Q4 2024 FTC Solar Inc Earnings Call
Good day, and thank you for saying Goodbye and welcome to the F. T C solar fourth quarter 2024 earnings conference call.
At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the special need to press Star one on your telephone you all didn't hear an automated message device in their hand is raised to withdraw. Your question. Please press star wouldn't want again. Please be advised today's conference is being recorded I would now like to harms over to your speaker today Bill Michelle It Vice.
Speaker Change: Or is it a investor relations. Please go ahead.
Bill Michelle: Thank you and welcome everyone to <unk> fourth quarter 2024 earnings conference call.
Speaker Change: For today's call you may have reviewed our earnings release slide presentation, and supplemental financial information, which are posted earlier today.
Bill Michelle: Not reviewed these documents they are available on the Investor Relations section of our website.
Bill Michelle: Dot com.
John Brandt: Joined today by John Brandt, The company's President and Chief Executive Officer, Kathy Lane, and the Companys, Chief Financial Officer, and Patrick Cooke, the company's head of capital markets and BD.
John Brandt: Before we begin I remind everyone that today's discussion contains forward looking statements based on our assumptions and beliefs in the current environment and 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.
John Brandt: 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.
John Brandt: As 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.
Jan: With that I'll turn the call over to Jan.
Jan: Thanks, Bill and good morning, everyone. It's great to speak with you all again here on my second earnings call as CEO of FTC solar.
Jan: I'll provide a few updates and commentary and then turn it over to Cathy to review the financials.
Jan: During the first six months of my tenure, our primary focus has been on shoring up our near term backlog, while also adding some incremental liquidity to the business. We have made very significant progress, including adding many multiples of our current annual revenue run rate to our backlog and signing long term customer agreements.
Jan: I'll share more on this progress in a moment I would like to start by briefly reviewing a few comments I made on the last earnings call.
Jan: That call I shared my 90 day observations on the company my optimism about the path to success for FTC solar built on the foundation of a great team a complete product set and a cost structure poised to enable strong margin growth and profitability.
Jan: Summarize those observations briefly they include one FTC solar or is that a clear inflection point and adoption of our differentiated <unk> technology is on the brink of major deployment by some of the biggest solar IPP and Pcs in the world.
Jan: Our relationships with our global customer base are in great position in this moment of the solar market, knowing how to bring a solar project to completion is critical and our team's collective experience is very well regarded in that way.
Jan: The FTC solar one P tracker the latest in this category to come to market. It has features and technology that are clearly differentiated and making it easier faster and safer tracker to install and four in 2025, we will see good progress on the conversion of our backlog into revenue, which will support us achieving.
Jan: Quarterly profitability this year.
Jan: So with that brief review of observations in the foundation for my optimism. Let me give you an update on the progress we have made to further support our recovery and strong future growth prospects.
Jan: I'm pleased to say that we have had a number of recent wins and are building momentum on our last call I highlighted a 500 megawatt supply agreement with strata clean energy a new one gigawatt supply agreement with Dudley energy additional detail on a one gigawatt agreement with <unk> energy.
Jan: <unk> million dollars note placement and a $4 $7 million cash earn out on a prior investment building on those successes today, we announced our highlighted several additional wins. These include.
Jan: First we announced today that we have entered into a five year five gigawatt supply arrangement with recurrent energy recurrent it's one of the world's largest and most geographically diversified utility scale solar developers.
Jan: Projects are expected to be located in the U S Europe, and Australia and utilize a combination of our <unk> and <unk> tracker technologies. It is anticipated that the first project revenue under this arrangement will begin in the second half of 2025.
Jan: Second we announced today, a new 333 megawatt project award notice from <unk>. The power generation subsidiary of multinational energy leader <unk>, which operates in more than 20 countries was $16 million customers. The project, which is located in Australia will utilize our <unk> pioneer tracker and.
Jan: It is expected to begin track for production in mid 2025.
