Good day and thank you for standing by. Welcome to the FTC Solar Fourth Quarter and Full-Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your host today, Bill Michalek, Vice President, Investor Relations. Please go ahead.

Thank you and welcome everyone to FTC Solar's fourth quarter and full-year 2021 earnings conference call. Prior to today's call, you have likely had the opportunity to review our earnings release, supplemental financial information and slide presentation which were posted earlier today. If you've not reviewed these documents, they are available on the Investor Relations section of our website at ftcsolar.com. I am joined today by Sean Hunkler, FTC Solar's President and Chief Executive Officer; and Patrick Cook, the company's Chief Financial Officer. 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. 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 would expect, we will be discussing both GAAP and non-GAAP financial measures today. Please note that the earnings release issued this morning includes a full reconciliation of each non-GAAP financial measure to the nearest applicable GAAP measure. In addition, we'll discuss our executed contracts and awarded orders, and our definition for this metric is also included in our press release. With that, I'll turn the call over to Sean.

Thanks, Bill, and good morning everyone. We covered a lot of ground in our Business Update call in January. So we'll keep our prepared remarks today relatively brief. I'll start with a few fourth quarter and other recent business highlights. First, our fourth quarter revenue grew approximately 92% sequentially, and 130% year-over-year. This was significantly ahead of the top end of our guidance range, as we had some pull forward of revenue previously expected in Q1. Even though revenue was above the range and gross margin saw strong improvement, we recorded a $3 million reduction to revenue and margin related to a reserve for a potential customer credit. This caused our adjusted EBITDA to come in at the lower end of the range. Well once we normalize for this reserve, and the incremental impact from logistics of about $1.8 million, our non-GAAP gross margin in the quarter would have been in the negative 2.5% range, which puts our performance on target to achieve our profitability goals in 2022. Regarding SunPath, we have added three more contracts since our last earnings call, bringing our total to seven. We also recently launched a new turnkey DG offering targeted at the profitable sub 20 megawatt segment of the market. This is a growing market with favorable pricing and margin, with average PPA prices that are two times that of larger systems. Based on a significant amount of customer feedback, we listened and acted and have worked over recent months to develop an offering that will address market needs and specific customer pain points, while maintaining all the benefits of an FTC Solar system. We have an EPC partner lined up and have already won our first two projects. We believe this business can achieve a higher than our average target margin profile, and can represent a meaningful portion of our overall portfolio by 2024. During our Business Update call, we presented our financial outlook for 2022, which at the midpoint would represent annual revenue growth of about 62%. We believe this would be much faster than market growth and reflects the continued strong customer growth and interest in our solutions. And finally, in addition to those highlights this morning, we announced our intent to acquire a strategic tracker company, which will accelerate our international expansion and be accretive to our shareholders. So why are we doing an acquisition? I would point you to four main takeaways. First, it accelerates our international expansion plans where it adds to our growth in particular is in China, the Middle East, Southeast Asia and Africa. These regions are expected to be significant for tracker sales. In fact, the home market of China is expected to be the largest market for tracker installations outside the U.S. by 2030. And a top two market outside the U.S. over the next 10 years. With the WRO and new AD/CVD overhangs on the U.S. market, we believe now is the time to bolster our international growth activities. We have seen progress from our organic growth actions in various regions as I mentioned earlier, but these organic efforts typically take about 18 months from boots on the ground to first project wins. The company is well-positioned to generate revenue now. They are positioned in strong growth markets with current orders and a large pipeline in markets where we don't have a sales presence, so it is fully additive to FTC's business. Second, it provides complementary technology that increases our total addressable market. The company produces 1P trackers for low-cost markets, which complements our Voyager 2P tracker. While we believe our 2P tracker is a best-in-class solution, and has achieved rapid adoption, we realized that 2P may not always be the best solution for every market or site. The pending acquisition which strengthen our product portfolio allow us to be technology agnostic in low-cost international markets, and position us to analyze each project site and determine the best FTC Solar solution in any market in which we offer both. In addition, our Voyager 2P product is designed to be fully differentiated in its ease of construction and reduced labor hours, which is most advantageous in high labor cost markets. The target company's trackers are designed and optimized for low labor cost markets, giving us more options in more targeted markets. Third, it strengthens our capabilities in several key areas including engineering, logistics, supply chain and sales. For example, we expect to see significant synergies in product IP and knowhow, allowing us to improve process and design to bring the best products to market. The acquisition gives us an opportunity to leverage relationships, infrastructure and technology across the full