Earnings call transcript: FTC Solar Q4 2024 revenue falls, stock declines

FTC Solar Inc. reported a revenue decline of 43.1% year-over-year for Q4 2024, while its stock experienced a significant drop following the earnings announcement. According to InvestingPro data, the company’s revenue decline has been even more severe over the last twelve months at -55.89%, with particularly weak gross profit margins at -13.62%. The company’s earnings per share (EPS) were lower than expected, contributing to a negative market reaction. Despite these challenges, FTC Solar outlined strategic initiatives aimed at future growth.

Key Takeaways

• FTC Solar’s Q4 2024 revenue decreased by 43.1% year-over-year.
• The company launched a new product, the 1P Pioneer Tracker, to improve installation efficiency.
• Stock price fell by 7.04% immediately after the earnings announcement.
• FTC Solar expects a 44% revenue growth in Q1 2025.
• The company aims for adjusted EBITDA breakeven in 2025.

Company Performance

FTC Solar’s performance in Q4 2024 reflected a challenging period, with revenue reaching $13.2 million, a 30.2% increase from the previous quarter but a 43.1% decrease compared to the same period last year. The company reported a GAAP net loss of $12.2 million, or $0.96 per diluted share. InvestingPro analysis reveals concerning trends, with the company’s overall Financial Health Score at a weak 1.3 out of 10, though it maintains more cash than debt on its balance sheet. Despite these results, FTC Solar is focusing on innovation and operational efficiency to drive future growth. Unlock 15+ additional InvestingPro Tips and comprehensive financial metrics with an InvestingPro subscription.

Financial Highlights

• Revenue: $13.2 million (30.2% increase from Q3 2024, 43.1% decrease YoY)
• GAAP Net Loss: $12.2 million ($0.96 per diluted share)
• Adjusted EBITDA Loss: $9.8 million
• Cash Balance: $11.2 million at quarter-end

Earnings vs. Forecast

FTC Solar’s earnings per share fell short of the forecasted -$0.0775, with the actual EPS at -$0.96. The revenue forecast was $11.86 million, but the company exceeded this with $13.2 million. The earnings miss and revenue beat resulted in mixed investor sentiment.

Market Reaction

Following the earnings release, FTC Solar’s stock dropped by 7.04%, closing at $2.51. In premarket trading, the stock further declined by 6%, reaching $2.35. InvestingPro data shows the stock has fallen significantly over multiple timeframes, with a -53.62% return over the past year and -63.27% over the last six months. Based on InvestingPro’s Fair Value analysis, the stock appears undervalued at current levels, though investors should note the company’s rapid cash burn rate and analysts’ expectations of continued losses this year. This movement reflects investor concerns over the company’s financial performance and future profitability.

Outlook & Guidance

Looking ahead, FTC Solar projects Q1 2025 revenue between $18 million and $20 million, marking a 44% sequential growth. The company is targeting adjusted EBITDA breakeven in 2025 and anticipates continued growth driven by strategic initiatives and product innovations.

Executive Commentary

CEO Jan Brandt emphasized the company’s long-term growth strategy, stating, "Sustainable growth is a process that doesn’t happen overnight." He also noted, "We believe our revenue bottomed in Q3," indicating optimism for future performance.

Risks and Challenges

• Supply chain disruptions could impact production and delivery timelines.
• Market saturation in key regions may limit growth opportunities.
• Macroeconomic pressures, such as inflation, could affect costs and margins.
• Competition in the solar technology sector remains intense.
• Currency fluctuations could impact international revenue streams.

Q&A

During the earnings call, analysts inquired about the company’s 5 GW agreement with Recurrent Energy, spanning the U.S., Europe, and Australia. FTC Solar highlighted its focus on 1P tracker technology and its limited exposure to steel price volatility as key factors in its strategic planning.

Full transcript - FTC Solar Inc (FTCI) Q4 2024:

: Good day and thank you

Conference Call Operator: for standing by. Welcome to the FTC Solar Fourth Quarter twenty twenty four 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 Please be advised, today’s conference is being recorded. I would now like to hand conference over to your speaker today, Bill Michalak, Vice President, Investor Relations.