Jan: Third we announced a new 280 megawatt project award from Rosenblatt, a top five EPC and the largest employee owned electrical contractor in the U S. The project, which is located on the U S. West Coast will also utilize our one P. Pioneer solution and is expected to begin tracker production in mid 2025.
Jan: Fourth on top of those swings. We have also continued to strengthen our positioning in talent, including the appointment last month, a solar industry veteran kept James as Chief Commercial officer for North America kept us somewhat I've known and worked alongside for nearly 20 years. He is one of the founding members of <unk> renewables and help scale the company to what it is.
Jan: Today, I know he will drive even stronger engagement with the developer and EPC community and add significant value to our company we.
Jan: We have also seen a significant increase in our bidding run rate, which has recently been nearly double what it was in the second quarter of last year, we're driving up our domestic content capabilities and are already taking orders for 100% domestic content, which we expect to have available in Q3 of this year.
Jan: The International front, the large Australia project is a great win and we expect to see increasing international traction, particularly in Australia and Europe. Our team is also working on our specialty design tracker for the India market as the market transitions in a big way from fixed tilt to tracker and the market opportunity is great.
Jan: Finally within the past few weeks, we have received another $3 $2 million earn out on our investment in dimension energy and we Upsized, our note offering which will bring them up to an additional $10 million to $15 million in the coming days.
Jan: So as I mentioned during the first six months of my tenure, we have been focused on shoring up our near term backlog, while also adding liquidity in aggregate. We've added multiples of our current annual revenue run rate to our backlog finding agreements totaling more than six five gigawatts with tier one accounts along with other awards added more than <unk>.
Jan: $30 million in additional liquidity to our balance sheet.
Jan: Strengthened our sales team with new hires including <unk> James.
Jan: <unk> strengthened our product offering and capabilities and increased our commercial traction with bids on many gigawatts of future projects.
Jan: Ultimately the opportunity for FTC stems from a combination of our people and product providing the best value for our customers. We look at the market today that has two extremes to navigate incredible demand for energy generation built now and an increasingly stressed labor market for EPC partners tracker installations can make up more than 60.
Jan: Percent of the labor need on a solar project, so being able to install FTC trackers easier faster and safer is incredibly valuable for our construction partners easier means you can train new workers to get proficient quickly, while reducing the need for specialty tools and equipment faster as man hour savings value right to the bottom line of our partners and the <unk>.
Jan: <unk> P&L to get more solar built in the same time span.
Jan: And every construction site starts and ends with safety and I'm proud of the role FTC place to reduce injuries on the job site.
Jan: We may not be the largest tractor company in the market today, but the demand for our product is increasing and most conversations I have with existing and prospective customers give me additional optimism.
Jan: Increasing demand will grow our backlog and bolster our ability to grow the company sustainable growth is a process that doesn't happen overnight, it's rooted in technology and people that provide measurable value for partners and we have those crucial ingredients and <unk>.
Jan: Closing I believe that FTC solar is in an incredibly fortunate situation in many respects with products that customers love a business. They enjoy working with in a cost structure that will enable strong margin growth in profitability and a compelling <unk> product set that opens up to 85% of the market that wasn't available to us before we believe our revenue bottomed.
Jan: In Q3, we saw growth in Q4 and expect growth in Q1 and have been winning many new awards that will help us ramp our revenue achieve adjusted EBITDA breakeven and become a strong and significant competitor in the industry with that I'll turn it over to Kathy.
Kathy: Thanks, John and good morning, everyone I'll provide some additional color on our fourth quarter performance and our outlook beginning with the discussion of the fourth quarter revenue came in at $13 2 million, which was at the high end of our target range.
Speaker Change: This revenue level represents an increase of 32% compared to the prior quarter and a decrease of 43, 1% compared to the year earlier quarter due to lower product volumes.
Speaker Change: GAAP gross loss was $3 8 million or 29, 1% of revenue compared to gross loss of $4 3 million or 42, 5% of revenue in the prior quarter.
Speaker Change: non-GAAP gross loss was $3 4 million or 25, 6% of revenue at about the midpoint of our guidance.