platform around the world. And the Founders have deep expertise in renewables and operations and strong relationships with important suppliers, customers and other key stakeholders in their market. Their combined experiences include leadership positions with JA Solar, Trina Solar, Cypress Semiconductor, McKinsey & Smith. And finally, the acquisition enhances our growth and profit opportunities and will be accretive to our shareholders. It will enhance our economies of scale and leverage with key logistics and steel suppliers. The company is in faster growing markets and we believe is positioned to outpace market growth, and we will have the opportunity to accelerate organic growth by applying best sales and technology efforts across the full base of our business. The proposed acquisition is HX Tracker, a Shanghai China-based supplier of 1P tracker systems formed in 2019. Their tracker launched last year was what we believe to be orders of approximately $12 million in China, and above 20 gigawatts of total pipeline opportunities. The acquisition is right in our wheelhouse and has important attributes that make it most strategically and financially attractive. Their tracker system is designed with a low-steel content, and is well suited for today's prevalent large format modules and can go just about anywhere the large scale Chinese EPCs operate. HX has a strong team with direct tracker market engineering expertise and deep connections in the market, including within China, the Middle East, and Africa. Consideration for the acquisition consists of $4.3 million in cash and approximately 1.4 million shares. This represents an attractive multiple of approximately 3x 2023 EBITDA. The sellers will also be eligible for an earn-out of approximately 1.6 million shares based on meeting certain performance metrics. Overall, we estimate the transaction can generate $59 million in revenue and $4 million of EBITDA accretion in 2023 and $67 million in revenue and $7 million of EBITDA accretion in 2024. We're excited about the acquisition and the strategic and financial benefits we expect it will bring to FTC Solar. They have an impressive and growing pipeline, a strong team and a business model and culture that fits ours. We believe they have strong growth opportunities. We expect to complete the acquisition in the second quarter, and we'll be sure to update you on our progress. Looking back on the full-year 2021, the FTC Solar team has achieved much. I'm very proud of our work including: growing total revenue by 44%; increasing top 15 developer and EPC penetration from 40% each to 47% and 60% respectively; completing our initial public offering in April further strengthening our balance sheet; winning our first project in certain key international markets, including our first two projects in Africa, and our largest project to-date in Australia at 88 megawatts; tripling our international pipeline to more than 26 gigawatts, excluding the proposed acquisition; launching our innovative SunPath performance software and securing several initial contracts; reducing the steel content and cost of our trackers for future projects by more than 20%; and finally, bringing smart, accomplished, and innovative new talent into the organization while retaining our top performers. In 2021, we delivered strong growth while investing for future growth, enhancing our position with customers, expanding into new innovative products and new markets, while strengthening our team as we lay the groundwork to capture the significant opportunities we see ahead. While 2021 was the perfect storm relative to cost, we've taken significant actions, controlling what we can control, and are making significant cost and margin improvements. The long-term market outlook remains incredibly strong. And I believe FTC Solar is uniquely positioned to continue to outpace the market in the U.S. and we'll continue to see increasing traction internationally. FTC Solar has a solution that is differentiated in the marketplace and increasingly recognized by customers, along with new higher margin offerings launched, and we believe we're poised for significant growth and margin improvement ahead. While we've made good progress, I'm even more excited about where we'll go from here. Finally, one leadership update before I turn it over to Patrick. As you know, Patrick has been with FTC virtually since the beginning of the company, and has been a very strong leader in driving the company's growth. In addition to being our first CFO, and building out our finance, accounting and IT infrastructure from the ground-up through to becoming a public company, he has been a key driver in nearly every aspect of the company's growth. In fact, quite a few of the customer relationships we have and projects in our pipeline have come from Patrick. I'm pleased to announce that Patrick will be taking on a new and expanded role as our Chief Commercial Officer overseeing sales, sales engineering, legal, and capital markets activities. I'm very excited to have Patrick in this new expanded role and see him as a key partner as we move forward. As Patrick moves into this new role, I'm pleased to announce that Phelps Morris will succeed Patrick as our new CFO. Phelps brings more than 20 years of experience in global finance operations, including treasury, capital markets, mergers and acquisitions, risk management, and investor relations. He most recently served as Senior Vice President and Treasurer of TrueBlue, a company with $2.2 billion in revenue, where he was responsible for the strategy and execution of treasury and finance-related functions. He was previously with MEMC Electronic Materials and SunEdison from 2009 to 2016, where he served in multiple roles, including leading the treasury and investor relations functions. Earlier in his career, he served in various positions for the Dow Chemical Company, as well as roles with Duff & Phelps Credit Rating Company and Skudder Kemper Investments. Patrick, is there anything you would like to add?

