FTC Solar Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 9, 2023

There are 10 speakers on the call.

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the FTC Solar Second Quarter 2023 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. At this time, I would like to turn the conference over to Mr.

Operator

Bill Michalek, Vice President, Investor Relations. Sir, please begin.

Speaker 1

Thank you, and welcome, everyone, to SEC Solar's 2nd quarter 2020 Earnings Conference Call. Before today's call, you may have reviewed our earnings release, supplemental financial information and slide presentation, 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 Sean Hunkler, FTC Solar's This 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.

Speaker 1

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 required by law. As you'd expect, we'll discuss both GAAP and non GAAP financial measures today. Please note that 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 backlog and our definition of this With that, I'll turn the call over to

Speaker 2

Sean. Thanks, Bill, and good morning, everyone. Our earnings announcement today includes a mix of near term disappointment with project delays impacting revenue as well as some very positive developments, including a number of significant project wins here in the past few weeks, which will boost our performance as we head into 2024. Getting right into it, our revenue for the Q2 came in at $32,400,000 which was below our guidance range of $42,500,000 to $52,500,000 For the 3rd quarter, we now to see revenue in the $24,000,000 to $34,000,000 range, which while we didn't have a public guidance number out there, I can tell you is significantly below our The 2nd quarter shortfall is largely related to contracted revenue being pushed between quarters. Specifically, projects from one customer were delayed to allow for additional planning and review around domestic content As these projects are looking to take advantage of those incentives in the Inflation Reduction Act or IRA, the review has now been completed and the approach finalized, but it had the effect of pushing revenue from Q2 to Q4.

Speaker 2

As it relates to our Q3 expectations, Our bidding activity remains very high and we have won a fair amount of new business, but the timing of many projects going to purchase order has been slower or pushed out by customers, whether due to domestic content clarity, module availability or delays in permitting, Interconnection or other issues, unfortunately given our current revenue run rate, a small handful of projects can have an out sized impact on our results. That will improve as we get back to scale, but it's a problem we need to manage now. The good news is that we have seen a significant uptick in project activity and wins in the last few weeks, including several notable projects, which should position us for a meaningful improvement as we head into 2024. As a result of visibility around these projects, we now We expect that we'll return to revenue growth in the 4th quarter and be on an accelerating path as we enter the New Year. We expect the 4th quarter will be our Highest revenue quarter in 2023.

Speaker 2

While the cadence of our revenue growth is different than we may have hoped a quarter ago, We have a number of bright spots in our business that give us a great deal of confidence in our future. 1, we believe our manufacturing cost is now in line with our leading competitors. We are more competitive than ever and we will get better with scale. 2, Our average new project margins puts us on track to achieve the gross margin targets we provided in the past. This includes our target of Achieving a gross margin of 12% to 18% at the $150,000,000 quarterly run rate and a 20 plus percent margin over the longer term.

Speaker 2

Even with lower revenue in the 2nd quarter, we saw gross margin expand another 90 basis points. We're set up for a strong margin expansion as revenue grows. We're confident in our cost structure and we have a lot of margin leverage, but obviously the level of revenue which drives cost absorption is a key driver of the actual performance. 3, we are now actively in the market with our 1P solution. We believe the 1P market has done better in this time of restricted module availability and we didn't have a solution until more recently.

Speaker 2

We now have a solution and a growing 1P pipeline. And with a recently received UL certification, we're focused on converting that pipeline to awards. In fact, we just won our largest 1P award to date at 140 plus megawatts, so we are on our way. And by the way, that 140 Megawatts is part of an overall 1 gigawatt award that we received in the last few weeks, which includes supplying a large multi technology renewables project in the Pacific Northwest. 4, We continue to grow our international business and are gaining traction in new regions.

Speaker 2

A couple of examples over the past few weeks include a new 120 Megawatt award in South Africa. We also won a new 300 Megawatt award for multiple projects in Italy and Spain, including utility scale agrivoltaic projects. These will be our first projects in these countries as we continue to expand in Europe and expand our served market. We have now been awarded projects in a dozen countries outside the U. S.