Speaker Change: The results for this quarter compared to a non-GAAP gross loss of $3 9 million or 38, 3% of revenue in the prior quarter.
Speaker Change: GAAP operating expenses were $9 $6 million on a non-GAAP basis, excluding stock based compensation and certain other costs operating expenses were $7 4 million.
Speaker Change: Down from $10 8 million in the same quarter last year.
Speaker Change: This represents the lowest level of Opex since early 2021, as we have found efficiencies across the company, while continuing to invest to support growth.
Speaker Change: This result compares to non-GAAP operating expense of $8 1 million in the prior quarter.
Speaker Change: GAAP net loss was $12 2 million or <unk> 96 per diluted share compared to a loss of $15 $4 million or $1 21 per diluted share in the prior quarter as adjusted for the reverse split and compared to a net loss of $11 2 million or <unk> 89 per diluted share post split in the year ago quarter.
Speaker Change: Adjusted EBITDA loss, which excludes an approximate $2 4 million from stock based compensation expense and other noncash items was $9 $8 million, which was better than our guidance range.
Speaker Change: This compares to losses of $12 $2 million in the prior quarter and $10 1 million in the year ago quarter.
Speaker Change: In terms of backlog, reflecting $67 million and new purchase order additions since November 12, 2024, and $65 million and adjustments to existing projects. The contracted portion of the company's backlog now stands at $502 million.
Speaker Change: Finally regarding liquidity, we ended the quarter with $11 $2 million in cash on the balance sheet subsequent to quarter end, we received a $3 $2 million cash earn out relating to our investment in dimension NRG and as John mentioned, we signed a term sheet to upsize our promissory note offering.
Speaker Change: As Youll recall, we collected $15 million from the note offering in Q4 and will now receive up to an additional 10% to $50 million here in the near term.
Speaker Change: On top of those items. We also continue to have about $65 million remaining under the ATM program at the end of the quarter.
Speaker Change: With that let us turn our focus to the outlook.
Speaker Change: Our targets for the first quarter call for the following.
Speaker Change: Revenue between $80 million and $20 million, which at the midpoint would be up about 44% relative to the fourth quarter.
Speaker Change: Along with this revenue level, we expect non-GAAP gross loss between $4 8 million and $2 $3 million or between negative <unk> 26, 6% and 11, 7% of revenue as.
Speaker Change: As you might expect the percentage ranges vary greatly at these revenue levels.
Speaker Change: non-GAAP operating expenses between $7 7 million and $8 $4 million and finally, adjusted EBITDA loss between $13 $3 million and $10 million.
Speaker Change: And as John mentioned, we continue to expect to achieve adjusted EBITDA breakeven on a quarterly basis in 2025 that we conclude our prepared remarks, and I will turn it over to the operator for any questions operator.
Speaker Change: Thank you ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone. If your question has been answered you assume with yourself from the queue. Please press star one again, we'll pause for a moment, while we compile the Q&A roster.
Speaker Change: Our first question comes from Philip Shen with Roth Capital Partners. Your line is open.
Philip Shen: Hey, guys. Thanks for taking the questions and congrats on the.
Speaker Change: Strong bookings momentum.
Speaker Change: In this difficult environment. So wanted to talk through some of that specifically on recurrence.
Speaker Change: <unk> five gigawatt agreement there was wondering if you could share what the mix of <unk> versus <unk> the mix of the geographies.
Speaker Change: So is it more dominated outside of the U S or is it U S.
Speaker Change: <unk> centric.
Speaker Change: Agreements and then.
Speaker Change: Also.
Speaker Change: You talked about the first project being.
Speaker Change: Put in place in the back half of this year, which geography would that be and then if you can just speak more about the basis for the win.
Speaker Change: And what you said in the prepared remarks that would be great. Thanks.
Speaker Change: Alright.
Philip Shen: Good to talk to you Phil.
Phil: Yes, I mean look we're really excited about the partnership with recurrent.
