FTC Solar, Inc. Q4 FY2025 Earnings Call

Good day, and thank you for standing by. Welcome to the FTC Solar, Inc. Quarter 2025 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. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear automated messages indicating a hand is raised. To withdraw your question, please press star 1 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your first speaker today, Bill Michalek, VP of Investor Relations. Please go ahead.

Thank you, and welcome, everyone, to FTC Solar, Inc.'s Fourth Quarter 2025 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 have not yet reviewed these documents, they are available on the Investor Relations section of our website at ftcsolar.com. I am 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 BD. 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 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 will turn the call over to Yann.

Thanks, Bill, and good morning, everyone. I am pleased to share that we have achieved another quarter of strong growth in Q4 and continue to position the company for long-term success. Our financial results came in at the high end of our targets, as we work to strengthen our product, operational performance, and overall positioning, including enhancements to one of the most innovative 1P tracker platforms in solar. Every day, we are seeing excellent commercial momentum as we build a foundation for future growth. In terms of financial results, we achieved several key milestones in the fourth quarter. Our results came in at the high end of our target ranges on all metrics. Revenue grew by 26% sequentially, which follows the 30% sequential growth posted in the third quarter, one of the best in company history, and came in at the highest quarterly level since 2023. Gross margin for the quarter was our best as a public company, and we posted our best adjusted EBITDA performance in six years, and our best since going public, coming in just shy of breakeven for the quarter, missing our 2025 target of breaking even by the narrowest of margins, not bad considering the challenges the solar industry faced with tariffs and legislative disruption. Our fourth quarter results fittingly marked an incredible year of progress for FTC Solar, Inc., a year I am proud to call my first at the company. For the year, we grew revenue by more than 110% versus the prior year, significantly improved margins, added multiple gigawatts of MSAs and secured purchase orders from Tier 1 customers, added new cash to our balance sheet with strategic financing, witnessed new incredible talent join our team, especially in sales, and have positioned our product platform as the most innovative tracker portfolio in the market, by far the easiest and fastest to install. Turning to customers, our commercial momentum is starting to accelerate at every level, from approved vendor list additions to project bidding, bookings, and contract conversion. It takes time and will not impact revenue immediately, but our progress here is clear, accelerating, and to me means everything. It is the foundation of our future growth. It ensures our company's success and has me excited about where FTC Solar, Inc. is headed. We are getting on approved vendor lists. Just in Q4 alone, we were added to the AVLs of four of the top 10 EPCs, bringing the total to eight of the top 10. We are gaining increased visibility while bidding with more customers and larger project sizes, actively providing proposals on the pipelines of these new EPCs, and those of many new customers. FTC Solar, Inc. is securing projects and seeing previously announced MSAs convert into bookings, including with our top-tier customer base. In the fourth quarter, we received bookings from two leading EPCs, and we expect some MSAs to start expanding in volume from the original capacity soon. We have improved net bookings over the last three quarters and experienced a significant increase in the fourth quarter. With a positive book-to-bill ratio, or positive net bookings in the period, we are starting to convert our MSAs into firm orders and book new projects. Since our last earnings call, we added $61 million to our contracted backlog, or roughly a $29 million addition net of Q4 revenue. We expect this progress to continue and accelerate. In addition to the positive net bookings, we have had recent wins in the form of multiyear MSAs that are not yet included in that backlog, with more expected to be announced soon. One notable addition we are announcing today is a new 1 gigawatt supply agreement with a leading