share of that backlog then brittle given that it sounds like most of those projects are tied to <unk> projects, which are not.

Acutely exposed to the module availability concerns that you'd outline yes.

Speaker 3: Yeah, I mean, I think thanks for this is Patrick. I mean, I think from our perspective, we've seen the module environment through the back cap of the year, and we've seen the engagement level on these defined projects that are in our backlog.

Yes, I think thanks Morgan this is Patrick I mean, I think from our perspective.

We've seen the module environment through.

Kind of through the back half of the year and we've seen the engagement level on these defined projects that are in our backlog really start to ramp up as we start going through final design engineering getting the site design finalized and ultimately ready to go and so theres been an uptick in activity to get those projects ready.

Speaker 3: really start to ramp up as we start going through, you know, final design, engineering, getting the site design finalized and ultimately ready to go. And so there's been enough tick and activity to get those projects ready to start construction in 2024 and in previously, it's been more of a, you know, kind of wait and see as models become available and with the release of more and more modules, those projects are moving forward.

To start construction in 2024 and previously it's been more of a.

Kind of wait and see as modules become available and with the release of more and more modules those projects are moving forward.

Speaker 6: We're definitely seeing strong momentum as we look into 2024 for backlog conversion. So no more downloading?

We're definitely we're definitely seeing strong momentum as we look into 2024 for backlog conversion.

Got it thank you I'll take the rest offline.

Thank you.

Speaker 1: Our next question to comment comes from a line of Graham Price from Raymond James. Mr. Price, the line is now open.

Our next question or comment comes from the line of Graham price from Raymond James Mr. <unk>. Your line is now open.

Speaker 13: Hi, good morning. Thanks for taking the question.

Hi, good morning, Thanks for taking the question.

Speaker 3: Maybe just one more on the quarter of record margin improvement. You mentioned number of items on the cost side. I was wondering if ASPs were up quarter of recorder and just kind of the relative contribution between that improvement from pricey inverses to cost side.

Maybe just one more on the quarter over quarter margin improvement.

You mentioned a number of items on the cost side I was wondering if the asps were up quarter over quarter, and just kind of the relative contribution between.

That improvement from pricing versus the cost side.

Speaker 6: So I would, you know, I would look at a gram that really our, a lot of it is coming from the cost improvements that we continue to drive. And so the team has been absolutely relentless in taking costs out of both our 2P product as well as our 1P product. And so that has been a major factor in contributing to the margin uplift.

So I would.

I would look at it Graham that really are.

A lot of it is is coming from the cost improvements that we continue to drive.

So the team has been absolutely relentless in taking cost out of both our <unk> product as well as our <unk> product and so that has been.

A major factor in contributing to the margin uplift.

Speaker 3: Got it. Thanks. And then from my follow up, great to see the expansion in Italy and Spain. I'm wondering looking forward how we should think about the international versus US looking at and how that's trending.

Got it thanks.

And then for my follow up.

Great to see the expansion in Italy, and Spain.

Wondering looking forward, how we should think about.

International versus U S bookings.

Bookings mix and how thats trending.

Speaker 6: So we're very excited about the progress we're making internationally. We talked about the new award in South Africa and as you mentioned, the projects in Spain and Italy, we see continued progress in markets like Australia as well.

So we're very excited about the progress we're making internationally we've talked about.

The New award in South Africa, and as you mentioned the projects in Spain and Italy.

We see continued progress in markets like Australia as well however are still are.

Speaker 6: However, our still are, we're still seeing strength obviously in the US environment. And so I think over time we'll see that the international continues to...

We're still seeing strength, obviously in the U S environment.

So I think over time, we will see the international continued to two <unk>.

Speaker 6: to strengthen as a percent of the total, but the US market will still continue to be a very, very strong core market for us.

Strengthen as a percent of the total but the.

U S environment. The U S market will still continue to be very very strong core market for us.

Got it.

Thank you that's it for me.

Speaker 1: Thank you. Again, ladies and gentlemen, if you have a question to comment at this time, please press star 11 on your telephone keypad. Our next question to comment comes from the line of Samir Joshi from H.C. Wainwright. Joshi, your line is now open.

Thank you again, ladies and gentlemen, if you have a question or comment at this time. Please press star one one on your telephone keypad. Our next question or comment comes from the line of Sameer Joshi from H C. Wainwright.

Joseph Your line is now open.

Speaker 14: Hey guys, uh, can you hear me? Yeah. Yeah. Yeah. Yeah. Uh, thanks for taking my question.

Hey, guys.

Can you hear me.

Yes, yes, yes, thanks for taking my question.

<unk>.

Speaker 14: On the D&A front, it seems you have been able to control those costs fairly well. What's there any one-time benefit on a non-gab basis that Michael has been here or is this the level we should expect going?

On the G&A front, it seems to have been able to control those costs are fairly well.

Is there any one time benefit.

On a non-GAAP basis that microbial here or is this the level, we should expect going forward.

Speaker 9: Yeah, so thanks for the question. Now, I mean, that's an area that we've obviously been very focused on is the off-ex side. We'll continue to have a focus on off-ex and something that we continually review as a management team. But no, that's the area that we're going to keep that in check. Control the things that we control. There is a lot of business in the business with Project Starts and Progress Push-Ups, but this is the one area that we're going to control and we'll continue to keep an eye on that.

Yes. So thanks for the question no I mean thats an area that we've obviously been very focused on is the opex side. We will continue to have a focus on opex and something that we continually review of them as a management team.

But no that's.

That's the areas that we'll continue to keep that in check.

Control the things that we control.

There is lumpiness in the business with project starts and project push outs, but this is the one area that we're going to control and we'll continue to keep an eye on that.

Okay, and just one more.

Speaker 14: After 259 million new orders of what proportion of this was non-UFLPA.

Of the $269 million.

New orders.

What proportion of this was non U S Lps.

Okay.

Speaker 15: All of it is non-UF LTA. So of what we booked this quarter, it's either international or the projects have multiple.

All of it is.

Non U F. LTA so of what we booked this quarter, it's either international or the projects.

Modules.

Speaker 14: Okay, thanks for that. And just maybe if I can, if I may,

Okay. Thanks for that and just maybe if I can if I may.

<unk>.

Speaker 14: One of the projects announced today, with project wins announced today includes floating solar insulation. Can you let us know what your capabilities are?

One of the projects announced project.

Project wins and honestly in tubes floating.

Solar installation.

Can you, let us know what your capabilities on that front.

Speaker 6: So, no, great question. So we will not be providing the floating solar for this particular project. We are gonna be providing one gigawatt worth of trackers, but this is part of a pretty groundbreaking, just generally renewable energy project in the Pacific Northwest, and we're excited to be a part of it. But we are delivering our one and two P tracker in the mode of a gigawatt.

No great questions. So we will not be providing the floating solar.

This particular project.

We are going to be providing one gigawatts worth of trackers, but this is part of a pretty groundbreaking.

Just generally renewable energy project.

Civic northwest, we're excited to be a part of it but we are delivering our one and two P tracker.