Please go ahead.

Bill Michalak, Vice President, Investor Relations, FTC Solar: Thank you, and welcome, everyone, to SEC Solar’s fourth quarter twenty twenty four 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 ftcolar.com. I’m joined today by Jan Brandt, the company’s President and Chief Executive Officer Kathy Beynon, 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’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 Jan.

Jan Brandt, President and Chief Executive Officer, FTC Solar: Thanks, Bill, and good morning, everyone. It’s great to speak with you all again here on my second earnings call as CEO of FTC Solar. I’ll provide a few updates and commentary and then turn it over to Kathy to review the financials. During the first six months of my tenure, our primary focus has been on shoring up our near term backlog, while also adding some incremental liquidity to the business. We have made very significant progress, including adding many multiples of our current annual revenue run rate to our backlog and signing long term customer agreements.

I’ll share more on this progress in a moment, but would like to start by briefly reviewing a few comments I made on the last earnings call. During that call, I shared my ninety day observations on the company. My optimism about the path to success for FTC Solar built on the foundation of a great team, a complete product set and a cost structure poised to enable strong margin growth and profitability. To summarize those observations briefly, they include: one, FCC Solar is at a clear inflection point and adoption of our differentiated 1P technology is on the brink of major deployment by some of the biggest solar IPPs and EPCs in the world. Two, our relationships with the global customer base are in great position.

In this moment of the solar market, knowing how to bring a solar project to completion is critical and our team’s collective experience is very well regarded in that way. Three, the FTC Solar 1P tracker is the latest in this category to come to market. It has features and technology that are clearly differentiated and make it an easier, faster and safer tracker to install. And four, in 2025, we will see good progress on the conversion of our backlog into revenue, which will support us achieving quarterly profitability this year. So with that brief review of observations and the foundation for my optimism, let me give you an update on the progress we have made to further support our recovery and strong future growth prospects.

While I’m pleased to say that we have had a number of recent wins and are building momentum, on our last call, I highlighted a 500 megawatt supply agreement with Strata Clean Energy, a new one gigawatt supply agreement with Dunley Energy, additional detail on a one gigawatt agreement with Sand Hills Energy, a $15,000,000 note placement and a $4,700,000 cash earn up on a prior investment. Building on those successes, today we announced or highlighted several additional wins. These include: First, we announced today that we have entered into a five year five gigawatt supply arrangement with Recurrent Energy. Recurrent is one of the world’s largest and most geographically diversified utility scale solar developers. The projects are expected to be located in The U.

S, Europe and Australia and utilize a combination of our 1P and 2P tracker technologies. It is anticipated that the first project revenue under this arrangement will begin in the second half of twenty twenty five. Second, we announced today a new three thirty three megawatt project award notice from GPG, the power generation subsidiary of multinational energy leader, Nattergy, which operates in more than 20 countries with 16,000,000 customers. The project, which is located in Australia will utilize our 1P Pioneer Tracker and is expected to begin tracker production in mid-twenty twenty five. Third, we announced a new two eighty megawatt project award from Rosenden, a top five EPC and the largest employee owned electrical contractor in The U.

S. The project, which is located on The U. S. West Coast, will also utilize our 1P Pioneer solution and is expected to begin tracker production in mid-twenty twenty five. Fourth, on top of those wins, we have also continued to strengthen our positioning and talent, including the appointment last month of solar industry veteran, Ken James, as Chief Commercial Officer for North America.

Kent is someone I’ve known and worked alongside for nearly twenty years. He’s one of the founding members of Primoris Renewables and helped scale the company to what it is today. I know he will drive even stronger engagement with the developer and EPC community and add significant value to our company. We have also seen a significant increase in our bidding run rate, which has recently been nearly double what it was in the second quarter of last year. We’re driving up our domestic content capabilities and are already taking orders for 100% domestic content, which we expect to have available in Q3 of this year.

