FTC Solar, Inc.

Good day, and thank you for standing by. Welcome to the FTC Solar First Quarter 2025 Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Bill Michelet, Vice President, Investor Relations. Please go ahead.

Thank you and welcome everyone to FTC Solar's first quarter 2025 earnings conference call. Before today's call, you may have reviewed our earnings release, slide presentation, and supplemental financial information, which were posted earlier today. If you've not reviewed these documents, they're available on the investor relations section of our website at ftcsolar.com. I'm joined today by Jan Brandt, the company's president and chief executive officer, Kathy Boehnen, the company's chief financial officer, and Patrick Cook, the company's head of capital markets and BD. Before we begin, I remind everyone that today's discussion includes forward-looking statements based on our assumptions and beliefs in the current environment and speaks only of the current date. As such, these forward-looking statements include risks and uncertainties, and actual results and events could differ materially from our current expectations. Please refer to our press release and other ACC filings for more information on the specific risk factors. We assume no obligation to update such information except as required by law. As you'd expect, we'll discuss both GAAP and non-GAAP financial measures today. Please note that the earnings release issued this morning includes the full reconciliation of each non-GAAP financial measure to the nearest applicable GAAP measure. With that, I'll turn the call over to Jan.

Thanks, Bill, and good morning, everyone. It has only been a month since our last call, so we'll keep it brief today. During the past two earnings calls, I've shared my observations on the company and the progress that's been made toward a primary focus of shoring up near-term backlog while adding incremental liquidity to the business. Slide 3 of our presentation today provides a summary of some of that progress. As you can see, we have added multiples of our current annual revenue run rate to our backlog, signed agreements totaling more than 6.5 gigawatts with Tier 1 accounts, along with other awards added or announced more than $30 million in additional liquidity for our balance sheet, strengthened our sales team, further strengthened our product offering and capabilities, and increased our commercial traction with bids on many gigawatts of future projects. Our priority is to demonstrate continued progress and convert those wins and backlog into sustainable growth and profitability. And after our revenue dropped in Q3 of last year, we have since seen sequential growth of 30% and 58% in Q4 and Q1, respectively. While these are nice percentage improvements, we still have a long way to go to get our revenue to where it needs to be. To that end, I thought it'd be good to provide a little bit of additional color on the positioning improvements we've made. and how that activity will lead to even stronger revenue growth in the future. To best understand the future possibilities of FTC, it's helpful to look at the past. All technology markets rotate as companies use innovation to leapfrog peers based on features and product portfolios. As many of you know, FTC's reputation has centered primarily on ease of use or constructability and service. The company broke into the market and won tier one developer and EPC business because it brought a new differentiated and easy to use tracker to the market. FTC was the unquestionable leader in the 2P market. However, that market has since shrunk as the size and availability of modules reduced the demand for the 2P architecture. Many of our customers still view 2P as a product they love, but only use it in unique situations. To greatly expand our served market and address market demand increasingly centered around 1P, FTC introduced its first 1P solution, Pioneer, leveraging all of the innovations and benefits of its 2P sibling, as well as an understanding of the full market landscape. While initially relatively narrow in scope, our 1P product line has since been greatly expanded, with the bulk of our research and engineering efforts being directed there. Our 1P additions have included high wind offerings that extend up to 150 miles per hour, compatibility for dozens of new modules and module manufacturers, now covering all module types, including ultra-large format and first solar family of modules. The ability for customers to make changes to module specifications late in the design process, which gives them significant flexibility and inherent architecture difference from the older legacy 1P systems in the market. Multiple features that reduce civil construction cut and fill with our terrain following options, including our new dual road tracker. The largest range of STO in the market for customized asset management, which is digitally controlled in our SunOps platform, integrated with weather stations and third-party alert systems. And 100% domestic content capabilities starting in Q3, to name a few. And with some legacy competitor projects in the marketplace underperforming due to products that are no longer being supported, FTC has leveraged its controls and software platform to help customers get those projects back on track. While this wasn't something that we have actively sought out, we can be relatively nimble as a company and view this as an opportunity to help our partners with their entire portfolio of assets and we'll help where we can. So overall, I believe we now have a robust and rather comprehensive product line to offer significant benefits to projects across developer and EPC portfolios. And our engineering and R&D teams have a full portfolio of incremental initiatives in progress to provide additional customer benefit, as well as further improve our cost structure. This compelling product line, along with the enhancements to our sales team and process, has led to a significant increase in customer interest and activity. For example, customer visits to our product demonstration facilities have increased considerably. Over the past six and nine months, visits are up 100% and 240%, respectively, versus the comparable year earlier periods. Bidding volume has increased considerably as well. In the first quarter, bid volume was up 60% versus a year ago. And the project size of our average bids is up as well, up 65% versus a year ago. And notably, our customer access or visibility has greatly improved. In fact, we believe we now are seeing almost every project that our peers do, even though they are significantly larger than us at this moment. We're getting the looks, and this was not the case just a few quarters ago. The innovation and expansion of a 1P offering and the ability to install FTC trackers easier, faster, and safer is incredibly valuable for our customers. That's a major part of what's allowing us to get these looks and to win significant Tier 1 business and head-to-head competition with our larger peers. Overall, 1P now represents 90% of all bidding activity. From a market perspective, we're all aware that there's a fair amount of static or uncertainty in the market between the tariffs, duties, and changes to permitting processes. Most of our pipeline continues to move through the process steps toward the start of construction. But with the expectation of trade deals, we also see customers waiting for additional clarity. While our team has done a great job positioning the company with robust diversified supply chain, trackers are only a piece of the overall equation which can include inverters, batteries, and modules from many different geographies. We'll continue to work closely with our clients and stay flexible on the timing of import. How quickly clarity could determine the size and scope of any air pocket or disruption we could see in the market. In other words, FTC will maintain, in partnership with our clients, the operating flexibility to ensure we are aligned on when to import any product that may be subject to tariffs, especially in a moment when, by all accounts, it appears that the tariffs will be reduced significantly or eliminated altogether. Let me take a moment to give you my view of the current solar market, a market I've been working in for nearly 20 years. The good news is that even though there are crosswinds, the demand for solar generation is as high as I have ever seen it. Looking at developments nearing the start of construction phase, it is typical to see a competitive market for investments and acquisitions of those projects. The bigger the project and the bigger the demand to have it built. What is unique about the current solar market is that the off-takers, the companies and utilities, are actively involved in the late stages of development and investments. Especially corporate customers with a pipeline of data centers are deploying capital into solar developers to gain an inside track for the generation to get built bigger and faster. On the legislative front, I am optimistic on the progress that the solar industry is making and advocating for the continuation for the investment tax credit and 45x manufacturing credits. Both play a crucial role in continuing the growth rate of the solar market, which is currently the most critical part of America's energy resource additions. Elected officials are recognizing the importance that solar plays across the country and across the political spectrum. FTC is actively involved in our trade association's efforts to advocate for the solar market and ensuring the best possible outcome. At the end of the day, solar has the most robust short-term pipeline that provides clean and cheap electricity for millions of consumers and businesses. And I believe the U.S. should do everything possible to build as much solar as we can to minimize energy prices and maintain American energy security and dominance. So right now we have $482 million in contracted backlogs. I believe our expanded offering and increased bidding activity will support continued backlog additions. Overall, I'm very bullish on the long-term potential and prospects for FTC Solar. We're positioned in the strong long-term growth industry with the right combination of people and products providing the best value for our customers. Interest and demand for our solutions are increasing and should position us for long-term sustainable revenue growth. With that, I'll turn it over to Cathy.