And the <unk>.

Mode of a gigawatt.

Thanks for that clarification and good luck. Thank you. Thank.

Speaker 14: Thanks for that clarification and good luck. Thank you. Thank you. Thank you.

Thank you. Thank you.

Speaker 1: Thank you. I'm sure no additional questions in the queue at this time. I would like to turn the conference back over to management for any closing comments.

Thank you I'm showing no additional questions in the queue at this time I would like to turn the conference back over to management for any closing comments.

Hey, Thanks, very much everyone for joining us we appreciate your time and while we do have disappointment with our Q2 results. We are absolutely optimistic about the future and the opportunities out there. So thank you again for your time and we look forward to our next interaction.

Speaker 6: Hey, thanks very much everyone for joining us. We appreciate your time. And while we do have disappointment with our cute two results, we are absolutely optimistic about the future and the opportunities out there. So thank you again for your time and we look forward to our next interaction.

Speaker 1: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day. Speaker, standby.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day speakers standby.

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Speaker 16: Good day, ladies and gentlemen. And thank you for standing by. Welcome to the FPC Solar Second Quarter 2023 Ernie's conference call. After this time, all participants are to listen only mode. After there's speakers presentation, there will be a question and answer session. To ask a question at that time, please press star 11 on your telephone keypad. At this time, I would like to turn the conference over to Mr. Bill Meshallik, Vice President investor relations. Sir, please begin.

Speaker 1: Good day ladies and gentlemen and thank you for standing by welcome to the FTC so our second quarter to twenty three earnings conference call. At this time all participants are to listen only mode after there's speakers presentation there will be a question and answer session to ask a question at that time please press star one one on your telephone

Good day, ladies and gentlemen, and thank you for standing by welcome to the F. T. C. So our second quarter 2023 earnings conference call. At this time, all participants are in a listen only mode.

The speaker's presentation, there will be a question and answer session to ask a question at that time. Please press star one one on your telephone keypad.

Speaker 1: At this time, I would like to turn the conference over to Mr. Bill Meshallik, Vice President Investor Relations. Sir, please.

At this time I would like to turn the conference over to Mr. Bill Michelle <unk>, Vice President Investor Relations Sir please begin.

Speaker 2: Thank you and welcome everyone to FTC Solar's second quarter, 2023 earnings conference call.

Thank you and welcome everyone to FTC Solar second quarter 2023 earnings Conference call.

Speaker 2: Before today's call, you may have reviewed our earnings release supplemental financial information and supply presentation, which are posted earlier today. If you've not reviewed these documents, they're available on the Invest Relations section of our website at ftcscolar.com.

For today's call you may have reviewed our earnings release supplemental financial information and slide presentation, which are posted earlier today.

If you've not reviewed these documents they're available on the Investor Relations section of our website at FTC Kohler Dot com.

Speaker 2: I'm joined today by Sean Hunkler, FEC's co-leader president, Keith Zuckerboster, helps Morris, the company's chief financial officer, and Patrick Cook, the company's chief commercial officer.

I'm joined today by John Haugh letter says all the President and Chief Executive Officer, Phelps Morris, The company's Chief Financial Officer, and Patrick Cooke, The company's Chief commercial officer.

Speaker 2: Before we begin, I remind everyone that today's discussion can date for the statement based on our assumptions and beliefs in a current environment. It speaks only as of the current date. As such, these four 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 FCC filings for more information on the specific risk factors. We assume no obligation to update such information except required by law.

Obligation to update such information, except as required by law.

Speaker 2: As you'd expect, we'll discuss both CAP and non- GAAP financial measures today. Please note that earnings release issues this morning includes a full reconciliation of each non- GAAP financial measure to the nearest applicable CAP measure. In addition, we'll discuss our backlog and our definition of this metric is often included in our press release. But that-

As you'd expect will discuss 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.

I will turn the call over to Sean.

Speaker 6: Thanks Bill and good morning everyone. Our earnings announcement today includes a mix of near-term disappointment with project delays impacting revenue, as well as some very positive developments, including a number of significant project winds here in the past few weeks, which will boost our performance as we head into 2024.

Speaker 6: Getting right into it, our revenue for the second quarter came in at 32.4 million, which was below our guidance range of 42.5 to 52.5 million.

Right into it our revenue for the second quarter came in at $32 4 million, which was below our guidance range of $42 five to $52 5 million.

Speaker 6: For the third quarter, we now expect to see revenue and the 24 to 34 million range, which, while we didn't have a public guidance number out there, I can tell you, significantly below our prior internal expectation.

For the third quarter, we now expect to see revenue in the $24 million to $34 million range, which while we didn't have a public guidance number out there I can tell you is significantly below our prior internal expectations.

Speaker 6: The second quarter shortfall is largely related to contracted revenue being pushed between quarters. Specifically, projects from one customer were delayed to allow for additional planning and review around domestic content, as these projects are looking to take advantage of those incentives in the Inflation Reduction Act or IRA. The review has now been completed and the approach finalized, but it had the effect of pushing revenue from Q2 to Q4.

The review has now been completed and the approach finalized, but it had the effect of pushing revenue from Q2 to Q4.

Speaker 6: As it relates to our third quarter expectations, our bidding activity remains very high and we have won a fair amount of new business. But the timing of many projects going to purchase order has been slower or pushed out by customers, whether due to domestic content, clarity, module availability or delays and permitting, interconnection or other issues. Unfortunately, given our current revenue run rate, a small handful of projects can have an outsized impact on our results.

Or other issues. Unfortunately, given our current revenue run rate for a small handful of projects you can have an outsized impact on our results.

Speaker 6: That will improve as we get back to scale, but it's a problem we need to manage now.

That will improve as we get back to scale, but it is a problem we need to manage now.

Speaker 6: The good news is that we have seen a significant uptick in project activity and wins in the last few weeks, including several notable projects which should position us for a meaningful improvement as we head into 2024. As a result of visibility around these projects, we now expect that we'll return to revenue growth in the fourth quarter and be on an accelerating path as we enter the new year. We expect the fourth quarter will be our highest revenue quarter in 2023.

As a result of visibility around these projects. We now expect that we will return to revenue growth in the fourth quarter and beyond an accelerating path as we enter the new year, we expect the fourth quarter will be our highest revenue quarter in 2023.

Speaker 6: While the cadence of our revenue growth is different and we may have hoped a quarter ago, we have a number of bright spots in our business that give us a great deal of confidence in our future. One, we believe our manufacturing cost is now in line with our leading competitors. We are more competitive than ever and we will get better with scale.

While the cadence of our revenue growth is different and we may have hoped a quarter ago, we have a number of bright spots in our business. They give us a great deal of confidence in our future. One we believe our manufacturing cost is now in line with our leading competitors, we are more competitive than ever and we will get better with scale to our.

Speaker 6: Two, our average new project margins puts us on track to achieve the gross margin targets we provided in the past.