On the international front, the large Australia project is a great win and we expect to see increasing international traction, particularly in Australia and Europe. Our team is also working on a specialty designed tracker for the India market as the market transitions in a big way from fixed tilt to tracker and the market opportunity is great. Finally, within the past few weeks, we have received another $3,200,000 earn out on our investment in Dimension Energy and we upsized our note offering, which will bring in up to an additional $10,000,000 to $15,000,000 in the coming days. So as I mentioned during the first six months of my tenure, we have been focused on shoring up our near term backlog while also adding liquidity. In aggregate, we have added multiples of our current annual revenue run rate to our backlog, signing agreements totaling more than 6.5 gigawatts with Tier one accounts along with other awards, added more than $30,000,000 in additional liquidity to our balance sheet, strengthened our sales team with new hires including Ken James, further strengthened our product offering and capabilities and increased our commercial traction with bids on many gigawatts of future projects.

Ultimately, the opportunity for FTC stems from the combination of our people and product providing the best value for our customers. We look at the market today that has two extremes to navigate, incredible demand for energy generation built now and an increasingly stressed labor market for our EPC partners. Tracker installations can make up more than 60% of the labor need on a solar project. So being able to install FTC trackers easier, faster and safer is incredibly valuable for our construction partners. Easier means you can train new workers to get proficient quickly, while reducing the need for specialty tools and equipment.

Faster is man hour savings value right to the bottom line of our partners and the project P and L to get more solar built in the same time span. And every construction site starts and ends with safety. And I’m proud of the role FTC plays to reduce injuries on the job site. We may not be the largest tracker company in the market today, but the demand for our product is increasing and most conversations I have with existing and prospective customers give me additional optimism. That increasing demand will grow our backlog and bolster our ability to grow as a company.

Sustainable growth is a process that doesn’t happen overnight. It’s rooted in technology and people that provide measurable value for partners and we have those crucial ingredients. In closing, I believe that FTC Solar is in an incredibly fortunate situation in many respects with products that customers love, a business they enjoy working with and a cost structure that will enable strong margin growth and profitability, and a compelling 1P product set that opens up to 85% of the market that wasn’t available to us before. We believe our revenue bottomed in Q3. We saw growth in Q4 and expect growth in Q1 and have been winning many new awards that will help us ramp our revenue, achieve adjusted EBITDA breakeven and become a strong and significant competitor in the industry.

With that, I’ll turn it over to Kathy.

Kathy Beynon, Chief Financial Officer, FTC Solar: Thanks, Jan, and good morning, everyone. I’ll provide some additional color on our fourth quarter performance and our outlook. Beginning with a discussion of the fourth quarter, revenue came in at $13,200,000 which was at the high end of our target range. This revenue level represents an increase of 30.2% compared to the prior quarter and a decrease of 43.1% compared to the year earlier quarter due to lower product volumes. GAAP gross loss was $3,800,000 or 29.1% of revenue compared to gross loss of $4,300,000 or 42.5% of revenue in the prior quarter.

Non GAAP gross loss was $3,400,000 or 25.6% of revenue at about the midpoint of our guidance. The results for this quarter compared to a non GAAP gross loss of $3,900,000 or 38.3% of revenue in the prior quarter. GAAP operating expenses were 9,600,000 on a non GAAP basis excluding stock based compensation and certain other costs, operating expenses were $7,400,000 down from $10,800,000 in the same quarter last year. This represents the lowest level of OpEx since early twenty twenty one as we have found efficiencies across the company while continuing to invest to support growth. This result compares to non GAAP operating expense of $8,100,000 in the prior quarter.

GAAP net loss was $12,200,000 or $0.96 per diluted share compared to a loss of $15,400,000 or $1.21 per diluted share in the prior quarter as adjusted for the reverse split and compared to a net loss of $11,200,000 or $0.89 per diluted share post split in the year ago quarter. Adjusted EBITDA loss, which excludes an approximate $2,400,000 from stock based compensation expense and other non cash items was $9,800,000 which was better than our guidance range. This compares to losses of 12,200,000 in the prior quarter and $10,100,000 in the year ago quarter. In terms of backlog, reflecting $67,000,000 in new purchase order additions since 11/12/2024, and $65,000,000 in adjustments to existing projects, the contracted portion of the company’s backlog now stands at $5.00 $2,000,000 Finally, regarding liquidity. We ended the quarter with $11,200,000 in cash on the balance sheet.