developer and operator of wind and solar farms. This is a three-year agreement for 1 gigawatt of our 1P and 2P trackers at sites across the U.S. This agreement also includes our SunPath software to achieve additional energy yield at these sites. Another example we announced just last week is a multiyear MSA with Lubanzi in South Africa, involving about 840 megawatts of trackers delivered across the country, and is a great win on the international front. The first project under that agreement is expected to commence midyear. Those are MSA wins on top of the net backlog additions we announced, bringing us to over 9 gigawatts of MSAs added in just one year. The leading indicators on the customer front are what will drive this business, and they are starting to look very favorable. They are improving, and we have significant momentum. From MSAs, AVLs, and strong bidding activity, these are clear signals showing us that FTC Solar, Inc. is a crucial part of the tracker diversification trend we are experiencing daily. While we have very admirable competitors, a market lacking choice is no market at all. In every meeting I attend, I hear about the necessity for diversification. Having met with most of the top 10 EPCs, I can assure you they are happy FTC Solar, Inc. is in the room—innovative, bankable, and competitive. Our team is a recognized counterparty with decades of relationships, and our product continues to perform exceptionally well. FTC Solar, Inc. is now a valued 1P tracker provider, and we see substantial opportunities to gain market share. Our goal remains to be among the top three tracker providers shortly. And we hope to have much more to share about new MSAs and the growing contracts backlog in the weeks to come as we work towards that. On the product front, independent row architecture is the gold standard for solar. It has the highest production for asset owners and offers the best long-term efficiency for solar farms. It is also ideally suited for automation in construction and O&M activity. I have shared that I believe we have undeniably the fastest and easiest tracker to install in the marketplace, whether independent row or otherwise. A product that is exceptionally cost-effective on a total installed cost basis and one that can be built from piles to mounted modules with unmatched efficiency of 0.053 labor hours per module, driven by our innovative Python clips, slide-and-glide rails, and open trunnion design along with power cinch clips. You can glean from the customer feedback as we announce recent wins that they are already recognizing the benefits of this efficiency. Our team is focused on achieving an additional 20% labor savings. This is crucial as labor shortages are increasingly a pressure point for the industry and are expected to persist, with labor costs continuing to rise as a proportion of the total project cost. We have engaged with Tier 1 EPCs and developers. Due to our constructability savings, they tend to evaluate the total install cost of our tracker rather than just the price. As more in the industry recognize our advantage in total installation cost, it should help shield us from pricing pressures or competition on projects. 2025 marked a strong step forward in positioning for what lies ahead. We doubled sales while expanding the balance sheet, enhanced our product range, increased our pipeline, and continued building a foundation of new project wins and MSAs. We have undeniably been on a steady upward growth path during my tenure with FTC Solar, Inc. Quarterly revenue levels for Q4 were three times higher than when I began, gross margin shifted from double-digit negatives to double-digit positives, and adjusted EBITDA losses improved to nearly reaching breakeven. Our enthusiasm is not derived solely from past achievements. It stems from our outlook ahead. While the solar industry faced significant regulatory uncertainties in 2025 that will have some carryover effects into 2026, FTC Solar, Inc.'s positioning is significantly stronger, and we are closer to achieving broad adoption by Tier 1 players than we have ever been. Our financial progression may not always follow a linear path, but we have made substantial progress thus far and are establishing a solid base of orders to enable strong long-term growth while aiming for a top market share position. I firmly believe that is within our reach. I remain extremely optimistic about the business prospects and look forward to providing you with continued updates on our progress in the months to come. With that, I will hand it over to Cathy.