Average new project margins puts us on track to achieve the gross margin targets. We provided in the past. This includes our target of achieving a gross margin of 12% to 18% at the $150 million quarterly run rate and a 20 plus percent margin over the longer term, even with lower revenue in the second quarter, we saw.

Speaker 6: This includes our target of achieving a gross margin of 12 to 18% at the $150 million quarterly run rate and a 20 plus percent margin over the longer term.

Speaker 6: Even with lower revenue in the second quarter, we saw gross margin expand another 90 basis point.

Speaker 6: We're set up for a strong margin expansion as revenue grows. We're confident in our cost structure, and we have a lot of margin leverage, but obviously the level of revenue, which drives cost absorption, is the key driver of the actual performance.

Speaker 6: We are now actively in the market with our one-piece solution.

Three we are now actively in the market with our <unk> solution.

Speaker 6: We believe the 1P market has done better in this time of restricted module availability, and we didn't have a solution until more recently. We now have a solution and a growing 1P pipeline. And with a recently received UL certification, we're focused on converting that pipeline to a WART.

We believe the <unk> market has done better in this time of restricted module availability and we didn't have a solution until more recently, we now have a solution and a growing <unk> pipeline and with our recently received UL certification. We're focused on converting that pipeline to awards. In fact, we just won our largest one.

Speaker 6: In fact, we just won our largest 1p award to date at 140 plus megawatts, so we are on our way. And by the way, that 140 megawatts has part of an overall 1 gigawatt award that we received in the last few weeks, which includes supplying a large multi-technology renewables project in the Pacific Northwest.

The award to date at 140, plus megawatts. So we are on our way and by the way that 140 megawatts as part of an overall one gigawatt award that we received in the last few weeks, which includes supplying a large multi technology renewables project in the Pacific Northwest.

Speaker 6: For, we continue to grow our international business and are gaining traction and new reach.

Four we continue to grow our international business and are gaining traction in new regions. A couple of examples over the past few weeks include a new 120 megawatt award in South Africa.

Speaker 6: A couple of examples over the past few weeks include a new 120 megawatt award in South Africa.

Speaker 6: We also won a new 300 megawatt of work from multiple projects in Italy and Spain, including utility-scale, agriboltayag project.

We also won a new 300 megawatt award for multiple projects in Italy, and Spain, including utility scale Agribiz tag projects. These will be our first projects in these countries as we continue to expand in Europe and expand our served market. We have now been awarded projects in a dozen countries outside the U S.

Speaker 6: These will be our first projects in these countries as we continue to expand in Europe and expand our sort of market. We have now been awarded projects in a dozen countries outside the US.

Speaker 6: And with the recent addition of our one P pioneer solution, we believe will be even better positioned to continue to grow our international business, as well as our business overall.

And with the recent addition of our <unk> pioneer solution, we believe will be even better positioned to continue to grow our international business as well as our business overall.

Speaker 6: Our backlog has now grown to 1.6 billion with 259 million at its since May 10. The recent project awards I've mentioned among others have helped us grow backlog to this new level. Most of these new multi-project awards include projects that we expect will have near-term purchase order dates and in some cases beginning initial production on the first projects during the fourth quarter of this year. But final project is expected to run through the end of 2025.

Our backlog has now grown to $1 6 billion with $259 million added since May 10.

2025.

Speaker 6: The majority of the remainder of our backlog is 2P, which we expect will be increasingly constructed as module availability improves.

Speaker 6: The continued growth of our backlog and the recent additions of certain projects that we expect will include more near term start dates allows us to continue to be cautiously optimistic about 2024 and gives us a nice foundation for future growth. And then six and finally we continue to control our operating.

Four and gives us a nice foundation for future growth.

And then sixth and finally, we continue to control our operating expenses Youll notice that our Q2 Opex came in better than we had guided and that along with the improved margins allowed us to keep adjusted EBITDA flat quarter over quarter. Despite the lower revenue will continue to control costs and look for efficiencies in many places.

Speaker 6: You'll notice that our Q2 op-x came in better than we had guided. And that, along with the improved margins allowed us to keep adjusted EBITDA flat quarter over quarter despite the lower revenue. We'll continue to control costs and look for efficiencies in many places. However, we will invest more in sales and engineering to sport growth and the pipeline conversion.

However, we will invest more in sales and engineering to support growth and the pipeline conversion.

Speaker 6: So in summary, while our cadence of revenue recovery is slower than we would have hoped a quarter ago, we have seen an exceptional spade of winds in the past few weeks, which gives us confidence in a return to growth in the fourth quarter and into 2024.

Speaker 6: Our international expansion continues and our newly certified 1P offering will only enhance that growth over time. We are positioned with a product cost structure that will enable our run of gross margin expansion to resume and reach new highs along with that revenue.

Speaker 6: and we will keep a cap on operating expenses while investing for future growth. With that, I'll turn it over to FELF.

Speaker 3: Thanks Sean and good morning everyone. I'll provide some additional collar armor, second cord performance in our outlook. So let's begin with the second quarter. As Sean mentioned, product delays in the quarter resulted in revenue coming in below our guidance range of $32.4 million.

Thanks, Sean and good morning to everyone I will provide some additional color on our second quarter performance and our outlook. So let's begin with the second quarter as Sean mentioned product delays in the quarter resulted in revenue coming in below our guidance range of $32 4 million.

This level represents a decline of 29% relative to the last quarter and an increase of five 3% relative to the year ago quarter.

Speaker 3: This level represents a decline of 20.9% relative to the last quarter and an increase of 5.3% relative to the year-go quarter.

Speaker 3: As we move on to gross profit, as you would expect, the delay in revenue also flowed down and caused margin to come in below our expectations.

As we move on to gross profit as you would expect the delay in revenue also flow down and caused margin to come in below our expectations power.

Speaker 3: However, with Project margins continuing to improve, we are still able to expand our gross margin percentage relative to the last quarter, even on lower revenue.

However, with project margins continuing to improve we are still able to expand our gross margin percentage relative to the last quarter, even on lower revenue.

Specifically, our GAAP gross profit was $2 2 million or six 8% of revenue compared to $2 million or 5% of revenue in the prior quarter.

Speaker 3: Specifically, our gap gross profit was $2.2 million or 6.8% of revenue compared to $2 million or 5% of revenue in the prior quarter.

Speaker 3: On the non-gap basis, GrossPoffit was $2.6 million or 8.2% of revenue compared to a non-gap gross profit of $3 million or 7.3% in the prior quarter. This represents a 90 basis point improvement quarter over quarter on the non-gap gross margin, our second quarter of positive margins into our IPO, and a 58 percentage point improvement over the past three quarters.

On a non-GAAP basis gross profit was $2 6 million or eight 2% of revenue compared to a non-GAAP gross profit of $3 million or seven 3% in the prior quarter.

This represents a 90 basis point improvement quarter over quarter on the non-GAAP gross margin, our second quarter, a positive margin since our IPO and a 58 percentage point improvement over the past three quarters.

Speaker 3: On a year over year basis, we deliver improvement to the non gap gross profit of. 8Million dollars on less than 2Million dollar increase in revenue. The improvements were driven primarily by improved tracker direct margins help by our product cost reduction effort.