Subsequent to quarter end, we received a $3,200,000 cash earn out relating to our investment in Dimension Energy. And as Jan mentioned, we signed a term sheet to upsize our promissory note offering. As you’ll recall, we collected $50,000,000 from the note offering in Q4 and will now receive up to an additional $10,000,000 to $15,000,000 here in the near term. On top of those items, we also continue to have about $65,000,000 remaining under the ATM program at the end of the quarter. With that, let us turn our focus to the outlook.

Our targets for the first quarter call for the following: revenue between $18,000,000 and $20,000,000 which at the midpoint would be up about 44% relative to the fourth quarter. Along with this revenue level, we expect non GAAP gross loss between $4,800,000 and $2,300,000 or between negative 26.611.7% of revenue. As you might expect, the percentage ranges vary more greatly at these revenue levels. Non GAAP operating expenses between $7,700,000 and $8,400,000 and finally, adjusted EBITDA loss between 13,300,000 and $10,000,000 And as Jan mentioned, we continue to expect to achieve adjusted EBITDA breakeven on a quarterly basis in 2025. With that, we conclude our prepared remarks and I will turn it over to the operator for any questions.

Operator?

Conference Call Operator: Our first question comes from Philip Shen with Roth Capital Partners. Your line is open.

Philip Shen, Analyst, Roth Capital Partners: Hey guys, thanks for taking the questions and congrats on the strong bookings momentum in this difficult environment. So wanted to talk through some of that, specifically on recurrent, that’s a big five gigawatt agreement there. Was wondering if you could share what the mix of 1P versus 2P is, the mix of the geographies. So is it more dominated outside of The U. S.

Or is it a U. S. Kind of centric agreement? And then also, you talked about the first project being put in place in the back half of this year, which geography would that be? And then if you can just speak more about the basis for the win beyond what you said in the prepared remarks, that would be great.

Thanks.

Jan Brandt, President and Chief Executive Officer, FTC Solar: Good to talk to you, Phil. Yes, I mean, look, we’re really excited about the partnership with Recurrent. And ultimately, it came down to answer the last part of your question first. We do have a really wide product set having really strong 1P offering now that’s latest to market, really easy to use. And then we have the 2P product that we’re one of the few manufacturers in the world that has it.

So the ability to do both, I think was a strong consideration for Recurrent. The 2025 project set, the diversity around where we’re going to be building and supplying trackers, like we said, is going to be U. S, Europe and Australia. U. S.

And Europe are likely to go first based on the work we’re now doing in terms of engineering and design. And I think you’re going to have numbers of projects be greater in Europe just because the project size is smaller, and you’re going to have larger more significant projects here in The U. S. But obviously from our standpoint, our preference is our goal is to supply the best product we can to wherever Recurrent is developing and deploying capital into these projects. They play role as a developer and asset owner.

So it takes into account all of the value propositions that we’re providing. Just the last part of your question, 1P and 2P is really going to be geographically oriented. 2P is a really strong offering still, especially where land density, the power density is important, but you have to have the right sort of environment in terms of wind loads and other technical considerations. So I think you’ll have some utilization of 2P in Europe and some parts of The U. S, but predominantly it’s going to be 1P.

I think overall it’ll be in line with where our current sort of pipeline and bid rate is, which is 85%, ninety % 1P.

Philip Shen, Analyst, Roth Capital Partners: Okay. Thanks, John. I appreciate that. Shifting over to the outlook for revenue, you gave an official guide for Q1 and that’s sequentially higher versus Q4. I know you don’t have an official outlook for Q2 or Q3, but can you talk about that trajectory maybe loosely speak through should we expect Q2 to be flat versus Q1 or should we see a ramp as we go through the year?