Thanks, Sean, and good morning, everyone. Let me just add that I am pleased to be taking on this new role, and to have the opportunity to continue serving FTC Solar and its shareholder in new ways. I will continue to be very closely aligned with the finance team as well as the investor community and then I'm committed to ensure that we have a smooth transition. While this means there will be changes to my scope of responsibility, there'll be no change in my effort and dedication to assist Sean and the executive leadership team to meet our near-term and long-term objectives. I'm also excited to welcome Phelps to the team. I've had the opportunity to work with him in the past and believe he'll make a great addition to FTC Solar. So with that, let's dive into my prepared remarks, which will cover additional detail regarding our fourth quarter and full-year performance and our outlook. And as a reminder, our year-over-year comparisons reflect the significant amount of growth in our personnel and corporate infrastructure ahead of becoming a public company, which occurred in the second quarter of last year. These items make the year-over-year comparisons a bit less meaningful. Beginning with the results for the fourth quarter, total revenue was $101.7 million, which was above our target range due to accelerated production and product delivery, pulling forward revenue we had initially anticipated in Q1. This revenue level represents an increase of 92% compared to the prior quarter, driven by higher product volume and an increase of 130% year-over-year on higher volume in ASP. GAAP gross loss was $8.6 million, or 8.4% of sales compared to $8 million, or 15.2% of sales in the prior quarter. This strong improvement in margin quarter-over-quarter and was actually muted by the reserve for potential customer credit that Sean mentioned, which was a $3 million reduction to revenue and margin. The result for this quarter compares to a gross loss of $4.8 million in the prior year period with the difference driven primarily by logistics impact in 2021 and a strong ramp up in our employee count and other overhead expenses to support the company's growth trajectory. GAAP operating expenses were $15 million. On a non-GAAP basis, excluding the stock-based compensation and certain other expenses, operating expenses were $9 million at the low end of the company's guidance range, which compares to $6.2 million in the year-ago quarter. The year-over-year increase was driven primarily by necessary growth in staffing and other public company preparations. GAAP net loss was $23.9 million, or $0.25 per share, compared to a loss of $22.9 million or $0.24 a share in the prior quarter. And compared to a net loss of $9.7 million or $0.15 a share in the year-ago quarter. Adjusted EBITDA loss, which excludes $3.2 million of stock-based compensation expense, certain consulting and legal fees, severance and other items, was $16.4 million. This was at the low end of the guidance range due primarily to the $3 million reserve mentioned previously. This result compares to an adjusted EBITDA of $16.1 million in the prior quarter and $10.9 million in the year-ago quarter. Our contracts and awarded orders as of March 14th were $606 million, with the expected delivery dates in 2022 and beyond. As a reminder, we can continue to add to our contract and awarded revenue for expected delivery in 2022 into the fourth quarter of this year and still recognize revenue. Following a seasonally slow holiday period and the headwind of withholding and release orders, our bidding activity has increased significantly. We look forward to resolution on WRO and remain incredibly bullish on the long-term growth opportunity in the U.S. I'd also like to add that I share Sean's excitement about the proposed acquisition. It's a great opportunity for us to further accelerate our growth as well as profitability. The definitive agreement for the transaction was signed yesterday with the consideration consisting of $4.3 million in cash, which will be funded with cash on hand, the issuance of approximately 1.4 million shares plus a potential earn-out of approximately 1.6 million shares upon the achievement of certain performance metrics. We expect the transaction to generate $4 million of EBITDA accretion in 2023 and $7 million in 2024. And we anticipate the integration costs to be approximately $250,000, which primarily is composed of legal and administrative activities, and limited to 2022. We expect the transaction to close in the second quarter of 2022, subject to satisfaction of customary closing conditions and due diligence. With that, let's turn to our outlook. As Sean mentioned, we presented our financial targets for 2022 during our Business Update call in January. Despite pulling about $25 million in revenue into Q4 2021, we continue to feel comfortable with those targets which call for revenue of $415 million to $460 million, which at the midpoint would represent a 62% annual growth year over our 2021 results. And we expect that will outpace the overall market. Along with this revenue, we are targeting an 11% to 14% non-GAAP gross margin, non-GAAP operating expenses between $49 million and $54 million, and adjusted EBITDA between negative $4 million and positive $11 million. Our targets for the first quarter, which reflect the pull forward in revenue into Q4, call for revenue between $55 million and $65 million targeting non-GAAP gross margin of negative 7% to breakeven, non-GAAP operating expenses of $12 million to $13 million, and adjusted EBITDA loss between $13.5 million and $17.5 million. With that, I'll turn it over to the operator for any questions.