Speaker 2

And with the recent addition of our 1P Pioneer solution, we believe will be even better positioned to continue to grow our international business as well as our business overall. 5, Our backlog has now grown to $1,600,000,000 with $259,000,000 added since May 10. The recent project awards I've mentioned among others have helped us grow backlog to this new level. Most of these new multi project awards include projects that we expect will We'll have near term purchase order dates and in some cases beginning initial production on the first projects during the Q4 of this year, with final projects expected to run through the end of 2025. The majority of the remainder of our backlog is 2P, which we expect will be increasingly constructed as module availability improves.

Speaker 2

The continued growth of our backlog and the recent additions of certain projects that we expect will include more near term start dates allows us to continue to be cautiously optimistic about 2024 and gives us a nice foundation for future growth. And then 6th and finally, we continue to control our operating expenses. You'll notice that our Q2 OpEx came in better than we had guided and that along with the improved margins allowed us to keep adjusted EBITDA flat quarter over quarter Despite the lower revenue, we'll continue to control costs and look for efficiencies in many places. However, we will invest More in sales and engineering to support growth and the pipeline conversion. So in summary, while our cadence of revenue recovery is slower than we would have hoped a quarter ago, We have seen an exceptional spate of wins in the past few weeks, which gives us confidence in a return to growth in the Q4 and into 2024.

Speaker 2

Our international expansion continues and our newly certified 1P offering will only enhance that growth over time. We are positioned with a product cost structure that will enable our run of gross margin expansion to resume and reach new highs along with that revenue growth. And we will keep a cap on operating expenses while investing for future growth. With that, I'll turn it over to Phelps. Thanks, Sean, and good morning, everyone.

Speaker 2

I'll provide some additional color on our 2nd quarter performance and our outlook. So let's begin with the 2nd quarter. As Sean mentioned, As we move on to gross profit, as you would expect, the delay in revenue also flowed down and caused margin to come in below our expectations. However, with project margins continuing to improve, we are still able to expand our gross margin percentage relative to the last quarter even on lower revenue. Specifically, our GAAP gross profit was $2,200,000 or 6.8 percent of revenue compared to $2,000,000 or 5% of revenue in the prior quarter.

Speaker 2

On a non GAAP basis, gross profit was $2,600,000 or 8.2 percent of revenue compared to a non GAAP gross profit of $3,000,000 or 7.3 percent in the prior quarter. This represents a 90 basis point improvement quarter over quarter on the non GAAP gross Margin, our 2nd quarter of positive margin since our IPO and a 58 percentage point improvement over the past 3 quarters. On a year over year basis, we delivered improvement to the non GAAP gross profit of $8,000,000 on less than $2,000,000 increase in revenue. The improvements were driven primarily by improved tracker direct margins helped by our product cost reduction efforts. Moving to OpEx, our GAAP operating expenses was $12,600,000 On a non GAAP basis, excluding stock based compensation and certain other expenses, Our operating expense was $9,700,000 compared to $12,400,000 in the year ago quarter.

Speaker 2

This was below or better than our guidance range. The year over year improvement was driven primarily by lower R and D and personnel related expenses. Next, GAAP net loss was $10,400,000 or $0.09 per share compared to the loss of $11,800,000 or $0.11 per share in the prior quarter and compared to a net loss of $25,700,000 in the year ago quarter. Our adjusted EBITDA loss, which excludes approximately $3,200,000 including stock based compensation expense and certain other non cash items was $7,200,000 which was just above the low end of our guidance range. The result was approximately flat versus the prior quarter and represented an improvement of $10,500,000 compared to an adjusted EBITDA loss of $17,700,000 in the year ago quarter.