Moving to Opex, our GAAP operating expenses was $12 6 million on a non-GAAP basis, excluding stock based compensation and certain other expenses. Our operating expense was $9 7 million compared to $12 4 million in the year ago quarter.

Speaker 3: Moving to OPACs, our gap operand expenses was $12.6 million. On a non-gap basis, excluding stock-based compensation on certain other expenses, our operand expense was $9.7 million compared to $12.4 million in the year ago quarter. This was below or better than our guidance range.

This was below or better than our guidance range.

Speaker 3: The year-over-year improvement was driven primary by lower RG and personnel related expenses.

The year over year improvement was driven primarily by lower R&D and personnel related expenses.

Speaker 3: Next, GAAP net loss is $10.4 million, or $0.09 per share, compared to the loss of $11.8 million, or $0.11 per share in the prior quarter, and compared to a net loss of $25.7 million in the year-ago quarter.

Speaker 3: are adjusted even a loss, but to exclude approximately $3.2 million, including stock-based compensation expense and certain other non-cash items with $7.2 million, which was just above the low end of our guidance range.

Our adjusted EBITDA loss, which excludes approximately $3 $2 million.

Stock based compensation expense and certain other noncash items was $7 2 million, which was just above the low end of our guidance range.

Speaker 3: The result was approximately flat versus the prior quarter and represented an improvement of 10.5 million dollars compared to an adjusted EBITDA loss of 17.7 million dollars in the year for a linear period. Okay clock? so my

The result was approximately flat versus the prior quarter and represented an improvement of $10 5 million compared to an adjusted EBITDA loss of $17 7 million in the year ago quarter.

Speaker 3: Finally, regarding liquidity, we had an operational use of cash for the quarter, also by usage of the ATM facility for which we received $15.2 million of cash within the quarter. In aggregate, we ended the quarter with $33.8 million of cash on the balance sheet.

Finally regarding liquidity, we had an operational use of cash for the quarter offset by usage of the ATM facility for which we received $15 $2 million of cash within the quarter.

In aggregate, we ended the quarter with $33 $8 million of cash on the balance sheet.

Speaker 3: We continue to hold note down on the battery. We have an undrawn credit revolver, as well as 76 million dollars remaining under the 18-programme quarter end. So with that, let's...

We continue to hold no debt on the balance sheet, we have an undrawn credit revolver as well as $76 million remaining under the ATM program at quarter end.

So with that let's turn our focus to the outlook.

Speaker 3: Based upon our current view, which includes the Project Salat, Sean's mentioned, we expect the third quarter revenue to be flatest to down relative to the second quarter.

Based upon our current view, which includes the project delays Sean mentioned, we expect the third quarter revenue to be flattish to down relative to the second quarter.

Speaker 3: A gross margin performance will be based on how revenue comes in. If the revenue is down, the lower cost of the option will be to margins coming in lower sequentially. However, if revenue is flat or slightly up, then we could see margins come in higher than the second quarter.

Our gross margin performance based on how revenue comes in if the revenue was down the lower cost absorption will lead to margins coming in lower sequentially. However, if revenue is flat or slightly up then we could see margins come in higher than the second quarter.

Speaker 3: We expect this to be filed in the fourth quarter by a resumption and revenue growth in margin expansion as the recent project winds are expected to begin production. Specifically, our targets for the third quarter call for the following.

We expect this to be filed in the fourth quarter by a resumption of revenue growth and margin expansion as the recent project wins are expected to begin production specifically our targets for the third quarter call for the following.

Speaker 3: First, revenue between $24 and $34 million. Next, non-gab gross margins between $0.7 million and $3.1 million, or between 3 and 9% of revenue. Next, non-gab operating expenses between $10 and $11 million. And finally, adjusted EBITDA loss between $10.3 million and $6.9 million.

First revenue between 24% and $34 million.

Next non-GAAP gross margins between zero point $7 million and $3 1 million or.

Or between 3% and 9% of revenue.

Next non-GAAP operating expenses between 10, and $11 million and finally, adjusted EBITDA loss between $10 3 million and $6 9 million.

Speaker 3: Looking forward, the recent uptick and project grants give us increased confidence that the revenue ramp expected the fourth quarter should continue into 2024.

Looking forward the recent uptick in project wins gives us increased confidence that the revenue ramp expected in the fourth quarter should continue into 2024.

Speaker 3: So in closing, the actions we take in the strength in the company, broadening our product offerings, refocusing our sales efforts, and improving our cost structure will benefit greatly moving forward. These efforts coupled with $1.6 billion in backlog have positioned us to not only grow, but to grow profitably.

So in closing the actions we've taken to strengthen the company broadening our product offerings refocusing our sales efforts in improving our cost structure will benefit greatly moving forward.

These efforts, coupled with $1 $6 billion in backlog and positions us to not only grow but to grow profitably.

Speaker 3: With that, we conclude our prepared remarks and I'll turn it over to the operator for any questions. Operator?

With that we conclude our prepared remarks, and I'll turn it over to the operator for any questions operator.

Speaker 1: Ladies and gentlemen, if you have a question or comment at this time, please press star 11 on your telephone keypad.

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Speaker 1: Our first question or comment comes to know from the line of Donald Schaeffer from Northern capital markets. Mr. Schaeffer, your line is up.

Our first question or comment comes from the line of downloads Schafer from Northern capital markets. Mr. Schafer. Your line is open.

Speaker 17: Hi guys, thanks for taking the questions. So I first want to ask about the backlog. Every time we meet, it seems like you guys have either just come from meeting with customers or right after you're rushing out the door to go meet with some more. So it's pretty clear to me that you're hustling and really kind of doing everything you can to generate sales and we can just end up in the growing backlog.

Hi, guys. Thanks for taking the questions.

I first wanted to ask about the backlog.

Every time, we meet it seems like you guys have either.

Just come from meeting with customers or right after you're rushing out the door to go meet with some more so it's pretty clear to me that you're hustling and really kind of doing everything you can to generate sales and we see this in the growing backlog.

Speaker 17: But if we look at the backlog you have versus the backlog of some of your peers, it's comparably large in size that it hasn't really flowed through or hit the financials yet.

But if we look at the backlog you have versus the backlog of some of your peers, it's comparable large in size, but it hasn't really flowed through or hit the financials yet.

Speaker 17: So I'm wondering if, and you know, you've given appropriate kind of reasons and explanations for all of that, but is there anything additional color you can give us in the backlog that?

So I'm wondering if you've given are appropriate kind of reasons and explanations for all of that but is there anything additional color you can give us on the backlog that given that we haven't seen it in the financials. Yet can you give us additional kind of assurances around things like can you talk about.

Speaker 17: Given that we haven't seen it in the financials yet, can give us additional kind of assurances around there. Things like, can you talk about the extent to which it has the ECAs that some peers have been using the how prevalent deposits are or is it significant to the size, really just anything to give us a better sense of kind of having peace to or staying power to this backlog. That would be great.

