Q3 2024 FTC Solar Inc Earnings Call
The
Thank you for standing by.
Luella: My name is Luella, and I will be your conference operator today. At this time, I would like to welcome everyone to the FTC Solar 3rd Quarter 2024 Earnings Conference Call.
Luella: All lines have been placed on mute to prevent any background noise.
After the speaker's remarks,
There will be a question and answer session.
Luella: If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. Please be advised that today's conference is being recorded.
Speaker Change: I would now like to turn the call over to Bill Michalek, Vice President of Investor Relations. Please go ahead.
Bill Michalek: Thank you and welcome everyone to FEC Solr's 3rd Quarter 2024 Earnings Conference Call. Before today's call, you may have reviewed our earnings release and supplemental financial information which was posted earlier today.
Bill Michalek: If you've not yet reviewed these documents, they're available on the Investor Relations section of our website at fdcsolar.com.
Bill Michalek: I'm joined today by Yann Brandt, the company's President and Chief Executive Officer, Cathy Behnen, the company's Chief Financial Officer, and Patrick Cook, the company's Head of Capital Markets and Business Development.
Bill Michalek: Based on our assumptions and beliefs in the current environment, and speaks only as of the current date. As such, these forelooking statements include risks and uncertainties, and actual results and events could differ maturely from our current expectations.
Bill Michalek: Please refer to our press release and other SEC filings for more information on the specific risk factors. We assume no obligation to update such information except as required by law.
Speaker Change: As we expect, we'll 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. With that, I'll turn the call over to Yann.
Yann Brandt: Thank you, Bill, and good morning, everyone. I'm pleased to speak with you all today on my first official earnings call as CEO.
Yann Brandt: I'll focus my comments on the state of FPC Solar and my observations overall, as well as a few updates, and then turn it over to Cathy to review the financials.
Yann Brandt: Throughout my career, which has taken me across the solar and storage industries, people seem to primarily only remember how things end up, and the successes we realize, not necessarily how they start.
Yann Brandt: In the case of FCC Solar, I see my 10 years starting with a company with a solid foundation, made up of a great team and complete portfolio of tracker products, and the potential to be enormously successful.
Yann Brandt: While revenue is at an inflection point, with gaps to be filled in with customer additions, both individual and portfolio projects.
Yann Brandt: I believe the company is in an enviable position in many respects. This includes having a product set with features that customers love, a business they enjoy working with, and a cost structure poised to enable strong margin growth and profitability.
Yann Brandt: In addition, the company now has a compelling and expanded product set in the 1T, or one panel and portrait market, that opens up the vast majority of the market that wasn't available to the company in the past.
Yann Brandt: In aggregate, I believe the company is in a strong position as it relates to some of the most critical aspects of the business and has had some recent business successes.
Speaker Change: here at about the 90-day mark of my tenure at FTC Solar.
I've met with dozens of customers.
prospective investors, and of course employees.
Speaker Change: I want to thank all of those constituencies, as well as the Board of Directors, for the fantastic welcome.
Speaker Change: and the candid feedback and advice I've received, which I can tell you has been heard and very much appreciated.
Speaker Change: All of those conversations and my work before and during my time here have led to a few observations.
Speaker Change: Before I share these observations, I want to share an exciting update, which is that FCC has entered into a binding agreement to add additional liquidity to our balance sheet.
Speaker Change: This capital will be valuable improvement to our capital structure that was a missing link to some commercial opportunities in the past.
Speaker Change: This capital, in addition to the ability to convert inventory into cash, strengthens FTC and provides additional comfort that we're a tractor supplier that our customers can continue to rely on.
Now, turning to the observations.
Speaker Change: First, I believe FTC is now at an inflection point thanks to the enormous traction in our 1P positioning and sales efforts. Over 70% of our bookings are now 1P pioneer products. That compares to 1P revenues of only 16% and 30% respectively in Q2 and Q3.
Speaker Change: It's well documented by now that the company has been out of position in the marketplace by not having a complete product portfolio inclusive of a single row 1P tracker available to the market, underscoring the importance of having innovative product market fit.
Speaker Change: While it has taken some time for the company to bring a compelling one-piece solution to the market, introduce it to customers, get several projects in the ground, expand the offering, and build a pipeline, the company has now done just that and is poised to prosper and expand in 2025.
Speaker Change: In fact, we now have our most complete 1P product portfolio, which is quite robust. Since our initial launch of the 1P, we have introduced
Speaker Change: High wind offerings can now extend up to 150 miles per hour.
Speaker Change: compatibility for all module types including ultra-large format m-series 7 with the ability for the contractor and asset owner to make changes to model specifications late in the design process
Speaker Change: and multiple features to reduce cut and fill which would fall into the terrain following category including a dual row option to name a few.