Thanks, Yann, and good morning, everyone. I will provide some additional details on our fourth quarter and full-year performance and our outlook. Beginning with a discussion of the fourth quarter, revenue came in at $32.9 million, which was above the midpoint of our guidance range of $30 million to $35 million. This quarterly revenue level represents an increase of 26% compared to the prior quarter and shows an increase of 149% compared to the year-earlier quarter. GAAP gross profit was $6.9 million, or 21% of revenue, compared to gross profit of $1.6 million, or 6.1% of revenue, in the prior quarter. Non-GAAP gross profit was $7.7 million, or 23.4% of revenue, marking one of the highest levels in company history and our best as a public entity. The strong gross margin performance was driven mainly by a favorable product mix in the quarter. This quarter's result compares to non-GAAP gross profit of $2.0 million in the prior quarter and a $3.4 million gross loss in the year-ago quarter. GAAP operating expenses were $10.6 million. On a non-GAAP basis, operating expenses were $8.2 million. This compares to non-GAAP operating expenses of $7.4 million in the year-ago quarter and $8.0 million in the previous quarter. Moving to GAAP net loss, as a reminder, the warrants issued as part of last year's capital raise are subject to liability rather than equity accounting and, therefore, require us to reflect changes in the warrant fair value each quarter in our GAAP financials. If our share price rises during the quarter, as it did in Q4, it will show as a non-cash loss, and conversely, a share price drop would indicate a gain. The share price appreciation we observed in the fourth quarter drove an increase in the fair value of the warrant liability of about $26 million. This is a non-cash accounting adjustment that does not reflect the underlying business performance or cash flow and will be excluded for purposes of adjusted EBITDA, but does impact our GAAP financials. So including that adjustment, the GAAP net loss was $33.7 million, or $2.23 per diluted share, compared to a loss of $23.9 million, or $1.61 per diluted share, in the prior quarter, and a net loss of $12.2 million, or $0.96 per diluted share post-split in the year-ago quarter. On an adjusted EBITDA basis, we almost achieved breakeven, posting a loss of just $300,000, which is our strongest result since becoming a public company. That excludes the net of approximately $33.5 million for the change in fair value of the warrant liability, certain transition costs, and other non-cash items. This represents our best adjusted EBITDA result in six years and a substantial improvement from adjusted EBITDA losses of $4.0 million in the prior quarter and $9.8 million in the year-ago quarter. Overall, another solid quarter of financial progress delivering some of the best results we reported in years. The contracted portion of our backlog now stands at $491 million, with approximately $60 million added since November 12. To briefly touch on annual results, for the full year 2025, revenue was $99.7 million, representing a 111% increase over 2024. The increase was primarily attributable to higher product and logistics volume, partially offset by a decline in average selling price. GAAP gross profit was $1.1 million, or 1.1% of revenue, compared to a gross loss of $12.6 million, or negative 26.6% of revenue, in the prior year. On a non-GAAP basis, gross profit was $3.2 million, or 3.2% of revenue, compared to a gross loss of $10.9 million, or negative 23% of revenue, in the prior year. The higher volumes and increased absorption were the primary drivers of this significant year-over-year improvement, which was partially offset by higher tariff costs. GAAP operating expenses were $34.5 million. On a non-GAAP basis, OpEx was $29.4 million, which compares to $35.5 million in the prior year. Thus, we managed to reduce OpEx costs by 11% on revenue that doubled year over year, demonstrating our continued focus on efficient growth. GAAP net loss was $76.9 million compared to $48.0 million in 2024. Adjusted EBITDA loss, which excludes the change in fair value of warrants, stock-based compensation expense, and other non-cash items, was $24.3 million compared to a loss of $43.1 million in 2024. With that, let us turn our focus to the outlook. Our targets for the first quarter call for the following: revenue between $20 million and $25 million; non-GAAP gross profit between negative $500,000 and positive $2.3 million, or between negative 2.5%–9.2% of revenue; non-GAAP operating expenses between $8.2 million and $8.9 million; and finally, adjusted EBITDA loss between $9.6 million and $5.9 million. For the full year 2026, we expect to continue to grow faster than the industry as our recovery progresses. Due to the timing of orders, which followed some regulatory uncertainty in 2025, as well as the ramp-up of our MSA project, we expect the results will be more weighted to the back half of the year. With that, we conclude our prepared remarks and will turn it over to the operator for any questions.

Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to enter a question, you need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. The first question comes from the line of Philip Shen of Roth Capital Partners. Your line is now open.

Hey, all. Sorry about that. Congrats on strong results and the good news you have in the quarter. I wanted to check in with you on the 2026 outlook. So you talked about significant growth. I'm guessing you may not want to quantify, but I was wondering if you could qualify or provide some color on what kind of growth we could see in '26 year over year.

Yes. No, thanks, Phil. Appreciate the question. Yes, look, we are really excited about where FTC Solar, Inc. is positioned from a competitive landscape standpoint versus our peers. The overall market dynamics, obviously, you know, continuing to sign MSAs with large volumes both in the U.S. and abroad. We are seeing good growth, naturally with some seasonality around the timing of the early part of the year. The conclusion of 2025 was remarkably strong, and results in '25 compared to '24 demonstrate that. However, it primarily comes down to our execution standpoint that fuels our enthusiasm and optimism, significantly adding strong talent to the sales pool. We, and I in particular, have been on the road full-time talking to the EPCs, developers, and IPPs worldwide. There is a pressing need for diversification and a necessity for constructability features that position FTC Solar, Inc. well within the product mix for these companies. So, I think a notably quantifiable trend—and I'll clarify—is our placement on approved vendor lists, particularly with the EPCs who make many procurement decisions concerning the projects they will use. Now being on eight of the top 10 EPC AVLs is an encouraging indicator and enables our sales team to close those projects. However, developing a product portfolio is a process that moves from technical development to sales and gaining approval for inclusion, and our enhanced bankability throughout the year highlights a strong indicator for those EPCs to add us to their approved vendor lists and include us in their bidding cycles.

Great. Thanks, Sean. You also mentioned that the backlog does not include almost two significant MSAs that you publicly announced since Q1. I think you alluded to more MSA signings to come, so you have a couple here that seem meaningful. Historically, we've seen some of your MSAs not materialize. So, could you give us some color on the timing of these MSAs? Will we see meaningful revenue in '26 and '27 from these, and can you provide a bit more insight into what they might look like?

You bring up a valid point, Bill, as when we discuss backlog, we are talking about concrete agreements, delivery schedules, etc. It doesn’t include verbal agreements, for example. Regarding the MSAs, I understand where you are coming from, and it marks a great beginning. We are starting to see those MSAs flow through, and we expect to announce some expansions shortly as we work through these agreements. That reflects both strong partnerships and our ability to convert through the project lists that our partners possess. Some are developers, while others are EPCs. Naturally, there may be intermittent delays in '26 and '25, with certain projects held up for capital or permits—challenges faced universally in the solar industry. However, we have identified the right projects that have the capacity to move forward. We do anticipate an acceleration of utilizing the MSA volumes in 2026.

Shifting to your earlier mention of air pockets of activity and challenges from last year, what are you seeing now? Do you believe that conditions have stabilized? We've been discussing some challenges related to tax equity and FIOC uncertainty. Could you provide some perspective on any current issues affecting the front end of the chain? Additionally, could you address your liquidity situation further and clarify your path to breakeven?

Yes. One critical aspect for FTC Solar, Inc. is that we are examining a lot more opportunities. From an FTC Solar, Inc.-specific standpoint, having additional projects available to book for revenue adds potential for increased bookings. This gives us more chances to capitalize on projects that reach the start-of-construction phase. Each project has a defined pathway to that initiation. There are positive developments overall. The offtake climate for projects is as favorable as I’ve seen since 2006 when I entered the solar sector. Some projects must address federal permit obstacles or wetlands, which present challenges. Nevertheless, I would describe the trend as optimistic regarding more projects commencing construction in the overall market, specifically for us, as I evaluate our project pipeline, for instance, MSAs, alongside the projects we are bidding on—we’re witnessing a consistent positive trend. We are primarily focused on placing ourselves in optimal projects capable of advancing. Our aim is to contribute to solar implementation for American consumers and companies that need electricity now more than ever. Being part of the product mix that has projects sourced for diversification among a couple of selected tracker vendors positions FTC Solar, Inc. favorably among the top track selection compared to historically. Our financial results since going public reinforce that perspective. Concerning liquidity, I am satisfied with where we concluded the year. We experienced robust growth from '24 to '25, with the second half increasing 44% when our competitors were flat to down. Our Q4 results brought us close to breakeven, which would have been exceptional; regardless, we achieved the best results FTC Solar, Inc. has ever attained. I am pleased with the guidance we've provided the company. This growth, combined with reduced operating expenses, signals that we can optimize efficiencies. I believe more can be achieved, and we remain committed to running the company in this efficient manner. Most importantly, it hinges on bringing an excellent product to market, gaining recognition by reaching AVLs, and organizing an exceptional sales team with robust relationships. When I reflect on the meetings we engage in and the feedback received, it is evident our sales team is positioned well to seize the opportunities presented by this consolidating market and work towards attaining a top three position, which I believe is attainable for us.