The extent to which that has VCA is that some peers have been using.

The how prevalent deposits are or the significance of the size really just anything to give us a better sense of kind of having teeth too.

Or staying power to this backlog that would be great.

Speaker 6: Yeah, hey, God, and this is Sean. Thanks for the question. Yeah, let me comment a little bit on the backlog. So if you think about our results, obviously, we're disappointed by our short-term results, but we remain optimistic and excited about the future. And one of the reasons is our backlog. And the team has done a great job continuing to grow the backlog.

Yes.

Hey, Jonathan this is Shawn thanks for the question.

Speaker 3: We talked a little bit about 2p versus 1p. The majority of our backlog is 2p, but we continue to add to it. We talked about our...

<unk> versus <unk>. The majority of the majority of our backlog is two P. But we continue to add to it we added we talked about our.

Speaker 3: One P addition, the new project at 140 megawatts, part of an overall one gigawatt project that we're super excited about.

One P edition, the new project at 140 megawatts part of an overall one gigawatt.

Project that we're super excited about.

Speaker 3: As we look forward, one of the reasons we're excited is we feel there's momentum and that we're...

As we look forward.

One of the reasons, we're excited as we feel there is momentum and that we are our expectation is that we will see backlog conversion really in 2024 with all the momentum we are seeing looking forward to 2024, let me, let me ask Patrick to comment as well, yes, Dom and thanks for the question I mean, I think I'll break.

Speaker 3: Our expectation is that we'll see backlog conversion really in 2024. With all the momentum we're seeing looking forward to 2024. Let me ask Patrick to comment as well. Yeah, Donovan, thanks for the question. I mean, I think I'll break it up in two parts. If you look at the, you know, 259 million that we booked this quarter, a lot of that is, you know, set the start kind of production in the back half of this year and into 2024. So these are projects that with near term that will carry over multiple quarters. So that conversion time at the backlog is just going to be relatively short.

It up in two parts. If you look at the $259 million that we booked this quarter a lot of that is set to start kind of <unk>.

Production.

The back half of this year and into 2024. So these are projects that with near term that will carry over multiple quarters. So that conversion time and the backlog is going to be relatively short.

Speaker 3: and comparison to some of the projects that we ultimately booked in the past.

Comparison to some of the projects that we ultimately booked in the past.

Speaker 3: But Sean said, as we started, modules started to get released, you've seen more projects ultimately go through. You know, our 2P backlog, when we're talking with our customers, expecting to be unlocked in 2024, as we kind of set the stage of DCs and developers that we've been working with. So seeing progress and really working on those projects now that have been sitting in our backlog for quite some time we're excited to convert that.

As Sean said as we started the modules are starting to get released you've seen more projects ultimately go through.

Our <unk> backlog.

We're talk with our customers is expecting to be unlocked in 2024, as we kind of set the stage vcs and developers that we've been that we've been working with so seeing progress and really working on those projects now that have been been sitting in our backlog for quite some time and we're excited to convert that.

So to answer your question Don.

Okay.

Speaker 17: Yes, that answers my question. Thank you. As a follow up for guidance, you guys are still kind of relatively new, growing company and Sean, you've been at the helm for not the whole kind of duration of the company. So was that in mind, I'm curious if you are the guidance process that you go through internally when you decide.

Yes that answers my question. Thank you.

As a follow up.

For guidance you guys are still kind of relatively new.

<unk> company.

Sean you've been at the helm for.

Not the whole kind of duration of the company.

So with that in mind I'm curious if you are.

The guidance process that you go through sort of internally when you decide.

Speaker 17: then what guidance you're gonna kind of put out externally.

And then what guidance youre going to kind of put out externally.

Speaker 17: Has that been evolving or changing? I'm asking because there's kind of a learning curve and figuring things out. And the miss on

Has that been evolving or changing.

Asking because.

Theres kind of a learning curve and figuring.

Figuring things out and.

The Miss on Q2 guidance coming in lower than what you had guided.

Speaker 15: coming in lower than what you had guided. Obviously, there's a lot going on in the market right now.

Obviously, theres a lot going on in the market right now.

Speaker 15: But when something like that happens, do you then kind of sharpen your pencil and say, is there something we can do from a processed endpoint or prestigious standpoint?

But.

Speaker 15: to get better at putting out our guidance.

Speaker 15: like is it the same process you went through for your third quarter guidance as the process you went to to come to second quarter guidance or are you kind of trying to figure out better ways to

Speaker 6: You know, Donovan, we like to think of ourselves as a learning company. And like you said, we're a relatively new company, but we spend a lot of time looking at processes and procedures from top to bottom in the company. And we always, we look at anytime there's a defect as an opportunity to improve further. But we spend, we take the guidance quite seriously and we do spend a lot of time internally as we think through the guidance.

Yes.

Donovan, we like to think of ourselves as a learning company and like you said, we're a relatively new company, but we spend a lot of time looking at processes and procedures from top to bottom in the company and we always we look at anytime Theres, a defect as an opportunity to improve further but we spend.

We take the guidance quite seriously and we do spend a lot of time.

Internally as we think through the guidance as we look at Q2 as we talked about we saw we saw some projects shift and unfortunately as we continue to build our base isn't quite yet to the point where it can.

Speaker 6: You know, as we look at Q2, as we talked about, you know, we saw some project shifts. And unfortunately, you know, as we continue to build, our base isn't quite yet to the point where it can, you know, it's very impactful when we see it, a few projects shift out just because our base is still growing.

So it's very impactful when we see a few projects shift out just because our base is still growing.

Speaker 6: But for all the things that we talked about in the earnings just a few moments ago, we remain very, very optimistic about the future and the opportunities that we have.

But for all the things that we talked about in the earnings just a few moments ago, we remain very very optimistic about the future and the opportunities that we have.

Speaker 3: Yeah, the other thing I'd add down to them is, it relates to the Q2 guidance obviously, disappointing, but these were projects that we have, ultimately purchase orders for, but given kind of the IRA ambiguity, the customer ultimately elected to push those out into Q4. And so these were projects that have orders in hand, but the ultimate delivery and revenue recognition because of IRA, move those out, move those out to orders, just to make sure that they could take advantage of the added income.

The other thing I would add Donovan as it relates to the Q2 guidance obviously.

Disappointing, but these were projects that we have.

Ultimately purchase orders for but given kind of the ambiguity of the customer ultimately.

Likely to push those out into Q4.

So these are projects that have orders in hand, but the ultimate delivery and revenue recognition because of IRR.

Those out a move those out two quarters just to make sure that they could take advantage of the added incentive.

Speaker 14: Okay, thank you. That's very helpful. I'll take the rest of my questions off line.

Okay. Thank you that's very helpful. I'll take the rest of my questions offline.

Thanks.

Yes.

Yeah.

Operator.

Speaker 1: Sorry I was on mute. Our next question to comment comes from the line of Phil Shin from Roth MKM, Mr. Shin. Your line is on.

Sorry, I was on mute our next question or comment comes from the line of Phil Shen from Roth km. Mr. Shen Your line is open.