Speaker Change: We have spent most of this year working with customers to ensure we can support diverse sets of site conditions, including the various wind, module, and terrain conditions customers may need.
Speaker Change: I believe we can now address the vast majority of the 1P market and, importantly, address all of those projects that asset owners are looking to invest in. We have transitioned from a 2P-only company to one that is balanced with compelling 1P and 2P solutions and can provide the optimal solution for each customer site.
Speaker Change: significantly increasing our total addressable market in the U.S. and key global solar markets. Think about it, we essentially opened up roughly 85% of the market by aggressively expanding into 1p.
Speaker Change: I believe the company's 2P product has always been top tier, and we're the clear market leader in that segment now, more than ever.
Speaker Change: In fact, 70% of our current purchase orders are now 1P and more than 80% of our outgoing proposals are 1P.
Speaker Change: I'm convinced that this compelling mock product line will enable us to gain real market share in several of the market segments and geographies in relatively short order.
Speaker Change: The second observation is that many customers find us amongst the easiest with which to do business.
Speaker Change: They value the relationships and experience working with our team. These relationships, rooted in collaboration and decades of experience in the solar industry, align with a deep understanding of what it takes to get a solar project built and operating for the long term.
Speaker Change: Customers do not want a duopoly. They want a healthy, robust, and competitive tracker market which supports competitive pricing, improves customer service experience, and continued innovation gives them more options.
Speaker Change: Several customers have shared examples with me where the FCC team has gone above and beyond in one way or another, engaging with customers in ways that our competitors either can't, don't, or perhaps no longer do.
Speaker Change: Lead times and support times matter, but it's more than that. FTC has a brand reputation much bigger than its current footprint in well-regarded products and service.
Speaker Change: In my opinion, there is nothing stopping us from being one of the clear leaders in this industry.
Speaker Change: Third, our current quarterly revenue levels are also at an inflection point.
Speaker Change: While the company has had a good amount of contracted business overall and is winning new business, the near-term revenue run rate has been low.
Speaker Change: Even though we are poised to grow much faster than the market, getting from purchase order to the start of delivery is a process that takes time.
Speaker Change: We are beginning to see 1P revenue make its way into our financial performance, but it is the start of the turn from this inflection point.
Speaker Change: We have many projects in flight and are working to increase our contracted backlog actively to enhance the volume of throughput. This low run rate means we are also currently not absorbing our fixed costs.
Speaker Change: We must give our team more overall volume to work with.
Speaker Change: Our cost structure is good and the breakeven revenue level is relatively low. So there's not a large ramp needed to get to profitability, but we're not there yet.
Speaker Change: As for capital, being new to the business, I've had a wide aperture as it relates to what options to consider.
from traditional fundraising to perhaps something more strategic.
Speaker Change: As I mentioned, today we announced we have entered into a binding term sheet with an investor group for the company to issue a five-year promissory note in the principal amount of $15 million.
Speaker Change: This transaction is expected to close by the end of this month.
Speaker Change: As Cathy will discuss, we also received an additional $4.7 million in cash after the end of the quarter from an earn-out on a prior investment.
Speaker Change: These items, along with the cash on the balance sheet, inventory, and $65 million remaining on the ATM, puts FTC in an improved capital position going forward.
Speaker Change: providing the bankability that our customers want to see from us.
Speaker Change: Many of you may have seen our customer comments recently in press releases or social media referencing us having one of the fastest and easiest trackers to install. These are comments I continue to hear from our customers and prospects.
Speaker Change: For some, it's a matter of cost and labor efficiency. For example, a leading EPC shared that the mechanical installation of our tractor, in their view, is much faster than our competitors and results in significant savings.
Speaker Change: safety is a significant factor of importance for all of our partners
Speaker Change: Our features focus on safety by minimizing activities that can cause injuries and removing dangerous pinch points throughout the system.
Speaker Change: I'm sure many of you may have seen our videos on the LinkedIn page or YouTube showing how quickly and easily one can hang modules on our tracker. The crew just lays the panels down, draping them like a picture frame. This is our sliding glide technology.
Speaker Change: Folks on the other side are quickly securing them with a rubber mallet, made possible by our cinch clips, as opposed to having people hold the modules and threading and securing bolts.
Speaker Change: When taken in aggregate, the ease of module hanging, less work at height, fewer connection points, no specialty tools, and less torquing, for example, are found by customers to be easier, faster, and safer for their crews.
Speaker Change: This can result in less time training new employees, more projects that can be completed in a year, doing our part as a key vendor to improve safety and worker injuries on solar projects.