Speaker 2

Finally, Regarding liquidity, we had an operational use of cash for the quarter, offset by usage of the ATM facility for which we received $15,200,000 of cash within the quarter. In aggregate, we ended the quarter with $33,800,000 of cash on the balance sheet. We continue to hold no debt on the balance sheet. We have an undrawn credit revolver as well as $76,000,000 remaining under the ATM program at quarter end. So with that, let's turn our focus to the outlook.

Speaker 2

Based upon our current view, which includes the project delays Sean mentioned, we expect the 3rd quarter revenue to be flattish to down relative to the 2nd quarter. Our gross margin performance will be based on how revenue comes in. If the revenue is down, the lower cost absorption will be to margins coming in lower sequentially. However, if revenue is flat or slightly up, then we could see margins come in higher than the 2nd quarter. We expect this to be filed in the 4th quarter by resumption in revenue growth and margin expansion as the recent project wins are expected to begin production.

Speaker 2

Specifically, our targets for the Q3 call for the following: 1st, revenue between $24,000,000 $34,000,000 Next, non GAAP gross margins between $700,000 $3,100,000 or between 3% 9% of revenue. Next, non GAAP operating expenses between $10,000,000 $11,000,000 and finally adjusted EBITDA loss between $10,300,000 $6,900,000 Looking forward, the recent uptick in project wins give us increased confidence that the revenue ramp The Q4 should continue into 2024. So in closing, the actions we've taken to strengthen the company, broadening our product offerings, Refocusing our sales efforts and improving our cost structure will benefit GreatLit moving forward. These efforts coupled with $1,600,000,000 in backlog have positioned us to not only grow, but to grow profitably. With that, we conclude our prepared remarks and I'll turn it over to the operator for any questions.

Speaker 2

Operator?

Operator

Our first question or comment comes from the line of Donald Schafer from Northern Capital Markets. Mr. Shaffer, your line is open.

Speaker 3

Hi, guys. Thanks for taking the questions. So I first want to ask About the backlog, every time we meet, it seems like you guys have either just come from meeting with customers or right after you're rushing out the door to go meet with So it's pretty clear to me that you're hustling and really kind of doing everything you can to generate sales and we see this in the growing backlog. But if we look at the backlog you have versus the backlog of some of your peers, it's comparably large in size, But it hasn't really flowed through or hit the financials yet. So I'm wondering if and you've given appropriate kind of reasons and For all of that, but is there anything additional color you can give us on the backlog that given that we haven't seen it in the financials yet, Can you give us additional kind of assurances around there?

Speaker 3

Things like can you talk about the extent to which it has VCAs that some peers have Been using the how prevalent deposits are or the significance of the size, really just anything to give us a better sense of kind of Having teeth to or staying power to this backlog, that would be great.

Speaker 2

Yes. Hey, Donovan, this is Sean. Thanks for the question. Yes, let me comment a little bit on the backlog. So if you think about Our results, obviously, we're disappointed by our short term results, but we remain optimistic and excited about the future.

Speaker 2

And one of the reasons is our backlog and the team has done a great job continuing to grow the backlog. We talked a little bit about 2P versus 1P, the majority of our backlog is 2P, but we continue to add to it. We added we talked about our 1P addition, the new project at 140 Megawatts, part of an overall 1 gigawatt project that we're Super excited about. As we look forward, one of the reasons we're excited is we feel there's momentum and that we're Our expectation is that we'll see backlog conversion really in 2024 with all momentum we're seeing looking forward to 2024. Let me ask Patrick to comment as well.

Speaker 2

Yes, Donovan, thanks for question, I mean, I think I'll break it up in 2 parts. If you look at the $259,000,000 that we booked this quarter, a lot of that is Set to start kind of production in the back half of this year and into 2024. So these are Projects that with near term that will carry over multiple quarters. So that conversion time of the backlog is going to be relatively short in comparison to some of the projects that we've ultimately booked in the past. But as Sean said, as we started modules have started to get released, You've seen more projects ultimately go through.