Thank you. Our first question comes from Donovan Schafer with Colliers Securities. Your line is open. Please go ahead.

Hi, guys. Congratulations on the results. With the pull forward from 2022 into Q1, this fourth quarter, I'm just curious, is there anything specific that was sort of driving that in terms of maybe modules being released earlier than expected or what changed in terms of your prior expectations to what really unfolded in the fourth quarter that allowed or enabled that significant pull forward in revenues?

So, thanks for the question, Donovan. It really I guess, I would say several factors. One is working with the suppliers and some customers requesting additional progress on certain projects. And so we were able to support that with capacity that was readily available. The capacity itself is a bit of a sign of what's going on in the market that in some areas, the steel demand is softening; they seem to be building only as many automobiles as they can get semiconductor components, it seems like in some markets, like in the China real estate market for second and third homes, things are slowing a little bit. So there was definitely more capacity available in working with our suppliers. And then again, some customers that wanted some additional progress on projects that we were able to support.

Okay. Actually I'm curious because I know with module imports, there's some challenge there, kind of knowing what type of modules you might be able to get with sort of EPC developers, EPC sometimes scrambling in some cases, or just reworking things to see what, working with what's available in terms of versus necessarily what they were originally planning for. So has that been a factor at all, in terms of maybe a project that originally was going to use one type of tracker, maybe switches to your tracker, just because the modules that happen to arrive are better suited to your tracker design, is there anything like that kind of a factor, or even on the steel side changing the steel prices, switching things up?

So it's been interesting. As we talked about in the update in January, there's a bit of choppiness in the market regarding module supply. And as you know, the big factor behind that is the WRO, and then more recently, the new version of AD/CVD. And we've seen some interesting things. We've seen requests for bids, where they're using multiple modules on a project. Typically in the past, you'd see a single module for any particular project. We have seen the modules change from what was originally requested, and we've seen a change order to change the modules to redesign for a different module. Of course, our tracker as you know is module agnostic, and so we can accommodate any module. I haven't seen anyone make a change in the tracker choice. Typically when they contract they've kind of worked through all that already. But the module choppiness continues until WRO is fully resolved. That being said, there are some positive signs of additional module flow opening up. But frankly we just, we're looking in anticipation of WRO getting completely resolved. And until then, it'll be I think they'll just continue to be some choppiness in module supply.

Okay. I have one last question before I return to the queue. Regarding the reserve for the customer credit you mentioned, I have been particularly interested in your unique approach to damping. I appreciated the white paper you released last week, which aligned with my interest. I recall that back in 2019 or 2020, you implemented a customer credit or retrofit due to the strain your damping method placed on the damper brackets, leading to some breaks that required retrofitting. Is the $3 million credit connected to that situation, reflecting a learning curve with your unique approach, or is it related to something different? Any clarification would be appreciated.

Hey, Donovan, thanks for acknowledging the white paper. We're really proud of our intellectual property and our unique damper system that delivers excellent performance in high wind conditions. We're excited about that. Regarding the $3 million we mentioned, that's just a minor payment discussion with a customer and is unrelated to the technology or any warranty issue. It's simply a small payment matter that we're currently addressing with the customer.

Okay, that's great, fantastic. Well congratulations again on the quarter. And I'll jump back in the queue. Thank you, guys.

