FTC Solar, Inc.

Good day and thank you for standing by. Welcome to the FTC Solar Second Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 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 call over to Bill Michalek. Please go ahead.

Thank you and welcome everyone to FTC Solar's second quarter 2026 earnings conference call. Before today's call, you may have reviewed our earnings release and supplemental financial information, which were posted earlier today. If you haven't reviewed these documents, they're available in the investor relations section of our website at fdcsolar.com. I'm joined today by Anthony Carroll, the company's president and CEO, Cathy Behnen, the company's chief financial officer, and Patrick Cook, the company's head of capital markets in 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 as of the current date. As such, these forward-looking statements include risks and uncertainties and actual results and events could differ materially from our current expectations. Please refer to our press release and other SEC filings for more information on the specific risk factors. We assume no obligation to update such information except as required by law. As you'd 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 Anthony.

Thanks, Bill, and good morning, everyone. I am pleased to speak with you all today following my first full quarter as CEO. Today, I'll share some thoughts on the state and positioning of the business and some recent highlights, then turn it over to Cathy to tell you about our second quarter revenue, which was at the high end of our range as well as our continued outlook for a strong second half of the year. If you've been following STC Solar's progress over the last couple of years, you know that it's about taking the company with a great technology in a 2P niche and opening up the vast majority of the market with a 1P platform. This included developing a really compelling 1P tracker platform, getting qualified on all the modules, expanding the platform for customer needs across wind, stow, and terrain, and then systematically going through the customer qualification and AVL process to gain access to bid on projects. It's been an incredible amount of work by the team and great work at that to really put the company in a great position to grow and scale. During that timeline, I was brought in to lead the customer advisory board, Then, late last year, I joined the board of directors. At the time of my first conversation with you on the last quarter's earnings call, I was only about five days into my tenure as CEO. I now have another 90 days behind me, and by my wife's count, I have spent more than 80 of those days on the road. During that time, I've met with countless customers, prospects, suppliers, employees, and others, and I believe we have continued good progress in the areas where we have momentum and we have taken early actions in some areas where we have opportunities to improve. Today, I'm going to focus on five key areas. The first is the need to methodically expand our customer base with the top 10 EPCs and developers. We shared last quarter that we had achieved AVL approval from nine of the top 10 EPCs. This is meaningful as EPCs don't just add vendors to their AVL for nothing. It's time consuming and requires a lot of work on both sides. So it truly puts us in a position to bid on a significant and increasing amount of business. The focus now is on converting these opportunities with this group. A good recent proof point. Just within the past two weeks, we received a new 400 megawatt PO from a top five EPC for a new 1P project that is also for a top five developer in the US. We have worked with this EPC on other projects recently, and we're excited to see a nice size follow up on project. We hope to share more news about continuing growth with these customers. We also recently received a new 1P purchase order from a TULP developer that has been a 2P customer of ours. It's about a 100 megawatt project on the East Coast, but notable that it is our first 1P project with them and represents a continued strengthening of the relationship. And obviously, if the project in the past would have gone to another TULP provider. So that's two new projects with TULP players and I expect we will add more with the two new customers from the top 10 list by year end. There are a couple of common themes that I hear repeatedly from customers and prospects that support our optimism for continued penetration. One is the desire for diversification in the tracker space. While there are good companies in the space, the share is pretty concentrated. and I believe there is a strong interest in having better selection and diversification with another strong player in the mix. And the other theme, which has been remarkably consistent, is that customers genuinely value our products and services. The CEO of a leading developer regularly tells me that our tracker technology is best in class and that we should be a much larger company by now. When our solution which customers describe as easier and faster to install enables a crew to finish an installation up to 40% faster and move on to the next project sooner. That translates directly into higher profitability for them. Another industry leader told me recently that IRR is the number one factor in selecting suppliers. Whether we add value for customers through a faster install, or as is also increasingly the case, through our engineering team enabling more power or less land grading through a more efficient design, that is real value. The second key focus area is to quickly make progress on bookings. We've done a great job getting on AVLs and actually since the last call, we were added to the AVLs of five more large EPCs and six more large developers. We'll continue that work, but I believe we have a critical mass with customers at this point and we are in great shape with a significantly expanded opportunity set. Now that we're on the AVLs and getting access to BID and the quality of our pipeline is improving as more business is tied to larger