And if so, what needs to happen and what are the what needs to happen in order to hit those expectations and then what are some lines of potential risk? Thanks.

Jan Brandt, President and Chief Executive Officer, FTC Solar: Yes. We certainly expect the year to be back half weighted, right? This is a commercial focus of deploying 1P and getting contract signed. Certainly, we’re working with our developer partners and getting the projects to the finish line, going through the engineering. We’re very optimistic about continued growth through the year.

But I think the way that I would frame it is definitely focus on the second half and waiting from that standpoint. There’s definitely a step up in Q1 from the guidance, up 45% sequentially, and we would expect another step up at the back half of the year.

Philip Shen, Analyst, Roth Capital Partners: Okay. And then that would suggest Q2 might be more flat versus Q1?

Jan Brandt, President and Chief Executive Officer, FTC Solar: I think I don’t want to over promise for Q2. It could the way that I would think about FTC is every single project matters. So if one project pulls in, it could be up, it could be flat, but the optimism is quite strong. We’re focused on the execution side of the house and getting to breakeven EBITDA breakeven by the back half of the year.

Philip Shen, Analyst, Roth Capital Partners: Got it. Thank you. And then one more and then I’ll pass it on. In terms of your bookings momentum, you have had a bunch of these agreements since you’ve joined. So I was wondering if we should expect this kind of train of agreements to continue as we get through the first half of the year?

Jan Brandt, President and Chief Executive Officer, FTC Solar: That’s certainly the expectation, bringing Ken James in, having been one of the founding members of Primoris, we’re taking a very dual approach in both focusing on the value proposition that we’re bringing to EPCs, helping them lower their labor burden by making it easier and faster to install, but also partnering with IPPs like Dunley and Sandhills to help early stage engineering. I think we’ll have continued demand of folks to do something on the early stage, the supply arrangements or MSAs or purchase orders or ahead of shipment. I think those are going to be some of our tactics, but also I think quite a bit of focus like we had announcing sort of our new contract signings, which is actually showing those projects come to fruition. At a certain moment, like our peers, we’ll have the translation of early stage actually becoming projects that will start shipment. We expect that to happen to be a big part of our back half of the year as those projects go through the development process.

We’re making a lot of traction in our bidding. I think that’s always the top of the funnel. Getting our 1P product through approved vendor lists has been a strong, something we’ve been doing quite a bit over the last six months in getting products approved by the biggest IPPs and their backers, that allows us to bid. And we’re bidding almost double the gigawatts

Conference Call Operator: on

Jan Brandt, President and Chief Executive Officer, FTC Solar: a monthly basis than we were a year ago. So the top of the funnel is really strong and I think it shows the appetite for the technical value that our pioneer tracker is bringing to the table.

Philip Shen, Analyst, Roth Capital Partners: Great. Okay. Thanks, Sean. I’ll pass it

Conference Call Operator: on. One moment for our next question. Our next question comes from Jeff Osborne with TD Cowen. Your line is open.

: Thank you. Good morning. Just a couple of quick ones on my side. Jan, I was wondering if you could quantify the 1P and how much faster you’re seeing some of the partners that you’ve announced today, what the anticipated experience is? I think in the past you guys have talked about 30% to 40% faster if my memory is right, but that was under prior management team.

What’s the pitch these days?

Jan Brandt, President and Chief Executive Officer, FTC Solar: Yes. The pitch is, there’s a duality, right? And I’ll sort of put all of those on the umbrella that it’s also has a safety component to it, which is an important one obviously for because no labor is faster if it’s not safer, right. So for EPCs particularly, this is of utmost importance. I think overall when you think about it, the mechanical installation of the tracker represents something like 60% or more depending on the region of the overall labor need by an EPC.

We see an opportunity, again, that 30% to 40% remains true. Depending on where the project is, there’s also the ability for lower cost labor to be used for particular parts of the installation like installing our cinch clips, for example. That’s a much faster and much easier process that not only is less time, but also less cost. So you could see 0.03 plus a lot of benefit by using Pioneer. And we’re certainly working to continuously improve the process and bring some lean methodology to our process.