Thank you. Thank you.

Thank you. And our next question comes from the line of Kashy Harrison with Piper Sandler. Your line is open. Please go ahead.

Good morning, everyone. Congratulations on the revenue pool, and I appreciate you taking my question. My first inquiry is regarding the HX acquisition. Could you elaborate on Slide 6 and explain what factors contribute to your confidence in increasing revenues from $10 million in 2022 to $59 million in 2023? What is behind that confidence?

So we did extensive due diligence. We've since the beginning, our company has had an M&A function, that's always out looking at potential opportunities. And so when this one came about, we gave it to the team to do some really extensive due diligence. So we looked into the pipeline, we had connections made to their customer base. And the Founders of this particular company are folks that we trust, because many of the folks in our company have worked with them in the past. And so through the due diligence and review of the pipeline, we believe this is a very credible plan that they put forth, and that with the support of the strong balance sheet of FTC we can achieve. I don't know, Patrick, do you have any further comment on that?

Yes, no, I mean, I think from our perspective, just the level of kind of granularity and transparency that the HX team allowed through kind of the due diligence process and engaging with their customer base and their supply base gave us kind of an inside view on what their overall pipeline and their deep relationships with the customers and partnerships were. And then also with the ability to kind of scale within FTC allows them to go meet these production targets for the customer. So it's really just a combination of those items, and really kind of centered around the transparency and with regard to the due diligence process.

Got it. Now, shifting focus to the base business, the contracted and awarded amount of $606 million is lower than the previous $692 million. What caused this decline and what portion of the $606 million is targeted for 2022?

I'm sorry you broke up there at the end. Do you mind repeating that the last piece of your question, Kashy?

Oh, apologies. I said, what piece of the $606 million is for delivery in 2022? I think last time you indicated it was $350 million. So I wanted to get an update on that number?

Yes. So we, since we guided to 2022, and we continue to reaffirm the guidance, basically the $415 million to $460 million. So essentially, since we're providing the guidance we're really just focused on that particular revenue number for the year.

Could you clarify what caused the decrease from $692 million to $606 million?

Yes, I mean, I think it's really kind of relates to what we're seeing is project kind of push-outs in terms of PO execution as relates to just overall module availability. I mean, I think the good news, what we're seeing no cancellations, and we're not seeing that FTC's are losing projects, just decisions aren't getting made in the overall macro environment. And we're seeing a lot of momentum in terms of our overall pipeline. Our sales engineering teams are really working overtime with our customers, bidding two or three different module suppliers in order to once the module supply gets turned back on to effectively turn the purchase order and start ultimately executing. So that's really kind of the driver, but our bidding activity remains high. And we aren't seeing FTC losing projects in the first quarter. It's really just tied to project decision push-out.

It's just a little bit of the ongoing choppiness in the module supply caused by primarily WRO. And as I mentioned, we are seeing some positive signs, in terms of certain flows being approved and modules from certain suppliers coming back in. But still until it's completely resolved, I think you'll see this level of choppiness.

Got it. And just one last question for me. Following the invasion of Ukraine, we've observed an increase in U.S. steel prices, at least in the forward curve. While there has been some movement, prices are still below last year's levels. I'm curious about how current or recent steel prices are aligning with your expectations that were factored into the full-year 2022 guidance. Thank you.

So we are okay, at this point with our steel pricing. Remember, most of our steel is sourced internationally, though we are prepared in the event that some version of build back better comes about that requires U.S. content, we'll be able to support that as well. But we see the international pricing is still in line with our expectations with the plan for the year. The other thing is that we've really added to some expertise to the team, and particularly in the areas of steel and logistics, and that's helping us as well, in terms of managing with our steel suppliers. And finally, the fact that we have enough scale and volume now to really matter to those suppliers is helping as well. But we're still aligned with expectations.

And Kashy, the one thing I think it's important to note is how we bid our projects. We're refreshing our project bids inside of every two weeks and not take the steel exposure on ourselves and really working to pass that off to the customer. So that allows us in these kind of commodity fluctuation pricing to make sure that we're able to kind of ultimately maintain the margin by having that transparent relationship with our customers.

Thank you. And our next question comes from the line of Pavel Molchanov with Raymond James. Your line is open. Please go ahead.