players, We need to close on an increasing number of projects. To support this, we have been adding strong new talent to bolster our sales team and will continue to add strategically there and in other parts of the company. We've also been utilizing our software team and AI to help improve our bidding and other process throughput and quality, and we are seeing material improvements. International markets also represent a significant opportunity for us. I'll talk more about this in future calls, but to give a couple of updates. We recently had a new win in Australia at about 90 megawatts that has deliveries happening in the second half of the year. We're also set to begin deliveries on a 330 plus megawatt project in Australia in the second half. This is a project that we did first announce in March of 2025, but the project timeline was revised and we just received notice to proceed in Q2. So while it's not a new win, it's moving ahead and we're excited about that. And I'm also pleased to announce that we recently entered the India market and have already won multiple initial projects there, ranging from pilot size to 100 plus megawatt projects with large and well-known customers. We will have more to share about our progress there in the coming weeks and months, but I did want to share that news. Shipments in this region have been ongoing in 2026. In aggregate, over the past three quarters now, we've been booking close to 60 million per quarter, and we're looking to materially increase that. The third focus area is ramping revenue in the second half of this year and into 2027. We were able to grow revenue by 52% sequentially in the second quarter. We're guiding for Q3 growth at the midpoint of another 24%, and we're reaffirming our full year growth outlook for 2026 of 40% for the year, implying an even stronger Q4. At this point, we have about 80% of our second half revenue needs already covered with a number of additional project decisions expected in the coming weeks that have the potential to drive that above 100%, and that's what we're aiming for. More important to me than any particular quarterly growth rate is that we're continuing to execute systematically and layer in more and more projects and build that sustainable growth for the future. And we're on a good path. Fourth, our cost structure and breakeven revenue level must improve. The company has made great strides over the past couple of years that will allow for margins to expand materially as revenue grows. But I believe there is a lot more we can do here across engineering, supply chain and sales. to increase our near and longer term margin capability and accelerate that improvement. For example, we have recently implemented targeted labor and non-labor cost savings initiatives that will more than offset the strategic hiring we're doing. We have also increased our use of software and AI to automate routine workflows and are already seeing improving productivity and new savings opportunities. and another that I've mentioned is that since we offer customers an overwhelming advantage in constructability, sharing in or capturing a portion of that incremental value in pricing is another opportunity. Fifth and finally, we believe robotics will be a major productivity driver for our customers and we want to help lead that transition. Our team has been engaged since the early days of this technology, optimizing our tracker for robotic compatibility and working closely with vendors across the ecosystem. Last month, we hosted our first Robotics Day at our Austin training facility, bringing together more than 100 attendees from robotic companies, EPCs, developers, and technology partners. The event focused on how automation can accelerate utility scale construction with live demonstrations across module installation, fastening, pile installation, quality control, and material handling. What I appreciate most about these pioneers is that they aren't just building robots. They're building tools that help people work better. That mindset aligns closely with why FTC was founded. Construction robotics isn't one solution. It's an ecosystem of innovators delivering measurable improvements in productivity, safety, data quality, and decision making. Robotics is a natural next step in solar installation. The industry needs faster, safer, and more automated processes to reduce install costs and support continued growth. FTC is investing in this future by working with leading companies on open platform agnostic solutions. We've already generated promising test and pilot results and expect to have these technologies operating on commercial projects with real world data soon. Overall, while we still have work to do and need to win much more business, I believe we have the ingredients needed for a strong future growth. The team has done incredible work to make sure that we have excellent products, a complete product offering, one for which now we have AVL approval with a critical mass of customers. We are winning projects. and strengthening those customer relationships. We are expanding our international market presence and seeing early wins. And we are working to improve our own efficiency and processes to improve our margin potential and lower our break-even revenue level. I am extremely proud to be the CEO of FTC Solar. This company has a long history of supporting this industry and really focusing on helping customers. We have been through a lot and this is a tough industry where so many things can impact your ability to grow and succeed. But our opportunity is great. Our plan is clear. The path to profitability is there and our second half revenue growth is very strong. My commitment to our shareholders, employees, customers, and partners is to be the best partner we can be. Continue with great support, competitiveness, fast response, and a true partnership approach. And I will continue to be there on the road where the action is and I'm looking forward to seeing everyone out there. and I also look forward to keeping you updated on our progress. With that, I will turn it over to Cathy.