Thanks, Jan, and good morning, everyone. I'll provide some additional color on our first quarter performance and our outlook. Beginning with the discussion of the first quarter, revenue came in at $20.8 million, which was just above the high end of our guidance range of 18 to 20. This revenue level represents an increase of 58% compared to the prior quarter and an increase of 65% compared to the year earlier quarter due to higher product volumes. GAAP gross loss was $3.4 million, or 16.6% of revenue, compared to gross loss of $3.8 million, or 29.1% of revenue in the prior quarter. Non-GAAP gross loss was $3 million, or 14.4% of revenue, above the midpoint of our guidance. The results for this quarter compared to non-GAAP gross loss of $3.4 million, or 25.6% of revenue in the prior quarter. GAAP operating expenses were $7.1 million, On a non-GAAP basis, excluding stock-based compensation and certain other costs, operating expenses were $6.6 million, down from $8.7 million in the same quarter last year and $7.4 million in the prior quarter. This represents the sixth consecutive quarter of OpEx reduction and our lowest level since 2020, which was before we were a public company, as we continue to control cost. GAAP net loss was $3.8 million, or 58 cents per diluted share, compared to a loss of $12.2 million or $0.96 per diluted share in the prior quarter, and compared to a net loss of $8.8 million or $0.70 per diluted share post-split in the year-ago quarter. Adjusted EBITDA loss, which excludes an approximate $5.9 million gain from the change in fair value of the warrant liability, gain from collections of an earn-out payment, and other non-cash items, was $9.8 million, which was just better than the top end of our guidance range. This compares to losses of $9.8 million in the prior quarter and $10.7 million in the year-ago quarter. The contracted portion of the company's backlog now stands at $482 million. On the balance sheet, we have been able to utilize some excess material and bring inventory down to more normalized levels. On cash, we ended the quarter with $5.9 million, although this does not include the up to $10 to $15 million from the upsizing of our notes offering, which is still expected to close in Q2. We also continue to have about $65 million remaining under the ATM program at the end of the quarter. With that, let us turn our focus to the outlook. As you may recall, on our fourth quarter call, we indicated that we expected 2025 revenue to be weighted toward the second half with a step up in the first quarter and another in the second half. That continues to be our expectation. Our targets for the second quarter call for the following. Revenue between $19 million and $24 million, which at the midpoint would show continued sequential growth relative to the first quarter. Non-GAAP growth loss between $4.4 million and $2 million, or between negative 23.4% and 8.5% of revenue. Non-GAAP operating expenses between $7.8 million and $8.6 million. And finally, adjusted EBITDA loss between $13.3 million and $10 million. Looking beyond Q2, in addition to the second half revenue being larger than the first half, we continue to expect to achieve adjusted EBITDA breakeven on a quarterly basis within 2025. With that, we conclude our prepared remarks and I will turn it over to the operator for any questions. Operator?