Thanks, Yann. I will pass it on.

Of course. Thanks, Phil.

Thank you. One moment for our next question. Our next question comes from the line of Sameer S. Joshi of H.C. Wainwright. Your line is now open.

Hey, good morning, and thanks for taking my questions. You have a considerable pipeline of $491 million or backlog. Do we know who the end customers are? What industries or commercial users are they? Also, regarding the $61 million in new orders received this quarter, any insight into the end customers would be great.

Sure. Great question. We have, of course, the counterparties purchasing from us, which are often the EPCs, but there are instances—including our new bookings in Q4—where we have established more global relationships with asset owners. Asset owners prioritize the longevity of the product and expect long-term gains concerning overall installation costs, which encourages them to invest in multiple projects. Predominantly, our counterparties consist of the EPCs. If you’re referring to counterparties on the offtake, we’re seeing significant interest from major data center players who are competing for generation. We’re beginning to observe a pipeline concerning bring-your-own-generation concepts emerging in data center headlines. Recently, we encountered a project that had interconnection cost challenges and may not have been feasible before; however, that project is currently being reconsidered for a bring-your-own-generation data center approach. Hence, this trend will undoubtedly open more opportunities for solar as a whole, with FTC Solar, Inc. being able to compete effectively.

Thanks for that insight, Yann. I think Phil inquired about this, but I will delve a bit deeper. Regarding the two recently announced MSAs, the 1 gigawatt and 840 megawatt agreements being three years long, when should we anticipate actual orders arising from this? Also, are there any regional exclusivity agreements associated with these customers?

Sure! Let’s discuss the Lubanzi agreement first—the one we announced last week. We do expect to begin projects in midyear. The process typically involves announcing MSAs, with some being public and others private. We generally negotiate standardized templates for purchase orders, simplifying contracting. We start working on co-designs for those sites, so the Lubanzi collaboration will see multiple projects start in 2026. As for the recent agreement in the U.S., we’re thrilled about its prospects. We are deep in designs for several sites, but they must go through permitting. It is possible that there are projects in the latter half of the year that we could book. That could accelerate if offtakers step up. These particular projects are primarily within a regulated market, meaning we have seen vigorous movements in negotiations for the offtakes of these agreements, which will facilitate easier permitting. While some projects are listed, from an exclusivity perspective, some agreements take a volumetric approach. Still, there is a mutual benefit whereby FTC Solar, Inc. invests in resources providing design services, etc., and gains priority access both in terms of design and capacity. Since we’ve been engaged, more customers are inclined to enter into these agreements, contributing to our total of 9 gigawatts.

Understood. Thanks for that clarification. Can you remind us of your revenue model for the SunPath software? Are there recurring revenues, or how is that structure set up?

Absolutely! SunPath is a fantastic tool that has undergone extensive development and refinement at FTC Solar, Inc. for quite some time. While our 1P tracker is a relatively new addition to our portfolio, our ability to provide 3D backtracking to the market is robust. Customers have varying preferences regarding payment. Some opt for upfront payments covering a set period, while others prefer a recurring revenue model. It genuinely depends on the site. The 3D backtracking software provides substantial advantages for FTC Solar, Inc., especially concerning independent row architecture. When sites feature undulating, uneven terrain, the necessity for 3D backtracking for energy yield enhancements becomes vital. Independent architecture allows motors to run each row independently, particularly throughout the year, enabling significant energy yield advantages. This is why I believe the market is coalescing around independent architecture.