Yes, thanks for taking the question. The revenue that you expect to get from the new acquisition, what's the geographic mix of that? So I imagine it's much more international versus your legacy business; is that correct?

Yes, that's exactly right, Pavel. So as you know, our international expansion has been driven by the boots on the ground strategy. And so as this opportunity came about and we looked at it, we felt that, while our organic approach has yielded results, we thought this approach would help us to accelerate in international markets. And so, we talked in the announcement about the opportunity in Middle East, in China, in Africa. One of the good things about this acquisition is the relationship that the Founders have with some of the large Chinese EPCs. And as you know, a lot of the business outside China in certain markets like Africa, like Middle East are driven by those EPCs. So, we're really excited about not only opportunity in China, but the opportunity outside China. And this is all pretty much international business for us.

Yes. In that context, I cannot help but ask kind of the obvious political dynamic here, since this will now be owned by an American company. Would Chinese project developers be comfortable purchasing from effectively a U.S. equipment supplier?

So we, as a consequence of this transaction, will have people in China dealing with the Chinese EPCs. And we've done some due diligence in that area. And we feel very comfortable that in fact, the association with us is going to be a positive. It'll help enhance the quality reputation, for example, the engineering reputation, et cetera, which are all really important factors. And frankly, on the ground, it's still a U.S. company it's not necessarily a negative in the China business environment.

Thank you. And our next question comes from the line of Maheep Mandloi with Credit Suisse. Your line is open. Please go ahead.

Hey, good morning. Thanks for taking the questions. Can you just talk more about the HX tracker acquisition? How much of the business you're kind of expecting in 2023/2024 comes from the Chinese markets versus other markets. And should we consider this as a similar EBITDA margin business, like the core business? Thanks.

It should definitely be considered a similar EBITDA performing business and as the current business and the expectations that we have for the current business. It's a mix in terms of the pipeline. So they have a pretty well distributed pipeline that includes China that includes Africa that includes the Middle East. And so we're expecting a fairly robust mix across those markets. And so that's what we've included in the guidance that we're providing in terms of both the revenue contribution and the EBITDA contribution. We expect it to continue to grow over time.

Got it. Well does it make more than half is China versus the rest of China?

Yes, I think that's a fair assumption roughly half and half.

Got you. That's helpful. I mean does this product help the DG market push also or does the DG product is going to be the 2P product for you?

Our current focus in the distributed generation market is on our Voyager 2P product. We will maintain this focus that we established in January regarding the DG market with our Voyager 2P product. In the long term, it’s encouraging to anticipate a diverse portfolio of products, but for the time being, we will concentrate our efforts on the Voyager 2P product as part of our plans for the DG market.

Got you. That's helpful. Just one last question for me regarding the macro side, specifically the solar sector. Since the last two months, when you first addressed the WRO issue in the industry, have those challenges changed? Are you expecting any quicker resolutions for the WRO issues? Additionally, are you seeing any concerns related to the anti-circumvention investigation targeting Southeast Asian module manufacturers?

So we see progress on WRO. But frankly, we need to see complete resolution for the module supply to get back to normal. Because even with some of the module flows released and module flowing back into the country for the module manufacturers that have confidence to start up factories again, I think, you'll need to see a more open environment in terms of the flow. So, we're optimistic that these issues with WRO will get resolved. The timing, of course is not clear to us, or it's no clear to us than it is to anyone else. But we've seen some positive signs lately. And that's the good news. On AD/CVD, the fact that Commerce asked for some more time on this latest version of AD/CVD. We'll have to see, in the short term, we'll all hear whether they're going to do the investigation or not. And we've heard opinions that run the gamut from they will not investigate because of the additional uncertainty will cause in the module supply, particularly in the current market, where there's still this WRO overhang and then we've heard on the other hand, that there are reasons for the investigation that will continue. So we're watching it very, very closely and hope to see it resolved positively over the next couple of weeks.

That's really helpful. Sorry, go ahead. That's all from my side. Thanks for the question. I'm done.

Yes, thank you. Thank you.

Thank you. And our next question comes from the line of Philip Shen with ROTH Capital Partners. Your line is open. Please go ahead.

Hi, everyone. Thanks for taking my questions. I was wondering if we could dig into the HX acquisition just a bit more. How long did the process take, who else did you consider in your M&A process and how are you thinking about the risks of diving deeper into China while the world is decoupling and you expect the someday offer a 1P tracker in the U.S.? Thanks.