Speaker 2

Our 2P backlog, when we talk with our customers is expecting to be unlocked In 2024, as we kind of set the stage, PCs and developers that we've been working with. So Seeing progress and really working on those projects now that have been sitting in our backlog for quite some time, and we're excited to convert that. Did I answer your question, Donnan?

Speaker 3

Yes, that answers my question. Thank you. As a follow-up, For guidance, you guys are still kind of relatively new and growing company. And Sean, you've been at the helm for not the whole kind of duration of the company. So with that in mind, I'm curious if you The guidance process that you go through sort of internally when you decide, then what guidance you're going to kind of put out externally, Has that been evolving or changing?

Speaker 3

I'm asking because there's kind of a learning curve and figuring things out and The miss on Q2 guidance coming in lower than what you had guided, obviously, there's a lot going on in the market right now. But when something like that happens, do you then kind of sharpen your pencil and say, is there something we can do from a process standpoint or To get better at putting out our guidance, like is it the same process you went through for your 3rd quarter guidance as the process you went to, to come to 2nd quarter guidance? Or are you kind of trying to figure out better ways to pin that down?

Speaker 2

Yes. Donovan, we like to think of ourselves as a learning company. And like you said, we're a relatively new company, But we spend a lot of time looking at processes and procedures from top to bottom in the company. And we always We look at any time there's a defect, there's an opportunity to improve further. But we spend we take the Guidance quite seriously and we do spend a lot of time internally as we think through the guidance.

Speaker 2

As we look at Q2, As we talked about, we saw some projects shift. And unfortunately, as we continue to build, our base isn't Quite yet to the point where it can it's very impactful when we see a few projects shift out just because our base is still growing. But for all the things that we talked about in the earnings just a few moments ago, we remain very, very optimistic about Yes. The other thing I'd add, Donovan, as it relates to the Q2 guidance, obviously, Disappointing, but these were projects that we had ultimately purchase orders for, but given kind of the IRA ambiguity, the customer ultimately elected to push those out into Q4. And so these were projects that have orders in hand, but they'll ultimate delivery and revenue recognition Because of IRA, moved those out 2 quarters just to make sure that they could take advantage of the added incentive.

Speaker 3

Okay. Thank you. That's very helpful. I'll take the

Speaker 4

rest of my questions offline. Thanks.

Speaker 2

Operator?

Operator

Sorry, I was on mute. Our next question or comment comes from the line of Phil Shen from Roth MKM, Mr. Shin, your line is open.

Speaker 4

Hi, everyone. Thanks for taking the questions. I wanted to dig into the outlook a little bit more. I was wondering if you could talk through some of the Q4 math on revenue. You talked about shipments being pushed out from Q2 to Q4.

Speaker 4

Do you see any Can you quantify the push outs from Q3 as well? And how much of that might also be in Q4? And should we be thinking about Q4 Kind of being well above $100,000,000 I know you haven't put out exact guidance, but was wondering if you could kind of bracket it for us in some way. Thanks.

Speaker 2

Yes, I mean, I think as it relates to the push outs from Q2 to Q4, a lot of the customers are trying to get Certain reach a certain kind of completion milestone by the end of the year. So we're not really anticipating any Project push outs from Q4 to Q1, ultimately at this time, because a lot of these projects ultimately need to take The incentive in 2023. And so from the perspective of Q2 to Q4, The partner that we were working with had the additional time to optimize their kind of incentive structure and still make it under the twelvethirty one deadline.

Speaker 4

Thanks, Phelps. Can you talk about how much you saw maybe from Q3 to Q4 or maybe into later quarters?

Speaker 2

Yes. I mean, I think, I'll tell you in terms of push ups. So we're very comfortable with the 2024 build out. When you look at Q3 to Q2, there is also some additional delays. I mean, I think you look at kind of where we bracketed, I think we said qualitatively since We're not providing Q4 guidance at this point that it will be the highest quarter that we've delivered to date within the year is our expectations for the quarter.