Thanks Anthony, and good morning everyone. I'll provide some additional color on our second quarter performance and our outlook. Beginning with a discussion of the second quarter results, revenue was $26.2 million, slightly above the high end of our target range for the quarter. This revenue level represents an increase of 51.5% compared to the prior quarter and an increase of 30.8% compared to the year earlier quarter. GAAP gross loss was $2.2 million or 8.5% of revenue compared to gross loss of $1.2 million or 7.1% of revenue in the prior quarter. Non-GAAP gross loss was $1.3 million or 5.1% of revenue and this quarter's results compared to non-GAAP gross loss of $0.4 million or 2.2% of revenue in the prior quarter and a $3.5 million gross loss in the year-ago quarter. GAAP operating expenses were $11.5 million. On a non-GAAP basis, operating expenses were $8.5 million, which was in line with our target range. This compares to non-GAAP operating expenses of $7.8 million in the prior quarter and $6.5 million in the year-ago quarter. GAAP net loss, which is a reminder, includes a non-cash accounting adjustment each quarter to adjust warrants to fair value based on a change in our stock price was $27.1 million, or a net loss of $1.69 per diluted share, compared to income of $32.6 million, or a loss of $0.72 per diluted share in the prior quarter and a net loss of $15.4 million or $1.18 per diluted share in the year-ago quarter. Adjusted EBITDA loss was $9.8 million coming in within our guidance range. Adjusted EBITDA excludes approximately $17.3 million net for the change in fair value of the warrant liability, certain transition costs as well as other non-cash items. On the balance sheet, we ended Q2 with about $11.2 million in cash. While the cash balance was higher than last quarter, this level fell short of the minimum unrestricted cash covenant of $15 million pursuant to our credit agreement. We were also not in compliance with the required minimum direct margin covenant for the quarter. Our lenders have provided waivers for these second quarter covenants, so the debt is not callable. However, as a result of the accounting treatment associated with these covenant matters, all outstanding borrowings under the credit agreement were classified as current as of June 30th. This classification will be reconsidered following the actual results of our near-term operating results and any capital raising activities. Subsequent to quarter end, we entered into an agreement to establish an equity line of credit, or ELOC, with an institutional investor. This facility, which has an aggregate maximum value of $20 million, has been established but not yet utilized. We believe this agreement will provide the company with an additional and flexible source of funding as may be appropriate. Combined with our expected revenue growth and ongoing working capital initiatives, we believe we have multiple avenues to support our liquidity needs as we execute against our growth plans. With that, let us turn our focus to the outlook. We indicated last quarter that we expected full year 2026 revenue to outpace the market and grow by at least 40% relative to 2025. and that we would see sequential growth for the remainder of the year. This continues to be our expectation. Breaking that down further, our targets for the third quarter call for the following. Revenue between $30 million and $35 million, non-GAAP gross profit between negative $0.9 million and a positive $1.8 million, or between negative 3% and positive 5.1% of revenue. Non-GAAP operating expenses between $7.7 million and $8.3 million. And finally, adjusted EBITDA loss between $9.3 million and $6 million. 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. The first question comes from the line of Jeff Osborne of TD Cohen. Jeff, please go ahead.

Thank you. Just a couple questions on my side. Cathy, I think on the covenants on the debt in the past, I believe for Q3 you needed $50 million of revenue, and obviously the guidance is below that. Do you have a waiver on that provision as well? You mentioned a few waivers in your prepared remarks.

Oh, hi, Jeff. Thanks for the question. The waiver that we got was for Q2 specifically. and we'll continue to work with our lenders. They've been very supportive to us as we've had this debt with them and we expect they'll continue to work with us as we go forward, but this was specifically a waiver for Q2.

Got it. And then maybe for Anthony, thanks for all the detailed remarks on the call. How should we think about the typical lag of the purchase orders that you highlighted on the call relative to the timing of revenue recognition. I'm just trying to reconcile the bookings momentum relative to the guidance that you gave and reiterated for the year, but acknowledging that it's only 80% covered.