Thank you. At this time, we will conduct our question and answer session. As a reminder, To ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jeff Osborne with TD Cohen. Your line is now open.

Thanks. Good morning. Just a couple questions on my side. I was wondering if you could articulate if there's any exposure to tariffs for any of the components you might be purchasing, motors or anything like that.

Yeah. Hey, Jeff. You know, from an exposure standpoint, certainly there are items that we import that would now be subject to the tariffs. We've, you know, the company has a really diversified supply chain, so we work to mitigate it. In terms of the company, The majority of the tariff, you know, are passed through to the customers, whether the UPCs or others. Contractually, you know, obviously we're always working hand-in-hand with our partners to work to mitigate it. And, you know, I would say that any impact here, you know, in Q1 and looking forward is really minimal at this point.

That's great to hear. And then maybe just along the same line of tariffs or the recent ADCVD case, Jan, I was curious, have you seen a pickup in module change configurations for the backlog in recent weeks that might then delay, you know, the timing or cadence of deliveries that you might have anticipated a few weeks ago or months ago?

No, I mean, you know, I think largely supply chain had been anticipating the ADCVD results, right? So from a total exposure that the market had on the modules and the impact, we haven't seen anything directly. I will say it is rare for a project, you know, to at least not try to design a system with, you know, with a module change or even with multiple module options. There's a lot of movement happening in the module side, which is, you know, obviously from an architecture perspective, something that we at FTC can withstand, given that it's agnostic from a design standpoint. You know, especially now with 52 gigawatts of module assembly here in the U.S., I think there's a lot of traction to move domestic. But we haven't seen any project shifts because of the module impacts.

That's great to hear. That's all I had. Thank you.

Thanks, John.

Thank you so much. Our next question comes from the line of Philip Shin with Roth Capital Partners. Your line is now open.

Hey, guys. Thanks for taking the questions. First one related to tariffs, but more for your customer base. I think, Jan, you mentioned that the pipeline most of the pipeline is still moving to construction start, but some are waiting for clarity. And so I was wondering if you could talk through what percentage of what you're expecting in the next 12 months might be on hold as opposed to pre-liberation day. And I have a follow-up as well. Thanks.

Yeah, I mean, look, I think I think this is where my sentiment around operating flexibility comes hand in hand. And it's in partnership with our customers, oftentimes the EPC and their customer, or ultimately the asset owner and the IPP. I think it really comes down to the majority of any imports What is the tariff impact? And what is the likelihood, you know, from a voiceover from the administration that a deal is pending? No one wants to pay tariffs needlessly. So I think folks are building in some flexibility into the overall timing. You know, there's some re-sequencing of projects that's currently happening that just, you know, ships, you know, starts to certain portions of the project. So everything still remains largely on track. The question is, you know, how long is this wait and see period going to happen? You know, if the voiceover remains that, you know, for example, that the China tariffs are too high and they'll come down, the question is, you know, not just for tracker parts, but for other components of the site, are we going to import something now or are we waiting for the tariffs to come down? So, you know, I think everyone is, you know, not just FTC, but I think everyone across the supply chain, especially projects with batteries, are looking at that closely. In the meantime, obviously, our supply chain team is working to ramp up additional capacity in markets that have lower tariffs or are sort of higher in the food chain of what appears to be trade deals in the making. You know, we already have a really diverse supply chain. in addition to a really robust capability set here domestically. So, you know, ultimately we're mitigating everything we can for our customers and, you know, projects still want to get built and get on track. And I will say that there is some flexibility that I see on, you know, elasticity around the offtake. Certainly the customers that need the energy are at the table as well. And I have heard of some conversations happening between asset owners and off takers to understand what is the tariff impact and what what is needed to overcome in order to keep project timelines on track. There's such a massive need for energy that there's a lot of people that want to keep timelines on track. But, you know, ultimately, clarity in the tariff universe is going to be helpful.