We have quite a big team working on the software and productivity side of how to install our tracker and just getting even better at that. We’re definitely looking to measure man hours per megawatt in a way that has returned data to each EPC. The more people will use the more people use our attackers, the more return data they’ll have and they’ll actually start including it in their bids. That’s always the leading edge of bringing a new product to market and why it takes a little bit of time sometimes. But as they use it once, people get comfortable with it and then they start recognizing opportunities to optimize.

And that’s the stage we’ll be in over the next twelve to eighteen months as these EPCs trial our product, the 1P product, they’ll start seeing opportunities to win more work with it.

: That’s helpful. And just given you’re now announcing five year sort of framework agreements and broad strokes across multiple geographies, how should investors think about the broader lens of sort of target gross margins for the business? I know you’re not giving revenue guidance, but three, five years ago people in the industry would say there’s sort of a low 20s gross margin prior to the IRA. What do you think FTC’s gross margin entitlement is longer term?

Jan Brandt, President and Chief Executive Officer, FTC Solar: Yes. I mean, I think without getting specific and just getting sort of qualitative on it, our track on margins is in line with our peers. Obviously, where do we have differentiation that’s sort of a headwind for us is, we have a little bit higher logistics costs given that we don’t have the supply chain base in quite as many as our largest peers. So and then also from a volume standpoint, there’s obviously some room to make up on our side. I think the important one is sort of tying it back to your initial question is, it’s not all about CapEx in the long run.

The value proposition of Pioneer, not just for the installation of our tracker, but if you think of if you take a step back and think about all things automation, my LinkedIn is full of it at this point. It’s one of the most automation friendly trackers, both for the installation as well as for O and M. It has the ability to lower cost. As that value proposition is learned by our partners, both EPCs and IPPs, that’s going to give us a little bit of pricing room. But ultimately right now, we’re competitive.

Our gross margins will increase as our volume increases certainly. And we see ourselves in line with at scale being able to be competitive on with our peers. Lastly, one thing we don’t talk a lot about because we talk about hardware mostly, our product Sun Path, which is our terrain based backtracking software is on a if you were to take a step back and obviously I have a biased view, but unbiased opinion, it’s one of the best backtracking softwares out there. It has obviously row to row capabilities. Right now backtracking software is one of these learned products in the market.

We have some peers that see a lot of pricing strength in it. We have some peers that give it away. Ultimately, we see SunPath as a huge opportunity for us to either provide value to win more work in the high volumes, but also the ability to monetize it as we show real tangible return data to the IPPs as the system is performing. I would say we’re quite ahead of a lot of our peers with SunPaths and I wouldn’t underestimate the value it brings in the long run to gross margins.

: And my last question is just in recent weeks, you’ve seen quite a bit of steel price volatility. How should we think about what transpired for Q1, but also for the next quarter or two? What’s your supply chain management is in light of the tariff environment and just price volatility in general, what’s your exposure is, etcetera?

Jan Brandt, President and Chief Executive Officer, FTC Solar: Yes. Our exposure is quite limited. Ultimately, as a company, we secure our steel right when sort of the purchase orders are negotiated. So there’s really, it’s a back to back procurement nature. It’s probably, if at much higher volumes, you have much greater exposure.

And there’s always the discussion of what can you pass on and what can’t you pass on. The reality is every single cost that increases on a project, whether it’s tariffs or commodity, often those two things are linked. The project itself needs to continue to pencil. So everyone’s sort of at the table figuring out how to keep the project moving forward. The tariffs and commodity prices moving in a higher direction, is going to increase cost of projects.

But from an exposure standpoint, I would say it’s zero to limited. We certainly haven’t had meetings internally where it’s a great concern to us. We updated with each of our proposals.

: Perfect. That’s all I had. Thank you.

Conference Call Operator: And I’m not showing any further questions at this time. As such, this does conclude today’s presentation. You may now disconnect and have a wonderful day.

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