Thanks for the question, Jeff. I think the percentage of projects that we have in bookings is actually a very positive percentage. You know, when you talk about revenue recognition, there's a few rules that tie into that, but also tied into your lead time. In the tracker industry, lead time is around or even sometimes under that 20-week mark. So it's actually a very positive indicator that as of the end of last quarter, we have more than 80% All of the revenue of the second half of the year guaranteed by book projects that are currently in execution.

Got it. Maybe the last one for me, Cathy. Some of your peers have talked about IEPA refunds from tariffs. Were there any refunds in the quarter? Do you anticipate any in the second half of the year?

Yes, we continue to work with our brokers and so forth and filing for the IEPA refunds and working those through. But they did not occur in Q2, but we expect to see some of that activity flowing through in Q3.

Got it. Thank you. Go ahead.

Thank you, Jeff. One moment for your next question.

The next question comes from the line of Philip Shin of Roth Capital Partners. Philip, please go ahead.

Hey guys, thanks for taking the questions. I wanted to see if you could give us a sense of how gross margins might trend in Q4, Q1, and beyond. Would you expect, looks like the guidance for Q3 is roughly break even. Would you expect to see positive gross margins in Q4? and do you think that could sustain if positive in Q1? Thanks.

Yeah, I think, Billy, as you look at our business, right, we've talked quite a bit before that, you know, we have a good cost structure and we continue to focus on improving our cost structure. And Anthony has put in a lot of, you know, programs since he's joined on, you know, focusing on improving our cost structure, continuing to do process improvements, and as we scale, we'll continue to scale more efficiently, right? So it's a volume game, and as you continue to see our volume, our top-line volume growth, you'll also see expansion in our margin performance as well.

Thanks, Cathy. And to add to that, Phil, I think when you think about gross margin and how they trickle through the financials, it's important to highlight that as we work with those Tier 1 customers, we are going to be working on more large projects that have an ability to forecast margin better. We're also working a lot on our supply chain. signing MSAs with large, for example, steel suppliers that allow to improve those margins going forward. And as Cathy mentioned, we're also implementing some efficiency strategies internally to be able to continue to support those margins. So, yes, we do expect that they will continue to improve in the future.

Great. Thanks, Anthony. You shared some color on how you're working to improve cost structure and taking costs out. Can you give us a little more color on the internal strategies, for example? Thanks.

Yes, and this is a usual question, right? When you talk about efficiencies, people have different ideas of what that means. I think it's a combination of a couple of things. We have a very strong software, AI, and robotics organization within the company. When I joined, I identified some really strong talent there. and what we decided was let's apply AI systems and processes across the rest of the company to be able to be more efficient, to be able to reduce cost, to be able to increase that efficiency as not just we execute the same tasks But we continue to grow. So you have the balance between larger pipeline. We're executing more projects. We're quoting more projects. But at the same time, we're reducing the time that it takes us to quote these projects. So in the areas where talent is needed, as I mentioned, sales and customer support team were actually growing. And then in other areas, where we are processing tasks that are repeatable and can be systematically improved, we are executing those efficiencies.

Great, okay, thank you. And then what do you think is, what kind of margin benefits could we see in the near term or do you think it takes a year or so to have these programs mature? And do you think this is like a 50 basis point move in margins or it might be too early to quantify? But just curious if you have any thoughts. Thanks.

Thanks, Phil. It's a very good question. I don't expect it will take a year to trickle through the organization. As you know, I'm 90 days in and they have been great 90 days. and those efficiencies and those strategies are being implemented as we speak. I really hope to be able to show results, not just promises, of these efficiencies in the next earning call and I definitely expect some of those efficiencies to trickle through our financials in Q4.