Speaker 2

There is potential upside there. Basically, it's predicated upon how much manufacturing production we can get within the quarter. So there will be some Depending on the time of the POs that we receive in Q3 that will drive the actual high end of the Q4 revenue, Phil. And the other part, Phil, if you look at the contract or the awards that we got, kind of articulated between South Africa, What we've got in the U. S.

Speaker 2

And then Europe and Spain, I mean these are projects that have either single large single projects or projects We're going to start recognizing revenue in the back half of this year and into 2020 and kind of carries in multiple quarters into 2024.

Speaker 4

Great. Okay. Thanks, Patrick and Phelps. In terms of the backlog, dollars 1,600,000,000 it's a big number. It's Much higher than what your quarterly revenue run rate would suggest.

Speaker 4

You talked about in your prepared remarks Meaningful growth in 2024. Consensus revenue has you close to $500,000,000 of revenue in 2024. Can you share what part of your Backlog is designated for 2024? Thanks.

Speaker 2

I don't think we're not Sharing how much of our backlog is broken out into 2024. I guess I'd leave kind of with 2 points. As we looked at the kind of historical backlog and the continued push outs with lack of module availability, we're now working with those developers We're kind of start anticipated start dates in 2024. In terms of kind of the 2024 and consensus numbers, Really not looking to reset expectations at this time at all.

Speaker 4

Okay, great. Thanks guys. I'll pass it on. Yes. Thanks, Phil.

Speaker 4

Thanks, Phil.

Operator

Thank you. Our next question or comment comes from the line of Kashy Harrison from Piper Sandler. Your line is now open.

Speaker 5

Just one for me as my other questions

Speaker 3

So you guys used north

Speaker 5

of $20,000,000 of cash in 2Q organically, which as you indicated was funded with the ATM. I was just wondering if you could speak to your expectations surrounding cash flow from ops in the second half of the year. Is it and then working capital as well. Just trying to get a sense of cash needs in 2H 2023. And that's it for me.

Speaker 2

Hey, Kashy, it's Phil. So thanks for the question. I think if you look at kind of Q3, right, the guidance is Yes, an EBITDA burn for the quarter, but what we see as potential offset is we anticipate the current forecast to deleverage some of the AR this quarter with some Chunky collections that were anticipating to come in that will offset some of that. And then in addition, as these Few projects hit within the quarter, you're going to get some additional deposits and down payments that would offset some of that potential Operational burn as you build up the revenue base. Got it.

Speaker 2

Thank you. Thanks for the question.

Operator

Thank you. Our next question or comment comes from the line of Jeff Osborne from TD Cowen. Mr. Osborne, your line is now open.

Speaker 2

Hi, Jeff.

Speaker 6

Beating that to a dead horse, but can we just talk about the linearity in the quarter? Was this problems that came up late in the quarter would be part A of the question and B, you had sort of a laundry list Of issues between module availability, interconnections, permits, etcetera. Is there a way of rank ordering those?

Speaker 2

Jeff, I would this is Sean. I would say, as we mentioned in the remarks, our biggest single issue was the shift of Projects related to the domestic content, the customer basically finalizing their strategy. So that was That accounted for the lion's share of the miss.

Speaker 6

And was that something that developed late in the quarter Versus expectation?

Speaker 2

Yes, it was. So as Patrick mentioned earlier, Jeff, we had the POs. They made a shift in terms of their strategy mid quarter to once some of the IRA information came out as a consequence, That's where it pushed out to the later quarters.

Speaker 6

Got it. My last question is just you made the comments on the margins, which are helpful at different revenue rates. You just talk about the overall pricing environment, both domestically and internationally?

Speaker 2

I mean, I think from a pricing perspective, With our cost structure that we have, we're able to really price these projects appropriately. We're not seeing kind of a race to the bottom in the geographies, which we're currently engaging with. And In terms of pricing and margins, the U. S. Continues to be a really good sector for us and continues to expand our margins.