We explored various opportunities, but I can't disclose specific names. Our M&A efforts have been ongoing since the start, and we are always eager to evaluate opportunities that align with our company's culture and the criteria we have established. HX is an excellent fit for us, especially since we have prior experience with the founders and trust them, which has greatly aided our process. This was a months-long due diligence effort, and we are thrilled to have signed the definitive agreement. We anticipate closing the transaction in Q2. Regarding the 1P tracker, we aim to maintain our focus on the Voyager 2P product in the North American market. The 1P tracker from HX will target markets where HX has strong connections, helping us broaden our international reach. As for introducing a 1P in the U.S., that remains uncertain; it will depend on the opportunities we identify as we gain insight into the HX 1P tracker. For now, our focus will be on those international markets for the HX 1P tracker, along with the North American market and some prior international markets for the Voyager 2P.

Thanks, Sean. Our check suggests a substantial amount of megawatts or gigawatts are being installed without modules, what percentage of your deliveries do you think this year are going to be for projects that don't have the modules yet, how do you expect that to trend by quarter and what do you see their ahead? Thanks.

Yes. So there are some unique things going on in the current market given people's uncertainty. We've seen, we mentioned we've seen projects now with multiple modules, we've seen projects where the modules change. And then you're right we've seen people who are doing projects that maybe don't have the module with 100% certainty, which is unique from the past. But I would say that's still a bit the minority of things that most projects, the customers have a sense of which module they're going to use.

Yes, Phil, this is Patrick. From that perspective, if there are developers that have line of sight to modules, but it's out in the call a distant future, they do feel comfort around placing the order for the tracker at that point. So the answer is yes to your question.

Okay. Thanks, Patrick. And then as it relates to your quarterly guidance, thanks for all that detail, it's super helpful. The transition from Q1 to Q2, we're seeing a jump in margins. Can you talk about the risks around going from call it the midpoint 0% margin in Q1 to the 12% midpoint in Q2 and how conservative that that look is? Thanks.

We have reaffirmed our guidance for 2022 and are providing our quarterly guidance for the first quarter. We are not updating the indicative numbers previously shared. As previously discussed, we are implementing a comprehensive program within the company to enhance gross margins, focusing on value pricing, lowering steel content, reducing steel costs, and optimizing logistics costs. This effort involves various initiatives designed to improve gross margin performance. However, there are risks associated with each of these areas, including engineering work to reduce steel content and negotiations with steel suppliers. External risks also exist, such as ongoing supply chain issues and the impact of tariffs, as well as the current geopolitical situation. Despite these challenges, we are intensely focused on the factors we can control, including engineering, procurement, and logistics work, to meet our objectives.

Great. Thanks for the color, Sean. I'll pass it on.

Thanks, Phil.

Thank you. And our next question comes from the line of Julien Dumoulin-Smith with Bank of America. Your line is open. Please go ahead.

Hey, guys, it's Alex on for Julien. Just two quick ones for me, given the significant cohort on revenue you guys had here in Q4, which looks to modestly reverse a little bit in Q1. I mean, should we expect any further spillover into Q2? And I guess, any sort of perspective challenges you might see on margin pressure there would be kind of the first question? And then I have a follow-up on that.

Yes, we are confident in the guidance provided for Q1. We fully expect to meet the ranges we've outlined for each parameter in Q1. We don't anticipate any unexpected revenue surprises or spillover effects. Does this address your question or concern?

I was really asking about, I guess, given that you have a sizable pull forward roughly like $25 million or so, I guess, versus your guide. Midpoint lowered a little bit into Q1, obviously, not to the same degree, though. I guess I really asked more about Q2, or I guess, prospectively, Q3 as well, if that makes any sense?

Yes. At this point, I don't have any concern that this will happen in the upcoming quarters.

Got it. I appreciate that. One more question regarding the acquisition. As I review the HX tracker and the projects they've participated in, it appears they have a solid base in utility scale, ground mount, and even some agribusiness. I'm curious about any synergies or insights you might gain from their projects and technology. How do you think their approaches could benefit your legacy U.S. business? That's all from me. Thank you.