Thanks, John. Shifting to the other side of the coin of the same topic. So in terms of construction starts, we just talked about that, but then flipping over to the activity that is required today to be able to book and really develop projects for construction start and maybe back half of next year or early 27. Just curious to see if you're seeing some slowdown in that activity as well. You know, it's, you know, people I got to imagine are a little bit on pause as it kind of wade through and figure out, you know, what they can count on and what they can't. Thanks.

Yeah. I don't think development activity has slowed the, what, what, what has, I think taking, you know, taking a pause on is the negotiations between off takers and project owners, because it's really hard to understand what, what the performer looks like, both on the CapEx side with, you know, sustained tariff levels, as well as, you know, what is the energy market? I mean, obviously, this is all kind of correlated. But the project developments themselves, I mean, I mentioned in my prepared remarks, we're seeing offtakers, both on the corporate side and utility side, participating in the M&A process where developers bringing capital in or selling the project, to the ultimate asset owner, we're seeing off-takers actually participate and invest and drive sort of expansion of those sites, especially where sites have large interconnection and sort of infrastructure investments. The corporates are really active in deploying capital and owning sort of that future pipeline. Solar certainly doesn't have any shortage of the opportunities to build projects. getting them to start of construction, permitting, use permits locally, et cetera. I think that has always been one of the gating items that determines the funnel of how much is buildable. But I think that's how I would characterize it. If the tariff level, if the tariff uncertainty, whereas we have a tariff, but the conversation is you know, it's coming down or a trade deal is coming, I think that's the gap that I would be hesitant to determine, you know, what the impact would be from a timing perspective, because again, nobody wants to pay a tariff that they expect to go away in the coming weeks or, you know, relatively, you know, low number of months. So that's the kind of operating flexibility we would bring to our customers, you know, having the domestic content capabilities It goes a long way, you know, certainly across the board.

Great. Thank you, Yon, for the caller. I'll pass it on. You bet.

Thank you so much. As a reminder, to ask a question on your telephone, you will need to press star 1-1 and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment for our next question, please. Our next question comes from the line of Amit Dow with H.C. Wainwright. Your line is now open.

Thank you. Good morning, everyone. Just on the gross margin and, you know, positive adjusted EBITDA, at least 100 level expectations going into the end of this year. In the face of all these uncertainties, you know, could you maybe give some color on, you know, what is driving those expectations? Is it just higher volumes you're expecting to deploy, or is there any pricing-related, you know, factors as well that, you know, gives you that level of visibility right now?

Yeah, no, thanks for the question. I mean, look, the – I keep saying it, obviously, since I've gotten here last year – FTC is at this inflection point, right? FTC has this legacy of being in the 2P category, which certainly is the DNA that feeds it. And now we've been in this ramp up of 1P deployment. We have signed more work and accelerated sort of the recognition of that backlog in recent months. And more than anything, we're starting to see almost every single project that's going out to bid to our peers who are much larger, but they've been in the 1P category now for many more years than we have. With our product really resonating with EPCs around the speed of use, the ease of use, it makes it a compelling case. And so it's that pull through and that taking of market share, because there's two things, right? One, taking share from our peers, but also some of the landscape of tracker providers is actively changing. So there's some open market share to be had. FTC really finds itself, I would say, from a volumetric standpoint, looking at 2024 volumes, much lower than where we anticipate and see the growth coming from. And that's, I think, where our confidence level comes in at in terms of what is the right volume as we grow and take share in a competitive marketplace where we have a really compelling And the newest technology in the market, which I think on almost every feature set stands on top against our peers.

So in that context, you know, what are the plans for 2P? Is this slowly going to be phased out and users be mainly focused on growing, you know, the 1P pipeline and revenues?

Yeah, look, 1P represents 90% of our bidding volume. There are markets where 2P works. You have to have the right sort of environmental situations. Because 2P now is 2P with larger modules than when it was originally architected. So there are some U.S. markets where 2P has a place. There are some European markets. geographies where 2P is especially compelling, especially where the agricultural solar farms come into play. Do we invest a lot into the further development of 2P? We don't. That certainly is not a priority. Our focus is having a really strong 1P pioneer platform and then you know, we've added all these amazing features, you know, high wind, you know, high wind is in the entire Southeast United States. Now the overlap of high wind with, you know, having amazing hail stow and, and, and asset management capabilities, you know, as well as the flood impact, right? So the flood maps and the flood insurance is certainly playing a role now. So building out that one P platform, I think helping customers get the right project designed is, in the right capex box that they're looking for, that's the type of value proposition. And it kind of transcends the conversation around price alone because it's the overall value that the FTC platform can bring to the table and, you know, what ultimately will drive and feed our growth.

Understood. Yeah, that's all I have, guys. Thank you for the call. I appreciate it. Great. Thanks.

Thank you so much. All right. I am showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.