Speaker 7: Everyone, thanks for taking the questions. Wanted to dig into the outlook a little bit more. I was wondering if you could talk to some of the Q4 math on revenue. You talked about shibbons being pushed out.

Everyone. Thanks for taking the questions.

Wanted to dig into the outlook a little bit more.

I was wondering if you could talk to some of the Q4.

On revenue you talked about shipments being pushed out from Q2 to Q4.

Speaker 7: Do you see any, you know, what can you quantify the push-outs from Q3 as well and how much of that might also be in Q4 and Should we be thinking about Q4 kind of being well above a hundred million? I know you haven't put out exact guidance, but was wondering if you could kind of bracket it

Do you see any.

Yes, I mean, I think as it relates to the push outs from Q2 to Q4.

A lot of a lot of the customers are trying to get.

Certain reach a certain kind of completion milestone by the end of by the end of the year. So.

Not really anticipating any.

Project push outs from Q4 to Q1 ultimately at this time because a lot of these projects ultimately need to take.

Speaker 3: you know, take the incentive in 2020, in 2023. And so, you know, from the perspective of Q2 to Q4, you know, the partner that we were working with had the additional time to, you know, optimize their...

Take that take the incentive in 2020, and 2023 and so from the perspective of Q2 to Q4.

The partner that we were working with had the additional time to.

Optimize there.

Speaker 3: You know, kind of incentive structure and still make it under the 1231 deadline.

Kind of incentive structure.

They'll make it under the 12 12 31 deadline.

Speaker 7: Thanks, Phelps. Can you talk about how much you saw maybe from Q3 to Q4 or maybe into later?

Thanks Phillips can you talk about how much you saw maybe from Q3 to Q4 or maybe into later quarters.

Yes, I mean, I think overall in terms of push out. So we are very comfortable with the 2024 24 build out I think when you look at Q3 to Q2. There is also some additional delays I mean, I think if you look at kind of where we bracketed I think we said qualitatively since we're not providing Q4 guidance at this point that will be the highest quarter that.

Speaker 3: Yeah, I mean, I think overall bill, you know, in terms of, you know, pushoff. So we're very comfortable with the 2024, 24 buildoff. And when you look at Q3 to Q2, there is also some additional delays. I mean, I think you look at, you know, kind of where we bracketed, you know, I think we said qualitatively since we're not providing people guidance at this point that the old and the highest quarter that we've delivered to date within the years or expectations for the quarter, there is potential upside there.

We've delivered to date within the year as our expectations for the quarter there is potential upside there.

Sure.

Speaker 3: You know, basically it's predicated upon how much manufacturing production we can get within the quarter. So it'll be some some depending on the time of the PO that receiving Q3 that will drive the actual high end of the Q4 revenue bill.

Basically predicated upon how much manufacturing for the.

Production, we can get within the quarter. So it will be some some depending on the timing of the Po that receive in Q3 that will drive the actual high end of the Q4 revenue Bill and the other part Phil If you look at the contract and the or the.

Speaker 3: And the other part, Phil, if you look at the contract and the awards that we got, that kind of articulated between South Africa, what we've gotten to U.S. and then Europe and Spain. I mean, these are projects that have just either single, large single projects or projects that have to find start dates that, you know, we're gonna start recognizing revenue in the back after this year and into 20, kind of carries in multiple quarters into 2024.

Awards that we got that kind of articulated between South Africa.

We've got in the U S and then Europe .

<unk> I mean these are projects that have either single large single projects or projects that have defined the start date.

We're going to start recognizing revenue in the back half of this year and into 2020 kind of carries in multiple quarters into 2024.

Great. Okay, Thanks, Patrick and follow ups.

Speaker 7: In terms of the backlog, 1.6 billion, it's a

In terms of the backlog $1 6 billion.

A big number.

Much higher than what you mean.

Speaker 7: much higher than what you'd like. Quarterly revenue run rate would suggest. You talked about in your prepared remarks, meaningful growth in 2024. Consensus revenue has you close to 500 million of revenue.

Revenue run rate would suggest.

You talked about in your prepared remarks meaningful growth in 2024 consensus revenue has close to $500 million of revenue in 'twenty four can you share what part of your backlog.

Speaker 7: When you share what part of your backlog is designated for 20...

Is it needed for 2024.

Speaker 3: You know, I don't think, you know, we're not sharing how much of our back log is, you know,

I don't think.

No we're not sharing how much of our backlog is.

Broken out into 2024, I guess I believe kind of a 2.1.

We looked at kind of a historical backlog and the continued push outs with lack of module availability. We're now working with those developers for kind of start anticipated start dates in 2024.

In terms of.

Kind of a 2024 and consensus numbers really not looking to reset expectations.

At this time at all.

Okay, great. Thanks, guys I'll pass it on.

Speaker 6: Yep, thanks Phil. Thank you. Our next question to comment comes from the line of Cassie Harrison from Piper Sandler. Your line is now open.

Thanks, Bill Thanks Bill.

Thank you. Our next question or comment comes from the line of Kashi Harrison from Piper Sandler. Your line is now open.

Question.

Speaker 5: Just one for me as my other questions were asked. So, you guys used North of $20 million of cash into Q organically, which as you indicated was funded with the ATM.

Just one just one for me.

My other questions were asked.

So.

You guys used north of $20 million of cash.

<unk> organically, which as you indicated was funded with the ATM I was just wondering if you could speak to your expectation surrounding cash flow from ops in the second half of the year.

Speaker 5: I was just wondering if you could speak to your expectations surrounding cash flow from ops in the second half of the year. And then working capital as well, just trying to get a sense of cash needs in two H2023.

Is it.

And then working capital as well just trying to get a sense of.

Cash needs.

<unk> 2023, and that's it that's it for me.

Speaker 9: Gosh, it felt so thanks for the question. You know, I think if you look at it, it's a huge free, right? The guide is a, you know, an even a burn for the quarter, but you know, what we see is potential offset is, you know, we anticipate the current forecast that it delivered some of the AR, this quarter with some chunky collections that were anticipating to come in that will offset some of that.

Hey, guys, Hey, it's felt so thanks for the question, Yes, I think if you look at Q3 right the guidance did they.

And EBITDA burn for the quarter, but what we see as potential offset is we anticipate the current forecasted deleverage some of the AAR this quarter with some.

<unk> collections that were anticipated to come in that will offset some of that.

Speaker 6: And then in addition, as these new projects hit within the quarter, you're going to get some additional deposits and down payments.

And then in addition, as the.

These new projects hit within the quarter or are you going to get some additional deposits and down payments that would offset some of that potential operational burn as you build up the revenue base.

Speaker 6: that would offset some of that potential operational burn as you build up the revenue base.

Got it thank you.

Speaker 18: Got it. Thank you. Thanks for the question.

Thanks for the question.

Speaker 1: Thank you. Our next question or comment comes from the line of Jeff Osborne from TD Cowen. Mr. Osborne, your line is now open.