Okay, thank you. Shifting over to your business development activities, I was wondering if you could give us more color on Thank you, Phil. Let me break that down into a few different parts maybe. One, with regards to the U.S.,

As you know, we just didn't have the right product a year ago, right? So it took time to go through those ABLs and get approved by those customers. This very large order that we just share with the group today is an example of a very known Very strong EPC selecting us for one of their biggest projects that is also for one of the largest developers. So I see that as a result of all these initiatives and strategies that we've been sharing with you in the past. So good progress there with one of our top customers. The other customer you mentioned who has always used R2P, I think that really validates Thank you for joining us. We saw great success in Australia. I'm actually going to be there next week tying into your comment about travel, meeting the CEOs of many strong developers and EPCs in the region, and I'm happy to see that progress. We also mentioned India. I think India is a great market where we have competitors that have healthy margins. I think the companies that have struggled in India are the ones that don't have a strong infrastructure in India. We do have that infrastructure. And then we've also hired some critical talent in Spain. As some of you know, I'm very closely tied to that country and my previous companies, and we found some great talent, many of them from competition that have chosen to join us, and we'll be able to share more about that soon.

Great, thank you very much. I'll pass it on.

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. One moment for your next question. The next question comes from the line of Sameer Josie of HC Wainwright. Sameer, please go ahead.

Good morning, Anthony, Cathy, Patrick. Thanks for taking my calls. A question. So just digging a little bit deeper into the order activity and how it relates to future revenues. I think it was 60 million that you are booking on average a quarter. Given your outlook of 40% year-over-year growth, your fourth quarter needs to be about that $60 million given your 3Q guidance. Also, juxtapose that with the 20-week lead time you mentioned. I'm just trying to figure out what your 2027 revenues might look like.

Thank you for the question, Sameer. I will answer it in two different ways. One, I won't be giving guidance to our 2027 revenue or target just yet. That should come soon. But with regards to our confidence on the bookings, Thank you very much. Thank you very much. with having a global approach and with the progress that we mentioned in the U.S., I am comfortable with being able to keep the booking level high and continue to succeed in the coming quarters.

Sounds good. And just a little bit more on converting pipeline into backlog. It's great to see you have nine of the top ten AVLs. Just would like to understand when you are winning, how you are winning, and what are the reasons that you may be not winning some of these bids?

That's a great question, Samir. Thank you. Let me start by the not winning. It just takes time. When you think about The design of a project, some projects are designed years before they're built, right? A year ago, nobody could design the 1P incredible product by FTC because it didn't exist. So there is a process that has to be followed. Getting on those AVLs, as you very well know, takes time and takes a lot of effort, and it is not a free effort. EPCs don't just qualify trackers for the sake of having more options that they're never going to use. They qualify a tracker because they intend to use it. I think one of the challenges we have faced is just time, getting through that process. We would have loved for that process to be faster, but we follow the timelines of our customers, and it is a very and many more. Thank you for joining us. Use it again. And for me this is fundamental. If a customer uses your tracker and then decides to go somewhere else, that means you have a problem either in execution or in the product. We don't have those problems. Customers continue to trust us and continue to invest in FTC. And if I may, the last positive remark I would like to share is We're competitive. We continue to compete with companies who are great and much bigger than we are, but we believe we have a great product that is faster and safer to install and we can compete head to head with these customers in the market.

That is really good color. I think in the future you could highlight the number of repeat orders from customers. That would be great. Thanks for that color. And then this last one on inventory management, it seems. Given your revenue levels, the inventories are really nicely managed. Should we expect that kind of working capital control in the future when revenues might increase from here?

Hi, Samir. Yes, thank you for the question. Yes, we watch that very carefully and, you know, we really try and time our inventories and with the project needs and trying to be just in time. So we'll continue that as we scale the business moving forward.

Sounds good. Good luck for your future. Thanks.

Thanks.

Thank you very much.

I am showing no further questions, so this concludes the question and answer session. I will now turn the call back over to management for any closing remarks.

Thank you. And thank you everyone for listening in and joining us today. I did want to share some closing remarks. As I mentioned on the call, I'm very proud to be the CEO of FTC. This is a tough market, but for those of us who have worked in it for a long time, we really do love what we do and we continue to support our customers and the market in general. As you know, we beat on revenue in Q2. As I also mentioned, we were awarded multiple new projects that make us very excited about the future. We also are going to guide to a great H2. and we have more than 80% of that revenue already in backlog with executed projects. I promised you that we would grow the company internationally and we have done that and we continue to do that and we continue to focus on better systems and AI to improve efficiency and serve our customers better. and also robotics I believe is going to be a great part of the future of this industry and FTC is going to be right there and growing and increasing efficiency and building projects for our customers. So thank you very much.

This concludes today's conference call. You may now disconnect.