We have conducted thorough due diligence on their engineering team and IP portfolio, as well as on projects they have completed or are currently working on. We are very impressed by the quality of their engineering team, which adopts a first-party approach akin to what we have implemented with the Voyager second-party project. A team of experienced engineers has collaborated to determine the best way to create a first-party tracker that addresses customer needs. We believe that integrating their engineers with our team will provide additional opportunities to enhance their first-party offering and improve the Voyager second-party project as we work together as one company. We are genuinely excited about the engineering quality we have observed and the potential for close collaboration moving forward.

Thank you. And we have a follow-up question from the line of Donovan Schafer with Colliers Securities. Your line is open. Please go ahead.

Hi everyone, I appreciate the chance for a follow-up. Regarding the steel efficiency increase, you mentioned a 20% increase in 2021 throughout the year. I think this means you're reducing the steel in the design by 20%. Please correct me if I'm wrong. I watched the September webinar with PV Magazine, which detailed your approach to extreme dampening and how it allows for steel reduction. This gives insight into your progress, as you've conducted initial wind tunnel testing and field work where technicians are shaking the modules to gather data on stiffness and other parameters. It seems like you are in the final stages of collecting all these data points on the mechanics of the structure. I'd like to know if you have any guidelines or estimates on how much more steel you could realistically remove. Obviously, you wouldn't be able to take out another 50%, and there may be diminishing returns, so I'm curious what realistic expectations are for further steel reduction.

So Donovan, it's really an interesting area. There are a lot of people in the company like myself with a deep semiconductor background. And as you know, semiconductor is all about continuous improvement. And in the company, we actually have an R&D facility; we call Solar Tech that's outside or close to the Denver Airport as part of an overall R&D science part there. And so we're actively doing experiments looking at every component in the Voyager 2P system to look for opportunities to optimize and further reduce the steel content. We also have a lab here in Austin that we're able to do analysis on each individual component. So as we look at making improvements in the system, as we look at reducing the steel content, we can make certain that we're not doing anything that affects the overall quality of the system. And so it's this continuous improvement effort that we'll never cease that we'll continue to remove steel over time out of the Voyager 2P system. It's just a continuous engineering improvement effort. And then ultimately, you could see that we'd ultimately have a rev of the design, a new version of the product, so to speak, eventually over time. And basically have an overall product roadmap to look at improvements and then moving from one version to the next. But it's just an overall continuous improvement effort. I think if you also go back to the Investor Update we did in January, there's some materials there, too, that talk a little bit about the continuous improvement and reduction in the steel content. But it's an ongoing effort and we'll always look to see where there's opportunities to improve the product, where there are opportunities to remove steel content. It's a really holistic approach.

Thank you. I have one last question, if possible. In the U.S., 2P has been seen as something that could perform well as we move to more constrained sites with fewer piles and the ability to handle uneven terrain. Historically, this raised the question of why anyone would choose 2P, but I know you also aim to be competitive in big, flat, open sites. There’s the Samson project in Texas where you had to win, but currently, in your pipeline and backlog, do you find that most of your success is in areas that play to your strengths, like the Carolinas, or in challenging locations with rocky terrain or riverbed constraints? Are you securing a significant number of projects in flat land areas like Texas or California, or is it more than you expected? I'm curious if there have been any changes or surprises in either direction compared to the past year or two.

Yes, there are several advantages to the Voyager 2P system regarding its constructability. This includes a lower component count compared to competitors, reduced DC costs due to the four-string architecture, and fewer man-hours needed per megawatt. These benefits are applicable across various site types. While we perform well on flat sites, the 2P system also offers additional advantages on sloped sites, where we can manage grades up to 17.5%. It is particularly beneficial in challenging terrains, as it requires fewer foundations. We've experienced success on both flat sites and those with difficult or unique terrains, and it appears that the number of projects in more challenging terrains is increasing over time.

Thank you. And I'm showing no further questions at this time. And I would like to turn the conference back over to management for any further remarks.

Thanks very much, operator, and thanks to all of you for participating in our earnings call today, and thanks for the questions. I remain extremely excited about the future of FTC Solar. And in particular, the acquisition of HX Tracker, I think it's really going to help to accelerate our international growth, and I'm super excited about that as well. So thank you again for your time, and thank you for your interest. Take care.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.