Thank you. Our next question or comment comes from the line of Jeff Osborne from TV Cowen Mr. Osborne. Your line is now open.

Okay.

Speaker 10: For a Jeff beating that to a dead horse, but can we just talk about the linearity in the quarter? Was this a problem that that came up late in the quarter would be part of the question and be, you had sort of a laundry list of of issues between module availability, interconnections, permits, et cetera. Is there a way of rank order?

Hi, Jeff.

So a dead horse, but can we just talk about the linearity in the quarter was this.

That came up late in the quarter would be part of the question and B you had sort of a laundry list of issues between module availability interconnections permits et cetera is there a way of rank ordering notes.

Jeff This is Sean I would say.

Speaker 6: Jeff, this is Sean. I would say, as we mentioned in the remarks, you know, our biggest, you know, single issue was the shift of projects related to the domestic content, the customer basically finalizing their strategy. So, that accounted for the lion's share of the miss. And was that something that developed?

As we mentioned in the remarks our biggest.

Single issue was the shift of projects related to the domestic content that customer basically finalizing their strategy. So that was that accounted for the lion's share of the Miss.

Okay.

Is that something that developed late in the quarter.

Versus expectation.

Yes, it was.

Speaker 6: So, you know, we had, as Patrick mentioned earlier, Jeff, we had the POs, they made a shift in terms of their strategy mid-quarter to once, you know, some of the IRA information came out as a consequence, that's where it pushed out to the later quarters.

So.

As Patrick mentioned earlier, Jeff we had them.

They made a shift in terms of their strategy mid quarter to once some of the IRI information came out as a consequence.

That's where it pushed out into later quarters.

Speaker 10: Got it. My last question is just you made the comments on the margins, which are helpful at different revenue rates. Can you just talk about the overall pricing environment, both domestically and internationally?

I mean, I think from a pricing perspective.

With our with our cost structure that we have we're able to.

It really price these projects appropriately we're not seeing.

Kind of a race to the bottom.

And the geographies of which we're currently in.

Engaging with and so.

Speaker 3: You know, in terms of pricing and margins, the U.S. continues to be a really good sector for us and, you know, continues to expand our margins. We're really excited about, you know, the 300 megawatts that we're going to be doing with with RE across our 5E across.

Terms of pricing and margins in the U S continues to be a really good sector for us and continues to expand our margins we're really excited about.

The 300 megawatts that we're going to be doing with with our E. R <unk> across.

Speaker 3: 11 different projects, two large scale utility projects, and some distributed generation, that's all very, very good and healthy margin. So we're not seeing a lot of pricing pressure. We're seeing the ability for us to compete with our cross-structured and deliver, continue to grow our margin based.

11 different projects to large scale utility projects and some distributed generation all at very very good and healthy margin. So we're not seeing.

Lot of pricing pressure, we're seeing the ability for us to compete with our cost structure and deliver.

Continue to grow our margin base.

Thank you that's all I had.

Thanks.

Speaker 1: Thank you. Stand by. Our next question of comment comes from a line of Julian Dumolin Smith from Bank of America. Your line is open.

Thank you standby our next question or comment comes from the line of Julien Dumoulin Smith from Bank of America. Your line is open.

Speaker 12: Hi, this is actually Morgan reading for Julian here. Thanks for the comments this quarter. I guess if you could kind of elaborate on the gross margin inflection that you're expecting.

Hi, This is actually Morgan.

Hi, Ian here.

Thanks for that comment this quarter I guess, if you could kind of elaborate on the gross margin inflection that you are expecting.

Speaker 12: In the 4th quarter, that would be helpful given that this is going to be kind of. The record revenue, they understand that the previous guidance. Um, for 2 Q, that wasn't hit given their revenue issue. I guess you should be expect gross margins, maybe in in excess of that sort of 2 Q type level, given the sort of confidence that you have around the 4 Q guidance. On a volume and revenue base.

In the fourth quarter that would be helpful. Given that this is going to be kind of the.

Our record revenue base understand the previous guidance.

Thank you.

That wasn't had given a revenue issue.

I guess should we expect gross margins maybe.

So that sort of <unk> type level, given that sort of confidence that you have around the <unk> guidance.

And revenue base.

Speaker 3: Yeah, hey Morgan, thanks for watching this video. So, I think the expectation for Q4 as we said earlier, it's going to be the highest for the year in terms of expectation.

Yeah, Hey, Martin Thanks for question itself, So I think.

The expectations for Q4 as we as we said earlier, it's going to be the highest for the year in terms of expectations.

Speaker 3: You know, in terms of getting operating leverage on the business, obviously as you grow the top line revenue, your overhead gets some leverage on top of that.

Product gross margins by 90 basis points, which I think is a good proof point to everybody.

The individual product margins.

Speaker 3: If you look at the variability in the guidance range for Q3, that's really just driven by the overhead that is basically the floor of the overhead that's not going to branch it up one way or the other. So in terms of margins for Q4, again, we haven't guided to that. But again, as you can anticipate, if you look back to the Q2 guidance range at those type of revenue levels.

If you look at that very building the guidance range for Q3, that's really just driven by the overhead.

It's basically the floor and the overhead that's not going to ratchet up one way or the other so in terms of margin for Q4 again, we havent guided to that but but again as you can anticipate if you look back kind of to the Q2 guidance range at those type of what revenue levels.

Speaker 3: That's where we'd anticipate margins to be at this point, face upon getting the operating leverage on the overhead, as well as the project margins that were seen in the pipeline.

That's where we would anticipate margins to be at this point based upon getting the operating leverage on the overhead as well as the project margins at preceding the pipeline.

Speaker 12: God, that's helpful. And then last one for me, in terms of the project pipeline or the backlog that you've outlined, you talked about private.

Got it that's helpful and then.

Last one from me in terms of the project pipeline.

Backlog that you've outlined you talked about.

Speaker 12: what between 1 p and 2 p or 2 p is currently the lion's share of the backlog. But it, but it sounds like based on your prepared remarks that the 2 p projects are kind of particularly delayed in terms of their ability to culture because the module availability concern. I guess what's the confidence that like the lion's share of that backlog then flows through given that it sounds like most of those projects are tied to 2 p projects which are most to Q. We exposed to the module availability concerns that you've out.

Split between one and two P to P is currently the lion's share of the backlog.

But it sounds like based on your prepared remarks that the <unk> projects are kind of particularly delayed in terms of that apparently the opportunity because of module availability concerns I guess, what's the confident that like the lion's share of that backlog that in Brazil, given that it sounds like most of those projects are tied to <unk> projects, which are now.

Acutely exposed to the module availability concerns that you'd outlined yes.

Speaker 3: Yeah, I mean, I think thanks for this is Patrick. I mean, I think from our perspective, you know, we've seen the module environment through kind of through the back half of the year. And we've seen the engagement level on these defined projects that are in our backlog.

Yes, I think thanks Morgan this is Patrick I mean, I think from our perspective.

We've seen the module environment group.

Through the back half of the year and we've seen the engagement level on these defined projects that are in our backlog really start to ramp up as we start going through final design engineering getting.

