FTC Solar, Inc. Q1 FY2025 Earnings Call

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 a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. 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 Michalek, 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 Yann Brandt, the company’s President and Chief Executive Officer; Cathy Behnen, the company’s Chief Financial Officer; and Patrick Cook, the company’s Head of Capital Markets and Business Development. 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 that 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 Yann.

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. We have strengthened our sales team, further improved our product offering 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. After our revenue trough 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 1 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 service 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 gives them significant flexibility and an inherent architecture difference from the older legacy 1P systems in the market. Multiple features reduce civil construction cut and fill with our terrain-following options, including our new dual-row tracker, the largest range of stow 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 will help where we can. Overall, I believe we now have a robust and comprehensive product line that offers significant benefits to projects across developer and EPC portfolios. Our engineering and R&D teams have a full portfolio of incremental initiatives in progress to provide additional customer benefits, 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 to nine months, visits are up 100% and 240%, respectively, versus a comparable year earlier period. 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 bid is up as well, up 65% versus a year ago. Notably, our customer access or visibility has greatly improved. In fact, we believe we are now 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 our 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 in 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 towards the start of construction. However, customers are waiting for additional clarity with the expectation of trade deals. While our team has done a great job positioning the company with robust, diversified supply chains, trackers are only a piece of the overall equation, which can include inverters, batteries and modules from many different geographies. We will continue to work closely with our clients and stay flexible on the timing of imports and 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, which 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 the 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 offtakers, the companies and utilities, are actively involved in the late stages of development and investment, especially corporate customers with a pipeline of data centers 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 of 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 addition. 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. 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 a 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, Yann, 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 million to $20 million. 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 reductions and our lowest level since 2020, which was before we were a public company, as we continue to control costs. GAAP net loss was $3.8 million or $0.58 per diluted share, compared to a loss of $12.2 million or $0.96 per diluted share in the prior quarter. 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 million 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 gross 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 will conclude our prepared remarks and I will turn it over to the Operator for any questions.

Thank you. Our first question comes from the line of Jeff Osborne with TD Cowen. 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. From an exposure standpoint, certainly there are items that we import that would now be subject to the tariffs. We have a really diversified supply chain, so we work to mitigate it. In terms of the company exposure to having to pay that, the majority of the tariffs are passed through to the customers, whether they’re EPCs or others, contractually. Obviously, we’re always working hand-in-hand with our partners to work to mitigate it. I would say that any impact here 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 AD/CVD case, Yann, I was curious, have you seen a pickup in module change configurations for the backlog in recent weeks that might then delay the timing or cadence of deliveries that you might have anticipated a few weeks or months ago?

No. I mean, I think, largely supply chain had been anticipating the AD/CVD 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, to at least not try to design a system with a module change or even with multiple module options. There’s a lot of movement happening in the module side, which is, obviously, from an architecture perspective, something that we at FTC can withstand given it’s agnostic from a design standpoint. 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.

Great. Thanks, Jeff.

Thank you so much. Our next question comes from a line of Philip Shen 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, Yann, you mentioned that most of the pipeline is still moving to construction start, but some are waiting for clarity. 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? I have a follow-up as well. Thanks.

Sure. Yeah. I mean, look, I think, this is where my sentiment around operating flexibility comes hand-in-hand. 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 from a voiceover from the administration that a deal is pending? No one wants to pay tariffs needlessly. Folks are also building in some flexibility into the overall timing. There’s some resequencing of projects happening that just shifts starts to certain portions of the project. Everything still remains largely on track. The question is, how long is this wait and see period going to happen? If the voiceover remains that, for example, the China tariffs are too high and they’ll come down, the question is, 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? I think everyone is, not just FTC, but I think everyone across the supply chain, especially projects with batteries are looking at that closely. In the meantime, our supply chain team is working to ramp up additional capacity and markets that have lower tariffs or are higher in the food chain of what appears to be trade deals in the making.

Thanks, Yann. Shifting to kind of the other side of the coin of the same topic. In terms of construction starts, we just talked about that, but then flipping over to the activity required today to be able to book and really develop projects for construction start and maybe back half of next year or early 2027. Just curious to see if you’re seeing some slowdown in that activity as well. I imagine people are a little bit on pause as they figure out what they can count on and what they can’t. Thanks.

Yeah. I don’t think development activity has slowed. What has, I think, taken a pause are the negotiations between offtakers and project owners because it’s hard to understand what the pro forma looks like, both on the CapEx side with sustained tariff levels, as well as the energy market. This is all kind of correlated. 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 bring capital in or sell the project to the ultimate asset owner. We’re seeing offtakers actually participate and invest and drive the expansion of those sites, especially where sites have large interconnection and infrastructure investments. The corporates are really active in deploying capital and owning that future pipeline. Solar certainly doesn’t have any shortage of opportunities to build projects. Getting them to start construction, permitting, use permits locally, et cetera. That has always been one of the gating items determining the funnel of how much is buildable. I think that’s how I would characterize it. If the tariff uncertainty exists, whereas we have a tariff, but the conversation is that it’s coming down or a trade deal is coming, I think that’s the gap I would be hesitant to determine 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 months. That’s the operating flexibility we would bring to our customers, and having domestic content capabilities goes a long way certainly across the board.

Great. Thank you, Yann, for the color. I’ll pass it on.

Thank you.

Thank you so much. Our next question comes from a line of Amit Dayal with H.C. Wainwright. Your line is now open.

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

Thank you for the question. Since I joined last year, FTC has reached an important turning point. We have a strong legacy in the 2P category, which is part of our identity. Recently, we have made significant progress in deploying 1P. We have signed more contracts and have been recognizing that backlog more quickly in recent months. Additionally, we are noticing that nearly every project going out for bid is now competing with much larger peers who have been in the 1P category for a longer time. Our products are appealing to EPCs because of their speed and ease of use, making a strong case for market share. We are not only taking share from our competitors but also capitalizing on changes in the tracker provider landscape. However, when we look at our volume projections for 2024, we see them as much lower than our anticipated growth. This gives us confidence in determining the right volume as we expand and gain market share in a competitive environment, leveraging our compelling and cutting-edge technology, which outperforms our peers in nearly every feature.

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

1P accounts for 90% of our bidding volume. While there are markets where 2P is effective, it requires specific environmental conditions, and it's evolved to incorporate larger modules than its initial design. In certain U.S. markets and specific European regions, particularly with agricultural solar farms, 2P can be appealing. However, we are not heavily investing in its further development as it is not a priority for us. Our main focus is on strengthening our 1P pioneer platform, which now includes remarkable features such as high wind capabilities. High wind is prominent across the Southeast United States, and we've integrated effective hailstorm and asset management functions along with flood impact features. Flood maps and insurance considerations are increasingly significant. Strengthening the 1P platform enables customers to design projects that meet their CapEx needs, delivering a value proposition that goes beyond just pricing. The overall value our platform provides is what will ultimately drive growth.

Understood. Yeah. That’s all I have, guys. Thank you for the color. I appreciate it.

Great. Thanks.

Thank you so much. All right. I’m 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.