Speaker 2

We're really excited about The 300 megawatts that we're going to be doing with RE or 5E across 11 different projects, 2 large scale utility projects and some distributed generation, all at very, very good and healthy margins. So We're not seeing a lot of pricing pressure. We're seeing the ability for us to compete with our cost structure and deliver continue to grow our margin base.

Speaker 6

Thank you. That's all I had.

Operator

Thanks. Thank you. Stand by. Our next question or comment comes from the line of Julien Dumoulin Smith from Bank of America. Your line is open.

Speaker 7

Hi. This is actually Morgan Regan on for Julian here. Thanks for the comments this quarter. I guess, if you could kind of elaborate on the gross Margin inflection that you're expecting in the Q4 that would be helpful given that this is going to be kind of the record revenue base. Understand that like the previous guidance for 2Q that wasn't hit given the revenue issue.

Speaker 7

I guess should we expect gross margins maybe In excess of that sort of 2Q type level, given the sort of confidence that you have around the 4Q guidance on a volume and revenue base?

Speaker 2

Yes. Hey, Morgan. Thanks for the questions, Phil. So I think the expectation for Q4, as we said earlier, it's going to be the highest For the year in terms of expectations. In terms of getting operating leverage on the business, obviously, as you grow the top line revenue, Your overhead gets some leverage on top of that.

Speaker 2

We're continuing to see the project margins be very strong individually. What you're seeing in Q2 and Q3, from Q1 to Q2, despite the fact that the revenue came backwards a little bit in Q2, we're still able to grow The gross margins by 90 basis points, which I think is a good proof point to everybody of the individual product margins. If you look at the variability, the guidance range for Q3, that's really just driven by the overhead that is basically the floor of the overhead that's Not going to branch it up one way or the other. So in terms of margin for Q4, again, we haven't guided to that. But again, as you can anticipate, if you look back kind of The Q2 guidance range at those type of live revenue levels, that's where we'd anticipate margins to be at this point based upon getting the operating leverage on the overhead as well as the project margins that we're seeing in the pipeline.

Speaker 7

Got it. That's helpful. And then Last one from me. In terms of the project pipeline or the backlog that you've outlined, you talked about kind of a Split between 1P and 2P, where 2P is currently the lion's share of the backlog. But it sounds like based on your prepared remarks that The 2 key projects are kind of particularly delayed in terms of their ability to go through because of module availability concern.

Speaker 7

I guess, what's the confidence that like the lion's share of that backlog then flows through given that it sounds like most of those projects are tied to 2P projects, which are Most acutely exposed to the module availability concerns that you've outlined.

Speaker 2

Yes, I mean, I think thanks, Morgan. This is Patrick. I mean, I think from our perspective, We've seen the module environment through kind of through the back half of the year and we've seen the engagement level on these defined projects that are in our backlog Really start to ramp up as we start going through final design, engineering, getting The site design finalized and ultimately ready to go. And so there's been an uptick in activity to get those projects ready to start construction In 2024, and previously, it's been more of a kind of wait and see as modules become available. And with the release of more and more modules, Those projects are moving forward.

Speaker 2

We're definitely seeing strong momentum as we look into 2024 for backlog conversion.

Speaker 7

Got it. Thank you. I'll take the rest offline.

Operator

Thank you. Our next question or comment comes from the line of Graeme Price from Raymond James. Mr. Price, your line is now open.

Speaker 5

Hi, good morning. Thanks for taking the question.

Speaker 2

Maybe just one more on the quarter over Quarter margin improvement,

Speaker 8

you mentioned the number of items on the cost side. I was wondering if ASPs were up quarter over quarter and just kind of the relative contribution between that improvement from pricing versus the cost side?

Speaker 2

So I would look at it, Graham, that really our a lot of it It's coming from the cost improvements that we continue to drive. And so the team has been absolutely relentless in taking cost out of Both our 2P product as well as our 1P product. And so that has been a major factor in contributing to the Margin uplift. Got it. Thanks.