Speaker 3: really start to ramp up as we start going through, you know, final design, engineering, getting the site design finalized and ultimately ready to go. And so there's been enough tick and activity to get those projects ready to start construction in 2024. And in previously, it's been more of a, you know, kind of wait and see as models become available. And with the release of more and more modules, those projects are musical.

The site design finalized and ultimately ready to go and so theres been an uptick in activity to get those projects ready to start construction in 2024 and previously it's been more of a.

Kind of wait and see as modules become available and with the release of more and more modules those projects are moving forward.

Speaker 6: We're definitely seeing strong momentum as we look into 2024 for backlog conversion.

We're definitely we're definitely seeing strong momentum as we look into 2024 for backlog conversion.

Got it thank you I'll take the rest offline.

Thank you.

Speaker 1: Our next question or comment comes from the line of Graham Price from Raymond James. Mr. Price, your line is now open.

Our next question or comment comes from the line of Graham price from Raymond James Mr. <unk>. Your line is now open.

Okay.

Speaker 3: Hi, good morning. Thanks for taking the question.

Hi, good morning, Thanks for taking the question.

Speaker 3: Maybe just one more on the quarter over quarter margin improvement. You mentioned a number of items on the cost side, was wondering if ASPs were up quarter over quarter and just kind of the relative contribution between, you know, that improvement from pricing versus the cost side.

Maybe just one more on the quarter over quarter margin improvement.

You mentioned a number of items on the cost side I was wondering if the asps were up quarter over quarter, and just kind of the relative contribution between.

And that improvement from pricing versus the cost side.

So I would.

Speaker 6: So I would, you know, I would look at a gram that really our, a lot of it is coming from the cost improvements that we continue to drive. And so the team has been absolutely relentless in taking cost out of both our 2P product as well as our 1P product. And so that has been a major factor in contributing to the margin uplift.

I would look at it Graham that really are.

A lot of it is is coming from the cost improvements that we continue to drive.

So the team has been absolutely relentless in taking cost out.

Both our <unk> product as well as our <unk> product and so that has been.

A major factor in contributing to the margin uplift.

Got it thanks.

Speaker 3: Got it. Thanks. And then for my follow up, great to see the expansion in Italy and Spain, wondering looking forward how we should think about the international versus US looking at how that's trending.

And then for my follow up.

Great to see the expansion in Italy, and Spain.

Wondering looking forward, how we should think about.

International versus U S bookings.

Bookings and how thats trending.

Speaker 6: So we're very excited about the progress we're making internationally. We talked about, you know, the new award in South Africa. And as you mentioned, you know, the projects in Spain and Italy. We see continued progress in markets like Australia as well.

So we're very excited about the progress we're making internationally we've talked about.

The New award in South Africa, and as you mentioned the projects in Spain and Italy.

We see continued progress in markets like Australia as well however are still are.

Speaker 6: However, you know, our still our, you know, we're still seeing, you know, strength, obviously in the US environment. And so I think over time, we'll see the the international continue to

We're still seeing strength, obviously in the U S environment.

So I think over time, we will see the international continued to two <unk>.

Speaker 6: to strengthen as a percent of the total, but the US market will still continue to be a very, very strong core market for us.

Strengthen as a percent of the total but the.

U S environment. The U S market will still continue to be very very strong core market for us.

Got it.

Thank you that's it for me.

Speaker 1: Thank you. Again, ladies and gentlemen, if you have a question or comment at this time, please press star 11 on your telephone keypad. Our next question or comment comes from the line of Samir Joshi from H.C. Wainwright. Joshi, your line is now open.

Joseph Your line is now open.

Speaker 3: Hey, guys, can you hear me? Yes, yes, yes. Yeah, thanks for taking my question.

Hey, guys.

Can you hear me.

Yes, yes, yes, thanks for taking my question.

<unk>.

Speaker 3: On the DNA front, it seems you have been able to control those costs fairly well. Was there any one-time benefit on a non-GAAP basis that might have been here, or is this the level we should expect going?

On the G&A front. It seems you have been able to control those costs are fairly well.

Is there any one time benefit.

On a non-GAAP basis that microbial here or is this the level, we should expect going forward.

Speaker 9: Yeah, so thanks for the question. Now, I mean, that's an area that we've obviously been very focused on is the off-ex side. We'll continue to have a focus on off-ex and something that we continually review as a management team. But no, that's the areas that we're going to keep that in check. Control the things that we control. There is a lot of business in the business with product starts and product pushups, but this is the one area that we're going to control. We'll continue to keep an eye on that.

Yes. So thanks for the question no I mean thats an area that we've obviously been very focused on is the opex side. We will continue to have a focus on opex and <unk>.

That we continually review of them as a management team.

But no that's.

That's the areas that we'll continue to keep that in check.

Control the things that we control.

There is lumpiness in the business with project starts and project push outs, but this is the one area that we're going to control and we'll continue to keep an eye on that.

Okay, and just one more.

Speaker 3: Of the 259 million new orders, what proportion of this was non-UFLPA?

Of the $269 million.

New orders.

What proportion of this was non U S Lps.

Okay.

Speaker 14: All of it is non-UF LTA, so of what we booked this quarter, it's either international or the projects have modules.

All of it is.

Non U F. LTA so of what we booked this quarter, it's either international or the projects have modules.

Speaker 3: Okay, thanks for that. And just maybe if I can, if I may.

Okay. Thanks for that and just maybe if I can if I may.

<unk>.

One of the projects announced today.

Speaker 3: One of the projects announced today includes floating solar installation. Can you let us know what your capabilities are?

Project wins announced today includes floating.

Solar installations.

Can you, let us know what your capabilities on that front.

Speaker 6: So, no, great question. So we will not be providing the floating solar, you know, for this particular project. You know, we are going to be providing one gigawatt worth of trackers. But this is part of a pretty groundbreaking, you know, just generally renewable energy project in the Pacific Northwest. And, you know, we're excited to be a part of it. But we are delivering our one and 2P tracker in the mode of a gigawatt.

So great question, so we will not be providing the floating solar.

This particular project.

We are going to be providing one gigawatts worth of trackers, but this is part of a pretty groundbreaking.

Just.

<unk> renewable energy project.

Civic northwest, we're excited to be a part of it but we are delivering our one and two P tracker.

And the mode of a gigawatt.

Speaker 3: Thanks for that clarification and good luck. Thank you. Thank you. Thank you.

Thanks for that clarification and good luck. Thank you.

Thank you.

Thank you I'm showing no additional questions in the queue at this time I would like to turn the conference back over to management for any closing comments.

Speaker 1: Thank you. I'm showing no additional questions in the queue at this time. I would like to turn the conference back over to management for any closing comments.

Speaker 6: Hey, thanks very much, everyone, for joining us. We appreciate your time. And while we do have disappointment with our Q2 results, we are absolutely optimistic about the future and the opportunities out there. So thank you again for your time, and we look forward to our next interaction.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day speakers standby.

Speaker 1: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day. Speakers stand by.

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