Speaker Change: Easier, faster, and safer. Impacts the entire life cycle from training to project completion and safe costs throughout, making projects more profitable and possibly higher cost projects economical.
Speaker Change: Go to Beadaholique.com for all of your beading supplies needs! Thanks for watching!
Speaker Change: One final observation I wanted to share is that we are poised to achieve quarterly profitability in 2025.
Speaker Change: We have an excellent product cost structure that enables strong margins. I know the company has discussed in the past all the work that is done as part of the design to value and design manufacturing process. So I won't rehash that. But the work is now paying dividends to set the company up very well for the future.
Speaker Change: The direct margins on projects are healthy and will enable strong gross margin improvement at the top line scales driven by recognizing our already signed bookings, as well as new projects that we will continue to add.
Speaker Change: We also have an efficient op-ex structure that doesn't sacrifice service to customers.
Speaker Change: The timing of the profitability depends on our growth in 1P and customer project timing. I'm going to resist putting out specific timing for the moment, and I'll avoid throwing out aggressive targets.
Speaker Change: But I'm confident in our positioning and that we can see strong improvement in our results as we move forward.
Speaker Change: Before I turn it over to Cathy, I want to highlight some of our recent successes and momentum.
Speaker Change: First, toward the end of the quarter, we signed a multi-year supply agreement with Strata Clean Energy, a development EPC and O&M leader in the solar industry.
Speaker Change: The agreement is for at least 500 megawatts of 2P trackers and could expand to more than a gigawatt. They have said great things about our trackers and service, and we are honored to have their endorsement and continued business.
Speaker Change: Second, after the end of the quarter, we signed a one gigawatt supply agreement with Dunlea Energy. The first project under that agreement is a 500 megawatt project under development in Nebraska, with tractor deliveries expected to begin in the second half of 2025.
Speaker Change: Dunlea is a new customer and we are excited to work with them.
Speaker Change: Third, we were recently able to share additional project details on the existing one gigawatt agreement with Sandhills Energy.
Speaker Change: We have previously announced a 225 megawatt project in Butler County, Nebraska, and we're able to share that we'll also be supplying nearby projects of 320 and 448 megawatts respectively.
Speaker Change: Tracker delivery on those projects is expected to begin in the second half of 2025.
Speaker Change: And finally, after the end of the quarter, we entered into a binding term sheet for the $15 million note placement I mentioned, and we received $4.7 million cash earn out from our previous investment in Dimension Energy.
Speaker Change: Dimension is a community solar developer in which the company invested $4 million in 2018. FTC subsequently sold its stake in 2021 for $22 million and has received earnouts of an additional $9 million since then, including the $4.7 million received in October.
Speaker Change: So, not a bad result so far, earning $31 million in a $4 million investment, and we're eligible to receive up to another $5 million based on their performance through the end of this year, which would be paid out in Q1.
Speaker Change: So in summary, as I take stock of our position as a company, I believe that we're in an incredibly fortunate situation in many respects and in one of the most critical aspects of the business.
Speaker Change: So yes, our revenue is at an inflection point, and we need to fill gaps in project timing.
Speaker Change: But, I also see us having an enviable position as it relates to having products that customers love.
Speaker Change: a business they love to work with, a cost structure that will enable strong margin growth and profitability, and now a complete 1P product set that opens up essentially 85% of the market that wasn't available to us before.
That's a pretty awesome position.
Speaker Change: Our stock price isn't yet reflecting this position or our potential. But as I said at the outset, people often forget where we start and only remember the successes we have from here.
Speaker Change: We'll see how it plays out this time around, but I'm optimistic about our future.
With that, I'll turn it over to Cathy.
Speaker Change: Beginning with the discussion of the third quarter, revenue came in at $10.1 million, which was just above the midpoint of our target range. This revenue level represents a decrease of 11.3% compared to the prior quarter and a decrease of 66.8% compared to the year-earlier quarter due to lower product volumes.
Speaker Change: Gap gross loss was $4.3 million or 42.5% of revenue compared to gross loss of $2.3 million or 20.5% of revenue in the prior quarter.
Speaker Change: Non-GAAP gross loss was $3.9 million or 38.3% of revenue, which was within our target range, although a bit below the midpoint, in part due to a product and service mix. The result for this quarter compared to a non-GAAP gross loss of $1.9 million in the prior quarter.
Speaker Change: GAAP operating expenses were $10.7 million. On a non-GAAP basis, excluding stock-based compensation and certain other costs, operating expenses were $8.1 million, down from $13.2 million in the same quarter last year.
Speaker Change: This represents the lowest level in more than three years as we have found efficiencies across the company while continuing to invest to support growth. This result compares to non-GAAP operating expenses of $8.3 million in the prior quarter.