Phil: Ultimately it came down to <unk> to answer the last part of your question first we do have a really wide product set having really strong <unk> offering now that its latest to market.
Phil: Really easy to use and then we have the <unk> product.
Phil: We're one of the few.
Phil: Manufacturers in the world that has so the ability to do both I think it was a strong consideration for recurring.
Phil: The 2025 projects.
Phil: The diversity around where we're going to be building in supplying trackers.
Phil: Like we said, there's going to be U S Europe and Australia.
Phil: The us and Europe are likely to go first.
Phil: On the work, we're now doing in terms of engineering and design.
Phil: And I think youre going to have numbers of projects be greater.
Phil: In Europe, just because of the project size is smaller.
Phil: And youre going to have larger more significant projects here in the U S but.
Phil: Obviously from our standpoint.
Phil: Our preference.
Phil: Our goal is to supply.
Phil: The best product, we can to wherever recurrent is developing and deploying.
Phil: Deploying capital into these projects.
Phil: <unk> role as a developer and asset owner. So it takes into account all of the value propositions that we're providing.
Phil: Just the last part of your question.
Phil: <unk> is really going to be geographically oriented two pieces are really strong.
Phil: Offering still especially where land density.
Phil: Power density.
Phil: As important.
Phil: But you have to have the right.
Phil: Sort of environment in terms of.
Phil: Wind loads and other technical considerations. So I think youll have some utilization of tupi and <unk>.
Phil: Europe, and some parts of the U S, but predominantly it's going to be <unk> I think.
Phil: Overall, it'll it'll be in line with where our current pipeline and bid radios, which is $85 90% of <unk>.
Speaker Change: Okay. Thanks, John I appreciate that shifting over to the outlook for revenue you gave an official guide for Q1 and Thats sequentially higher.
Speaker Change: Versus Q4, I know you don't have an official outlook for Q2 or three but.
Speaker Change: Can you talk about that trajectory maybe loosely.
Speaker Change: Speak to should we expect Q2 to be flat versus Q1, or where should we see a ramp as we go through the year and if so what needs to happen and what are the.
Speaker Change: What needs to happen in order to hit those expectations and then what are some lines of potential risks.
Speaker Change: Yes, we certainly expect the year to be back half weighted right. This is a.
Speaker Change: This is a commercial focus of deploying <unk> in getting contract signed.
Speaker Change: Yes.
Speaker Change: Certainly that we're working with our developer partners and getting the projects to the finish line.
Speaker Change: Going through the engineering.
Speaker Change: Yes.
Speaker Change: We're very optimistic about continued growth through the year.
Speaker Change: But I think the way that I would frame it is definitely focus on the second half.
Speaker Change: And waiting.
Speaker Change: Waiting from that standpoint.
Speaker Change: There is definitely a step up in Q1, some of the guidance up 45% sequentially.
Speaker Change: And we would expect another step up at the back half of the year.
Speaker Change: Okay, and then that would suggest Q2 might be more flat versus Q1.
Speaker Change: I think I don't want to over promise for Q2.
Speaker Change: It could.
Speaker Change: The way that I would think about FTC is every single project matters.
Speaker Change: So if one project pulls in.
Speaker Change: It could be up it could be it could be flat, but the optimism is quite strong.
Speaker Change: We'll focus on the execution side of the house.
Speaker Change: Just getting to breakeven EBITDA breakeven by the back half of the year.
Got it. Thank you and then one more and then I'll pass it on in terms of your bookings momentum you have had a bunch of these.
Speaker Change: Agreements since you've joined.
Speaker Change: So was wondering if we should expect this.
Speaker Change: Kind of train of.
Speaker Change: Agreements to continue as we get through the first half of the year.
Speaker Change: That's certainly the expectation, bringing Kevin James then.
Speaker Change: Having having been one of the founding members of promos, we're taking a very.
Speaker Change: Dual approach in both focusing on the value proposition that we're bringing into epc's.
Speaker Change: Helping them lower their labor burden.
Speaker Change: By making it easier and faster to install.