Speaker 8

And then for my follow-up, Great to see the expansion in Italy and Spain. Wondering looking forward how we should think about international versus U. S. Looking mix and how that's trending?

Speaker 2

So we're very excited about the progress we're making Internationally, we talked about the new award in South Africa. And as you mentioned, the projects in Spain and Italy, We see continued progress in markets like Australia as well. However, our still our We're still seeing strength, obviously, in the U. S. Environment.

Speaker 2

And so I think over time, we'll see the international continue to strengthen as a percent of the total, but the U. S. Market will still continue to be Very, very strong core market for us. Got it. Thank you.

Speaker 2

That's it for me.

Operator

Thank you. Our next question or comment comes from the line of Sameer Joshi from H. C. Wainwright. Joshi, your line is now open.

Speaker 8

Hey, guys. Can you hear me?

Speaker 2

Yes. Yes.

Speaker 9

Yes. Thanks for taking my question. On the G and A front, it seems you have been able to control those costs fairly well. Was there any one time benefit on a non GAAP basis That might have been here or is this the level we should expect going forward?

Speaker 2

Yes. So thanks for the question. No, I mean that's an area that we've obviously been very focused On is the OpEx side. We'll continue to have a focus on OpEx. It's something that we continually view as a management team.

Speaker 2

But no, that's the areas that we're going to keep that in check, control the things that we control. There is lumpiness in the business with product starts and positive push outs, but this is the one area that we're going to control and we'll continue to keep an eye on that.

Speaker 9

Okay. And just one more. Of the 259,000,000 New orders, what proportion of this was non UFLPA?

Speaker 2

All of it is non UFLPA. So of what we booked this quarter, it's either international or the projects have modules.

Speaker 9

Okay. Thanks for that. And just maybe if

Speaker 8

I can, if I may,

Speaker 9

One of the projects announced today, the project wins announced today includes floating solar installation. Can you let us know what your capabilities are on that front?

Speaker 2

So, no, great question. So we will not be providing the floating solar For this particular project, we are going to be providing 1 gigawatt worth of trackers, but this is part of a pretty groundbreaking, Just generally renewable energy project in the Pacific Northwest and we're excited to be a part of it, but We are delivering our 1 and 2P tracker in the mode of a gigawatt.

Speaker 9

Thanks for that clarification and good luck. Thank you.

Speaker 2

Thank you. Thank

Operator

you. Thank you. I'm showing no additional questions in the queue at this time. I would like to turn the conference back over to management for any closing comments.

Speaker 2

Hey, thanks very much everyone for joining us. We appreciate your time. And while we do have disappointment with our Q2 results, We are absolutely optimistic about the future and the opportunities out there. So thank you again for your time, and we look forward to our next interaction.

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Key Takeaways

  • FTC Solar reported Q2 revenue of $32.4 million, missing its guidance of $42.5–52.5 million due to project delays for IRA domestic content reviews, and now expects Q3 revenue of $24–34 million with Q4 set to be its highest revenue quarter of 2023.
  • Backlog grew to $1.6 billion (up $259 million since May), with many new awards expected to begin purchase orders and initial production in Q4 and extend through 2025, supporting a return to growth in Q4 and 2024.
  • Non-GAAP gross margin expanded by 90 basis points in Q2 to 8.2% despite lower revenue, with manufacturing costs now in line with competitors and targets of 12–18% margin at a $150 million quarterly run rate and >20% long-term.
  • The newly UL-certified 1P tracker solution has gained traction, highlighted by a 140 MW award (part of a 1 GW multi-technology renewables project), positioning FTC Solar to capitalize on restricted module availability.
  • International business continues to accelerate with recent wins including a 120 MW project in South Africa and 300 MW of utility-scale agrivoltaic projects in Italy and Spain, bringing awards in 12 countries outside the U.S.
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Earnings Conference Call
FTC Solar Q2 2023
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