Speaker Change: Gap net loss was $15.4 million or $0.12 per diluted share compared to a loss of $12.2 million or $0.10 per diluted share in the prior quarter, and a net loss of $16.9 million or $0.14 per diluted share in the year-ago quarter.
Speaker Change: Adjusted EBITDA loss, which excludes an approximate $3.2 million net loss from stock-based compensation expenses and other non-cash items, was $12.2 million, which was better than the midpoint of our guidance range.
Speaker Change: This compares the losses of $10.5 million in the prior quarter and $9.7 million in the year-ago quarter.
Speaker Change: Finally, regarding liquidity, we ended the quarter with $8.3 million in cash on the balance sheet. Subsequent to quarter end, we received $4.7 million cash earn out relating to our investment in Dimension Energy. And as Yann mentioned, we entered into a binding term sheet for the company to issue a five-year interest-bearing promissory note in the principal amount of $15 million.
Speaker Change: The note bears interest at a rate of 11% per annum, payable semi-annually if paid in cash, or at our option, a rate of 13% per annum if paid in kind. In connection with the agreement, the company intends to issue warrants with a 10-year term to purchase 17.5 million shares of common stock.
Speaker Change: The transaction is expected to close by November 30th, subject to customary closing conditions and the preparation of definitive documents.
Speaker Change: So, we reduced our cash burden in the quarter, and with these items, expect to end Q4 with higher cash levels. We also continue to have about $65 million remaining under the ATMs program at the end of the quarter.
With that, let us turn our focus to the outlook.
Speaker Change: Our targets for the fourth quarter call for the following. Revenue between $10 million and $14 million, which would be approximately flat to up nearly 40% relative to the third quarter.
Speaker Change: Along with this revenue level, we expect non-GAAP gross loss between $4.2 million and $1.5 million, or between negative 42.2% and 10.7% of revenue. As you might expect, the percentage ranges vary more greatly at these lower revenue levels.
Speaker Change: Non-GAAP operating expenses between $8.2 million and $9 million. And finally, adjusted EBITDA loss between $13.7 million and $9.9 million.
Speaker Change: With that, we conclude our prepared remarks and I will turn it over to the operator for any questions. Operator?
Thank you very much.
Speaker Change: At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster.
Thank you for watching!
Speaker Change: Your first question comes from the line of Sameer Joshi with HC Wainwright. Please go ahead.
and Bill Michalek.
Speaker Change: Yeah, good morning. Thanks for taking my call. Yeah, I'm Cathy. Just a quick question on the 1P revenues.
Speaker Change: What proportion of the backlog or the current backlog is coming from that and then just in terms of feedback from customers, just like 2P, are you getting feedback about the ease and safety of installation as well for 1P products?
and Bill Michalek. Thank you.
Yann Brandt: Thanks for the question. This is Yann. About 70% of our signed purchase orders today are in the 1P category, so we're going to start seeing revenues come in from the 1P category, as I mentioned in the prepared remarks.
Yann Brandt: It's part of the inflection point that we're starting to see about 16 and 18% in Q2 and Q3 came from the 1P category and that's going to.
Yann Brandt: continue to grow over time as those projects get to the start of construction.
Yann Brandt: The feedback on the 1P has been excellent. As I mentioned, I've been visiting with a lot of EPCs, the contractors that have to install it, as well as
Yann Brandt: the investors that are going to own the project. There's some key features.
Yann Brandt: that makes the system easier and faster to install as well as safer. You know, it's an advantage of being the last 1P product to the market.
Yann Brandt: is that our team was able to build innovations on top of the products that were in the market, working hand-in-hand with potential customers to drive those innovations.
You know, the...
The category that's interesting about FTC's 1P product
is that it's not just...
Yann Brandt: a monolithic piece. I mentioned we have the high wind solutions all the way up to 150 mile an hour, especially with growth in solar in the southeast and, you know, obviously the expansion of where hurricanes are hitting.
Yann Brandt: We have some trade following features. So it's not just the individual aspects of the product, but also how wide the product portfolio can span, which allows us to, you know, increase our share of wallet with customers, regardless of where they're investing.
Speaker Change: Thanks, Yann, for that. I was going to go there in terms of the geographic diversity you mentioned. Can you just like qualitatively describe how your projects and your new projects are distributed geographically?
Yeah, our geography is pretty diverse. Obviously, our
Speaker Change: We have a strong focus on the U.S. but also in some international markets, but in the U.S.
Speaker Change: You know, we're seeing strong growth in the Northeast, which has its own challenges with terrain, the value of land, so density is really important. Let's focus on, you know, wind.