That underscores your value proposition. Good to know. Just a question, perhaps for Cathy. The service margins were lower, despite sequential growth in service revenue. Is this due to GAAP reasons, or are there more structural factors?

Thanks for the question. I believe what you are observing is that our service revenue includes all logistics services we provide. As tariffs increase, those are pass-through costs, which tend to compress margins.

Got it. Understood. Thanks for addressing my questions, and good luck for 2026.

Thank you. One moment for our next question. Our next question comes from the line of John Wyndham of UBS. Your line is now open.

Thanks for taking my questions. I wanted to follow up on, I think, Phil Shen's inquiry regarding liquidity. There is, of course, the note in the release about not being in compliance with the purchase order covenant for the credit agreement. Could you walk us through the status of that and what needs to be done to ensure compliance?

Absolutely. I appreciate the inquiry. To provide a high-level overview, as mentioned in the note, this situation is a technical issue and a technical default. The language in the agreement was unintentionally restrictive and led to a surprising accounting outcome. This emerged during the audit process; we have not resolved the issue yet but expect to do so. It pertains to bona fide purchase orders and the bookings we signed, and we believe it’s a technical problem that resulted in a handful being excluded for the covenant.

Shifting gears, many of your competitors, like Nextracker, Array, and GameChange, have been diversifying through acquisitions in tangential product categories, including wires and foundations—Nextracker has even reached into inverters. I would love to hear your thoughts on your strategy surrounding this and whether you think you need a more diversified product lineup to remain competitive or if you're content with a single product focus.

I appreciate their growth, and while I understand their approach, our relationships as tracker vendors are such that procurement teams are often purchasing various products. Although there is overlap in who you converse with, each product's value proposition depends highly on its unique characteristics. We are experiencing growth at a pace that exceeds our peers, who seem to be seeking growth through diversification in alternate products. Our focus remains on becoming a top three tracker provider, and we are making considerable strides there. Hence, we’ve been investing in expanding our sales team and capabilities that allow us to progress in that direction. The tracker landscape is dynamic, and while peers are branching out into other areas, our growth trajectory remains significant as we head into 2026, outpacing the market. Currently, we are dedicating ourselves to gaining approved vendor placements, converting MSAs into projects; this is our core focus.

I have a quick follow-up on that. You make a compelling point regarding aiming for a top three tracker provider's position. Using Array as a benchmark—$1.2 billion in revenue—that suggests 12x growth for FTC Solar, Inc. How do you perceive the timelines for achieving that level of expansion, and how do you feel about your capacity to manage such growth?

Yes. As I have previously mentioned, it’s important to note that this journey will not be instantaneous nor linear. Comparing the projects we are evaluating now to my first day at the company, I encounter 300 to 400-megawatt opportunities every week that we can bid on, and we are now listed on the approved vendor lists among both IPP and EPC sectors. These prerequisites are integral to our growth. The advancements we have made in our product portfolio—including longer trackers and washerless components—target specific customer needs based on regional or installation preferences. We do not anticipate a capacity constraint if we can convert our MSAs and project opportunities into bookings. With our acquisition of Alpha Steel in Q4, we have more control over our supply chain alongside our global contract manufacturing capabilities. Ultimately, the direction is dictated by customer input; the EPCs inform us about expectations regarding the tracker mix. The market can shift quickly; a couple of years ago, the trend shifted negatively for FTC Solar, Inc., but now the momentum has reversed positively. Our growth in the latter half of 2025 against our peers serves as a leading indicator. However, I reiterate that my optimism is derived from (01) meeting with clients in the U.S. and abroad, highlighting their ongoing demand for diversification; there is a recognized urgency to decrease their reliance on a few vendors. This isn't a criticism of our peers—many are doing an excellent job—but rather a recognition of the evolving landscape where clients are increasingly looking for architecture that fits the specific needs of their sites.

Thank you so much. I appreciate your attention to my questions and your patience with me.

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