Speaker Change: But also partnering with Ipp's like Dudley.
Speaker Change: Sand hills to help early stage engineering.
Speaker Change: I think we'll have <unk>.
Speaker Change: Demand of folks to do something on the early stage the supply arrangements or msas or purchase orders are ahead of shipment.
Speaker Change: I think those are going to be.
Speaker Change: Some of our tactics, but also.
Speaker Change: It's quite it's quite a bit of focus like we had.
Speaker Change: Announcing sort of a new contract signings, which is actually showing those projects come to fruition at a certain moment.
Speaker Change: Like our peers will have the translation of early stage actually.
Speaker Change: Becoming projects that'll start shipment, we expect that to happen to be a big part of our back half of the year as those projects go through the development process.
Speaker Change: We're making a lot of traction.
Speaker Change: Our bidding I think that's always the top of the funnel getting our one <unk> product through approved vendor lists has been a strong.
Speaker Change: We've been doing quite a bit over the last six months.
Speaker Change: And getting products approved by the biggest IPP and their backers.
Speaker Change: That allows us to bid.
Speaker Change: We're bidding almost double the gigawatts on a monthly basis than we were a year ago. So the top of the funnel is really strong and I think it shows the appetite for the technical value that our Pi.
Speaker Change: Pioneer trackers, bringing to the table.
Speaker Change: Great. Okay. Thanks, Sean I'll pass it on.
Speaker Change: One moment for our next question.
Speaker Change: Okay.
Speaker Change: Our next question comes from Jeff Osborne with TD Cowen Your line is open.
Jeff Osborne: Yeah. Thank you. Good morning, just a couple of quick ones on my side and I was wondering if you could quantify the <unk> and how much faster you are seeing some of the partners that you've announced today, what the anticipated experiences I think in the past you guys had talked about 30% to 40% faster if my memory's right, but that was under prior management team what's the.
Speaker Change: These days.
Speaker Change: Yes, the pitches.
Speaker Change: Theres a duality right.
Speaker Change: And I'll sort of put all of those on there birla of that.
Speaker Change: It's also has a safety component to it.
Speaker Change: Which is an important one obviously for because no labor is faster if it's safer right so for Upc's, particularly.
Speaker Change: Most important.
Speaker Change: I think overall when you think about it.
Speaker Change: The mechanical installation of the tracker represent something like 60% or more depending on the region of the overall labor needs by an EPC.
Speaker Change: We see an opportunity again that 30% to 40% remains true.
Speaker Change: Depending on where the.
Speaker Change: The project is Theres also the ability for.
Speaker Change: For.
Speaker Change: Lower cost labor to be useful, particularly particular parts of the installation like.
Speaker Change: Installing our Sams clubs for example, that's a much faster and much easier process that not only is less time, but also less cost.
Speaker Change: You could see three plus sense, a lot of benefit by using pioneer.
Speaker Change: And we're certainly working to continuously improve the process the process and bring some lean methodologies to a process we have.
Speaker Change: Right, a big team working on the software and productivity side of how to install archrock or just getting.
Speaker Change: Even better at that.
Speaker Change: We're definitely looking to measure Matt.
Speaker Change: Man hours per megawatt in a way that is has returned data to each EPC.
Speaker Change: The more people will use the more people use our charters the more return data that will have and they will actually start including it in their bids.
Speaker Change: That's always the leading edge of bringing a new product to market and why it takes a little bit of time sometimes.
Speaker Change: But as they use it once people get comfortable with it and then they start recognizing opportunities to optimize and that's that.
Speaker Change: The stage will be in over the next 12 to 18 months as these upc's trial, our product the <unk> product.
Speaker Change: Start seeing opportunities to win more work with it.
Speaker Change: That's helpful.
Speaker Change: And just given you are now announcing five years sort of framework agreements.
Speaker Change: Brian show X across multiple geographies, how should investors think about the broader.
Speaker Change: Our lens of sort of target gross margins for the business I know youre, not giving revenue guidance, but.