Speaker Change: and Hale, for example. But, you know, the strong markets continue to be the Southwest and Texas, but we're seeing, you know, strong growth in the Northeast, as well as now with the high wind product. We see a good opportunity in the Southeast.
Speaker Change: Got it. And then just in terms of the macro environment, not the interest rate environment, but the political environment, do you expect to see any headwinds, any tailwinds based on what happened last week in the election?
Speaker Change: Yeah, I mean, look, the, we don't, we, you know, solar is going to continue to be strong, you know, politically speaking, solar continues to thrive. And I want to remind everyone.
Speaker Change: You know, from 2017 to 2020, solar had nearly 100% growth, right? Growing from about 11 gigawatts up to 20 gigawatts in 2020.
Speaker Change: We've seen tariffs and ITC extensions, tax credit extensions, when both parties were in power.
Speaker Change: So, you know, Solar has headwinds and tailwinds regardless of who's in the White House and who has control of Congress. There's obviously a lot of utilization of
Speaker Change: The solar tax credit as well as the storage tax credits that enable more projects to get done. 85% of the domestic manufacturing in the U.S. is in Republican congressional districts.
Speaker Change: So, and now we have, you know, SIA put out numbers about 45 gigawatts of domestic supply.
Speaker Change: being built here in the US. So you know, with the data center growth and what the utilities are saying, the base load growth rate is, that energy is going to have to come from somewhere, and solar is the easiest, fastest, cheapest choice, as well as being the cleanest, and has one of the largest development pipelines out there.
Yeah, no, yeah, makes sense. We agree.
Speaker Change: One last question on the Outlook for 4Q. It seems based on the...
Speaker Change: Outlook for the non-GAAP gross profit number relative to the revenue outlook. The margin seems to be pretty healthy.
Speaker Change: Is it because of product mix or some other like pricing or something is at play here?
Yeah, let me have Cathy chime in here.
Speaker Change: Yeah, thanks, Samir. This is Cathy. Yes, it's really driven by the product mix that we have in Q4.
Okay, thanks.
I'll take my other questions offline. Thanks.
Thank you.
Speaker Change: Again, if you would like to ask a question, press star then 1 on your telephone keypad. Your next question comes from the line of Graham Price with Raymond James. Please go ahead.
Speaker Change: Hi. Good morning. Thanks for taking my question. I guess first one for me.
Speaker Change: In the past, we've talked about a break-even revenue range of around $50 to $60 million.
Speaker Change: You know you brought up kind of a breaking point briefly in the comments but just wondering if that's still a decent rule of thumb and how that might have changed with the heightened shift towards one
Sorry, Cathy.
Speaker Change: I'm sorry. Sorry, Grant. Could you repeat your question? I was getting a breakup.
Thank you very much.
Grant: Sure, no problem. I was just asking, in the past, you've discussed a break-even revenue range of around $50-60 million. I was just wondering if that still holds, especially given the shift to 1P.
Speaker Change: Okay, thanks. Thanks, Grant. Yes, that still holds. We are still looking at $50 to $60 million as our break-even point. We experience really pretty similar margins on 1P and 2P, and it really has more to do with product mix in terms of timing of the project throughout the quarter. But yes, $50 to $60 is still our break-even point.
Thank you for joining us.
Thank you.
Yeah.
Speaker Change: Graham, good question. I mean, look, we have a pretty strong signed purchase order backlog.
Speaker Change: that we're walking into 2025 in, in addition to the commercial traction that we're seeing that we'll add to it.
Speaker Change: Our expectation is about 60% of the signed backlog is going to start recognizing revenue in 2025.
Speaker Change: Even though we're in the middle of the, you know, annual operating plan process.
You know, we do see strong growth potential in 2025.
Speaker Change: Not just on that time backlog, but you know the expansion of that and the commercial opportunities we're seeing With the cut that you know our existing customers and new ones that we're going that we're adding to the roster
Got it.
Thanks, and then last one.
From my end, just wanted to check on the strata.
Speaker Change: Supply Agreement. I wanted to verify that those are only 2P.
Speaker Change: delivery. And just wondering if there could be any future opportunity for 1P on that project.
your thoughts on
You know, opportunity to cross sell between 1P and 2P.
Speaker Change: Yes, absolutely. So the MSA currently is on 2P. Strata has been a longtime user and a big fan of the feature set, you know, and a lot of that is driven by the fact that FTC didn't have a 1P product
available to the market until recently.
Speaker Change: you know, particularly with the same feature set that makes it easier and faster and safer to install, you know, so I think we're going to have.
Speaker Change: More and more opportunities as people look at their product mix and their supplier base for their projects, especially the larger EPPs. They plan out, you know,
more than three, four quarters at a time.
We're having opportunities to bid many of these projects.
Speaker Change: Just to give you a sense, in Q3 of this year,
Speaker Change: Our average proposal, you know, 80% of which was 1P, the average project size was 160 megawatts. So we're seeing the inclusion of FTC in that product mix. I think it makes us an obvious top four player here in the U.S. tracker landscape, you know, especially with, you know, having access to domestic content, et cetera. So we have strong 2P customers. It's still the majority of our revenue today.
Speaker Change: clear signal that 1P is gaining adoption not just... we're definitely working on Strata, but many others as well and 1P and 2P are really product solutions
becomes an important factor for consideration.
Speaker Change: 2P is a really good choice. We're a very clear market leader in the 2P category. Not a lot of our peers have a 2P solution and we, you know, obviously have one of the largest track records in the market with our 2P.
Speaker Change: with, you know, you add that to the 1P catalog, provides a technical solution for almost every project in an investor's portfolio.
Speaker Change: I understood. Thank you very much. I'll jump back into the queue.
Goodbye.
Ladies and gentlemen, seeing as...
Speaker Change: All right again if you would like to ask a question press star 1 on your telephone keypad.
Again that is star 1 on your telephone keypad.
Thank you.
Speaker Change: Ladies and gentlemen, seeing as there are no further questions, that concludes today's call. Thank you all for joining. You may now disconnect.
Speaker Change: Once upon a time In A Realm Far, Far Away so
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Speaker Change: [music].
little Ella: Thank you for standing by my name is little Ella and I will be your conference operator today at this time I would like to welcome everyone to the F. P. C solar third quarter 'twenty to 'twenty four earnings conference call. All lines have been placed on mute to prevent any background noise.
little Ella: After the speakers remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star. One again. Thank you please be advised that todays call.
little Ella: Friends is being recorded I would now like to turn the call over to Bill metallic Vice President of Investor Relations. Please go.
Speaker Change: Thank you and welcome everyone <unk> third quarter 2024 earnings Conference call before today's call. You may have reviewed our earnings release and supplemental financial information, which of course it earlier today.
Speaker Change: If you've not yet reviewed these documents are available on the Investor Relations section of our website at <unk> Dot com.
Joined today by a young brand the company's President and Chief Executive Officer, Cathy <unk>, the company's Chief Financial Officer, and Patrick Cooke, the company's head of capital markets and business development.
Speaker Change: Before we begin I remind everyone that today's discussion contains forward looking statements.
Speaker Change: Based on our assumptions and beliefs in the current environment and speaks only as of the current date.
Speaker Change: These forward looking statements include risks and uncertainties and actual results and events could differ materially from our current expectations. Please.
Speaker Change: Please refer to our press release and other SEC filings for more information on the specific risk factors, we assume no obligation to update such information, except as required by law.
Speaker Change: As we 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 measures to the nearest applicable GAAP measure.
Speaker Change: With that I'll turn the call over to Jan.
Thank you Bill and good morning, everyone I'm pleased to speak with you all today on my first official earnings call as CEO.
Speaker Change: I'll focus my comments on the state of FTC solar and my observations overall as well as a few updates and then turn it over to Cathy to review the financials.
Speaker Change: Throughout my career, which is taking me across the solar and storage industry people seem to primarily only remember Hudson bundle and the successes, we realize not necessarily how they start.
Speaker Change: In the case of FCC solar I see my phone, they're starting with a company with a solid foundation made up of a great team and complete portfolio of chocolate products and the potential to be enormously successful.
Speaker Change: While revenue was at an inflection point with gaps we felt then with customer additions, both individual and portfolio of projects.
Speaker Change: I believe the company is in an enviable position in many respects.
Speaker Change: This includes having a product set with features that customers love, our business and joy working with and our cost structure poised to enable strong margin growth in profitability.
Speaker Change: In addition, the company now has a compelling and expanded product set and the one key or one panel and corporate market that opens up the vast majority of the market that wasn't available to the company in the past.
Speaker Change: In aggregate I believe the company is in a strong position as it relates to some of the most critical aspects of the business and that's had some recent business successes.
Speaker Change: Here at about the 90 day Mark of my tenure of FTC solar.
Speaker Change: I've met with dozens of customers.
Speaker Change: Prospective investors and of course employees.
Speaker Change: Want to thank all of those constituencies as well as the board of directors for the Fantastic welcome.
Speaker Change: And the camera feedback and advice have received which I can tell you has been heard and very much appreciate it.
Speaker Change: All of those conversations and my work before and during my time here has led to a few observations.
Speaker Change: Before I share. These observations I want to share an exciting update which is the FCC has entered into a binding agreement to add additional liquidity to our balance sheet. This capital will be valuable improvement to our capital structure that was a missing link to some commercial opportunities in the past.