Speaker Change: Three five years ago people in the industry would say theres sort of a low twenty's gross margin prior to the IRA.
Speaker Change: What do you think FTC's gross margin entitlement is longer term.
Speaker Change: Yes, I mean, I think without getting specific and just getting sort of qualitative on it.
Speaker Change: Our archrock on on margins is in line with our peers obviously.
Speaker Change: Where do we have differentiation, that's sort of a headwind for us.
Speaker Change: We have a little bit higher logistics costs, given that we don't have the supply chain base.
Speaker Change: I'm quite as many as our largest peers.
Speaker Change: So and then also from a volume standpoint, Theres, obviously, some room to make up on our side.
Speaker Change: I think the important one is sort of tying it back to your initial question as it.
Speaker Change: It's not all about capex in the long run the value proposition of pioneer.
Speaker Change: Not just for the installation of our tracker, but if you think if you take a step back and think about all things automation My Linkedin full of it at this point.
Speaker Change: It's one of the most automation friendly trackers, both for the installation as well as for O&M.
Speaker Change: It has the ability to lower cost as that value proposition.
Speaker Change: As learned by our partners, both <unk> and <unk>.
Speaker Change: That's going to give us a little bit of pricing room.
Speaker Change: But ultimately right now we're competitive our gross margins will increase as our volume increases certainly.
Speaker Change: And we see ourselves in line with at scale being able to be competitive with our peers. Lastly, one thing we don't talk a lot about because we talk about hardware mostly.
Speaker Change: Our our product some path, which is our terrain base back tracking software.
Speaker Change: Is.
Speaker Change: If you were to take a step back and obviously I have a biased view, but unbiased opinion, it's one of the best Backtracking software is out there.
Speaker Change: It has obviously Roader road capabilities.
Speaker Change: Right now back tracking software is one of these learned products in the market.
Speaker Change: We have some peers that see a lot of pricing strength in it.
Speaker Change: Some peers that give it away.
Speaker Change: Ultimately, we see some path is a huge opportunity for us to either provide value to win more work and the high volumes, but also the ability to monetize it as we show real tangible return data to the Ipp's as the system is.
Speaker Change: Forming.
Speaker Change: I would say we are.
Speaker Change: Quite ahead of a lot of our peers.
Speaker Change: Some path and.
Speaker Change: Underestimate the value it brings in the long run to gross margins.
Speaker Change: Perfect and my last question is just in recent weeks, we've seen quite a bit of steel price volatility how should we think about what transpired for Q1, but also for the next quarter or two what's your supply chain management.
Speaker Change: In light of the tariff environment, and just price volatility in general what your exposure is et cetera.
Speaker Change: Yes, our exposure is quite limited ultimately.
Speaker Change: As a company we we secure.
Speaker Change: Secure our steel right when sort of the purchase orders are negotiated so theres really.
Speaker Change: Back to back procurement nature.
Speaker Change: Probably.
Speaker Change: If at much higher volumes you have much greater exposure.
Speaker Change: And there's always the.
Speaker Change: The discussion of what can you pass on and what can't you pass on.
Speaker Change: The reality is every single cost increases on a project, whether it's tariffs or commodity often those two things are linked.
Speaker Change: Project itself needs to continue to pencil, so everyone's sort of at the table.
Speaker Change: Figuring out how to keep the project moving forward.
Speaker Change: The tariffs.
Speaker Change: And commodity prices.
Speaker Change: Moving in a higher direction.
Our goal is going to increase cost of projects, but where we are.
Speaker Change: From an exposure standpoint, I would say it's.
Speaker Change: Zero to limited.
Speaker Change: We certainly haven't had meetings internally, where it's a great concern to us we updated with each of our.
Speaker Change: Each of our proposals.
Speaker Change: Perfect Thats all I had thank you.
Again, ladies thank you again, ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone.
Speaker Change: And I'm not showing any further questions at this time as I assess this does conclude today's presentation. You may now disconnect and have a wonderful day.
Speaker Change: Yes.
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