Speaker Change: This capital in addition to the ability to convert inventory into cash strengthens FTC and provides additional comfort that were tracker supplier that our customers can continue to rely on.
Speaker Change: Now turning to the observations.
Speaker Change: First I believe FTC is now at an inflection point, thanks to the enormous traction at a one P positioning and sales efforts over 70% of our bookings are now one P. Pioneer product that compares to one P revenues of almost 16% and 30% respectively in Q2 and Q3.
Speaker Change: It's well documented by now that the company has been out of position in the marketplace by not having a complete product portfolio inclusive of a single road <unk> track are available to the market underscoring the importance of having innovative product market fit.
Speaker Change: While it has taken some time for the company to bring a compelling <unk> solution to the market introduce it to customers get several projects in the ground expand the offering and build a pipeline. The company has now done just that and is poised for prosper and expand in 2025.
Speaker Change: In fact, we now have our most complete <unk> product portfolio, which is quite robust since our initial launch of the <unk> we have introduced.
Speaker Change: Higher end offerings that now extend up to 150 miles per hour.
Speaker Change: Compatibility for our module types, including ultra large format and series seven with the ability for their contract on asset owner to make changes to module specification late in the design process.
Speaker Change: Multiple features to reduce carbon fill which would fall into the train following category, including a dual ROE option to name a few.
Speaker Change: We have spent most of this year working with customers to ensure we can support diverse types of tight conditions, including the various wind module and trained conditions customers may need.
Speaker Change: I believe we can now address the vast majority of the <unk> market and importantly address all of those projects that asset owners are looking to investment we have.
Speaker Change: <unk> from our <unk> only company to one that is balanced with compelling <unk> solution and can provide the optimal solution for each customer site significantly increasing our total addressable market in the U S and key global solar markets think about it we essentially opened up roughly 85% of the market by aggressively.
Speaker Change: Expanding into one P I.
Speaker Change: I believe the company's <unk> product has always been top tier and we're the clear market leader in that segment now more than ever.
In fact, 70% of our current purchase orders are now <unk> and more than 80% of our outgoing proposals are lumpy.
Speaker Change: I am convinced that this compelling product line will enable us to gain real market share in several of the market segments and geographies in relatively short order.
Speaker Change: The second observation is that many customers find us amongst the easiest with which to do business they value the relationships and experience working with our team. These relationships rooted in collaboration and decades of experience in the solar industry aligned with a deep understanding of what it takes to get a solar project built and operating for the long term.
Speaker Change: Customers do not want a duopoly they want a healthy robust and competitive tracker market, which supports competitive pricing improves customer service experience and continued innovation that gives them more option.
Speaker Change: Several customers have shared examples with me, where the FCC team has gone above and beyond in one way or another engaging with customers in ways that our competitors, either can't or don't or perhaps no longer do.
Speaker Change: Lead times and support times matter, but it's more than that FTC.
Speaker Change: <unk> is a brand reputation much bigger than its current footprint and well regarded products and service and <unk>.
Speaker Change: Our opinion, there is nothing stopping us from being one of the clear leaders in this industry.
Speaker Change: Third our current quarterly revenue levels are also at an inflection point.
Speaker Change: While the company has had good amount of contracted business overall and is winning new business. The near term revenue run rate has been low.
Speaker Change: Even though we are poised to grow much faster than the market getting from purchase order to the startup deliveries is a process that takes time.
Speaker Change: We are beginning to see <unk> revenue and make its way into our financial performance, but it is the start of the turn from this inflection point.
Speaker Change: We have many projects in flight and are working to increase our contracted backlog actively to enhance the volume or throughput. This low run rate means. We're also currently not absorbing our fixed costs.
We must give our team more overall volume to work with.
Speaker Change: Our cost structure is good and the breakeven revenue level is relatively low. So there is not a large demand needed to get to profitability, but we're not there yet.
Speaker Change: As for capital being new to the business I have had a wide aperture as it relates to what options to consider from.
Speaker Change: From traditional fundraising to perhaps something more strategic.
Speaker Change: As I mentioned today, we announced we have entered into a binding term sheet with an investor group for the company to issue a five year promissory note in the principal amount of $15 million. This transaction is expected to close by the end of this month.
Speaker Change: As Kathy will discuss we also received an additional $4 $7 million in cash after the end of the quarter from an earn out on our prior investments. These items along with the cash on the balance sheet inventory and $65 million remaining on the ATM, but FCC and an improved capital position going forward.
Speaker Change: Providing the bank ability that our customers want to see from us.
Fourth.
Speaker Change: Our solutions are widely viewed as easier safer and faster to install.
Driven by a significant innovation in key product features.
Any of you may have seen our customer comments recently in press releases or social media referencing us having one of the fastest and easiest practice to install these are comments I continue to hear from our customers and prospects for some it's a matter of cost and labor efficiency. For example, a leading EPC shared that the mechanical installation of our <unk>.
Speaker Change: And their view is much faster than our competitors and results in significant savings.
Speaker Change: Safety is a significant factor of importance for all of our partners.
Speaker Change: Our features focus on safety by minimizing activities that can cause injuries and removing dangerous pinch points throughout the system.
Speaker Change: I'm sure. Many of you may have seen our videos on the Linkedin page or Youtube, showing how quickly and easily one can hang modules on our tracker the crude slate that panels down draping them like a picture frame. This is our slide on the right technology folks on the other side are quickly securing them with a rubber mallet made possible by our central.
Speaker Change: As opposed to having people hold the modules and threatening and securing bowls.
Speaker Change: When taken in aggregate the ease of module hanging less work at height pure connection point, no specialty tool and less talking for example are found by customers to be easier faster and safer for their crews.
Speaker Change: This can result in less time training new employees more projects that can be completed in a year doing our part as a key vendor to improve safety and worker injuries on solar projects.
Speaker Change: Easier faster and safer impacts the entire lifecycle from training to project completion, and save costs throughout making projects more profitable and possibly higher cost projects economical.
Speaker Change: One final observation I wanted to share is that we are poised to achieve quarterly profitability in 2025.
Speaker Change: We have an excellent product cost structure that enables strong margins I know the company has discussed in the past all the work that is done as part of the design to value and design manufacturing process. So I won't rehash that but the work is now paying dividends to set the company up very well for the future.
The direct margins on projects are healthy and will enable strong gross margin improvement as the top line scales driven by recognizing our already signed bookings as well as new.
Speaker Change: We'll continue to add.
We also have an efficient opex structure that doesn't sacrifice service to customers.
Speaker Change: The timing of the profitability depends on our growth and lumpy and customer project timing I'm going to resist putting out specific timing for the moment and I'll avoid throwing out aggressive targets, but I am confident in our positioning and that we can see strong improvement in our results as we move forward.
Speaker Change: Before I turn it over to Cathy I want to highlight some of our recent successes and momentum.
First towards the end of the quarter, we signed a multi year supply agreement with <unk> clean energy development, EPC and O&M leader in the solar industry. They.
Speaker Change: The agreement is for at least 500 megawatts of Tupi trackers and could expand to more than a gigawatt.
Speaker Change: Great things about our trackers and service and we are honored to have their endorsement and continued business.
Speaker Change: Second after the end of the quarter, we signed a one gigawatt supply agreement with suddenly energy. The first project under that agreement has a 500 megawatt project under development in Nebraska with tracker deliveries expected to begin in the second half of 2025.
Speaker Change: <unk> is a new customer and we're excited to work with them.
Speaker Change: Third we were recently able to share additional project details on the existing one gigawatt agreement with sand Hills energy. We have previously announced the 225 megawatt project in Butler County, Nebraska, and we're able to share that will also be supplying nearby project of 320, and 448 megawatts respectively.
Speaker Change: Tracker delivery on those projects is expected to begin in the second half of 2025.
Speaker Change: And finally after the end of the quarter, we entered into a binding term sheet for the $15 million note placement I mentioned, and we received $4 $7 million cash earn out from our previous investment as I mentioned energy.
Speaker Change: Dimension as a community solar developer in which the company invested $4 million in 2018 FCC.
Speaker Change: FCC subsequently sold its stake in 2021% to $22 million and has received earn outs of an additional $9 million. Since then including the $4 7 million received in October.
Speaker Change: So not a bad result, so far earnings $31 million on a $4 million investment and we're eligible to receive up to another $5 million based on their performance through the end of this year, which would be paid out in Q1.
Speaker Change: So in summary, as I take stock of our position as a company I believe that we're in incredibly fortunate situation in many respects and in one of the most critical aspects of the business.
Speaker Change: Yes, our revenues at an inflection point and we need to fill gaps and project timing.
Speaker Change: I also see us having an enviable position as it relates to having products that customers love.
A business they love to work with a cost structure that will enable strong margin growth and profitability and now a complete <unk> product set that opens up essentially 85% of the market that wasn't available to us before.
Speaker Change: That's a pretty awesome position.
Speaker Change: Our stock price isn't yet, reflecting disposition or potential, but as I said at the outset people often forget where we start and only remember the successes we have from here.
Speaker Change: We will see how it plays out this time around but I am optimistic about our future.
Speaker Change: With that I'll turn it over to Kathy.