Hi everyone. My name is Philip Shen with ROTH MKM, and I cover renewables. Up next we have FTC Solar, Patrick Cook, the Chief Commercial Officer, Cathy Behnen.
Behnen.
Behnen, okay, the CFO. And Bill Michalek?
That's right.
The VP of IR. So, we'll just get into the questions, and thanks for joining, guys.
Thanks for having us.
Okay, so, you know, you guys just reported your Q4 results. You know, the guidance for Q1 was weak. Q2, the outlook is a little bit better, but then you see a big ramp in the back half of 2024. And so, with that ramp, you think you can get the revenue that's gonna be break-even in Q3 and then profitable in Q4. Can you talk about 'cause you guys have had this, you know, for a couple years now, unfortunately, with detentions of modules and so forth, just a challenging outlook where you've had to change the forecast, like, the outlook. And so, what kind of confidence can you give to this outlook, this guidance? You know, is it what kind of risk is associated with it, and what gives you that confidence that you can deliver on that ramp? Thanks.
Yeah, and I'll let Cathy answer a little bit too. But I think in terms of the confidence, I mean, I think this is the longest guidance that we've given, you know, in terms of kind of the sequential growth quarter on quarter. You know, at your point, you know, Q1 was, you know, a disappointing guide, but we've seen projects, you know, push out, in terms of the start date with IRA and other items. But, you know, the confidence that we have in the full year 2024 is really the projects that we have, that we talked about, you know, kind of in that $415 million, and also the projects are much larger than what we had in 2023. So the revenue that you have gives you more visibility because it's being recognized over two, three, four, five, five quarters.
Yeah, I agree with that. I guess just to add on to that is what we're, you know, kind of seeing is this, you know, layering on of these purchase orders. So as we're seeing the acceleration of, you know, purchase orders, you have projects coming to actual purchase orders, you can kind of see the trajectory as they start to layer projects upon projects as they get kicked off going forward. That's where we see the ramp really happening in the back half of the year.
Okay. We've been writing a fair amount that there are actually some delays, right? I mean, and so have you accounted sufficiently for the delays that might occur? You know, 'cause a lot of these things are not just interest rates, but long lead time, high voltage equipment, interconnection queues taking longer than expected, labor shortage, EPCs still being tight. So, if those things deteriorate, do you have enough conservatism in your perspective or outlook so that you can still hit that kind of back half ramp?
Yeah, no, I mean, the guidance that we put out, we felt was conservative and feel very comfortable with it.
Can you share a little bit on the basis of the conservatism?
Yeah, I mean, I think you look at we've got, you know, $415 million worth of firm, firm purchase orders that we that we talked about on the call. You know, and the way we built that, you know, you build a forecast out is you expect some form of slack or, you know, delay in all some of these projects and, you know, kind of work your way work your way backwards.
Okay, great. The bookings in the quarter are actually very good, right? I mean, so it sounds like you're in this $50 million per month level. So you quarterize that, you get to $150 million. That compares to your Q1 guidance of what was it, $12.5 million or $15 million?
That's right.
That is an almost order of basically order of magnitude greater level of kind of forward kind of view on what could be happening. So, the bookings that you are generating, you know, now, typically bookings in normal, like, industries are 12 months out. You know, you book something, it's contracted 12 months out. But I think for trackers, backlog is and bookings are defined as purchase orders in addition to verbally awarded orders. So what's the rough timing of that $50 million per month volume? Thanks.
Yeah, I mean, I think part of it, we, we're not guiding kind of when everything ultimately hits. But, you know, as you see, these revenue projects get recognized over a multitude of quarters. So, you know, we'll see revenue start to ramp in the back half of the year, with a little bit of increase in Q2. But, you know, some of those projects will go into 2025 in terms of the overall, you know, delivery schedule. And certainly we expect to continue to add on additional purchase orders throughout the year that, you know, give us more clarity into 2025 as well. So, we feel comfortable with the forecast that we've been given and what we have. And, you know, in the breakdown, you know, it's not all POs and it's not all verbal.
We have, you know, awarded MSAs as well. We talked about the 500-megawatt agreement that we have with Primoris, for example, the 350-megawatt agreement that we have with 5E over in Italy and Spain. So those, those account for some of not the purchase order, not the 415, but some of the additional ones we talk about having, you know, more firm, firm-type command over that.
That $50 million a month is purchase orders?
Purchase orders.
Yeah.
Yep.
So that's great. 'Cause it's been a couple years of difficult sledding. You know, when I've talked to some customers, you know, they've shared that, you know, it's just been a little bit tough. And so, over time, you know, what can you guys do to win some of these customers back? And, you know, you have that 500 MW with Primoris. Are they slowing things down at all? Are there projects specifically tied to each of those megawatts that you guys have in your MSA?
Yeah, so there's five for that one particularly. There's five projects. It was really more focused on the one-in-portrait. That's what they're building out. And we've talked about, you know, we launched that at the back half of 2023 in Q4 or late Q3, early Q4. And a lot of those projects are gonna be tied to the 1P system and getting those kicked off. And we've seen a lot of the thing that we've been excited about is the level of adoption of the 1P relatively early. I think people like the constructability of our 2P. We saw the 2P market kind of pull back with the lack of availability of modules. And, you know, now we're seeing a little bit of a pickup there in terms of some of that order backlog converting from contract and award.
We're seeing, you know, those types of projects kind of move forward, but also a pretty rapid adoption of our, our 1P. A lot of the POs that we signed are tied to Pioneer, our 1P solution.
Right, okay. And if people in the audience have any questions, feel free to jump in. So right now, in terms of the competitive landscape, you know, you have Nextracker, you have Array. Those are the big guys. There's a private company out there as well. And then, you know, the market, based on some of the work that we've done, is willing to maybe add a fourth, you know, tracking company. And so, you know, it's kind of an oligopoly, you know, and you guys made some progress to kind of break in a little bit. Can you just help the audience understand your value proposition? You talked about constructability, but just, you know, when you think about those incumbents and you as a rising player, how do you win that business? What's your value prop to them?
Yeah, I mean, I think our value proposition is really driving out person hours per megawatt through constructability. So if you look at kind of component costs, whether it's modules, inverters, transformers, trackers, you see kind of a natural degradation in cost that's being forecasted. But labor and wage inflation kind of really continues to rise. So when we developed the Voyager tracker, it was really around that idea of constructability. How do you drive the EPC labor cost down, that allows, you know, for faster installation but also reduced costs to the developer and ultimately the EPC? So we took that, you know, we have a patented damper. We've got a fast module attached solution. We drive 55% fewer piles for Voyager. But we also incorporated that fast installation in our Pioneer technology.
So we've got some fast module attachment associated with Pioneer. We've got less piles. We also have, you know, a couple patents around our clip to the module rail that also allows for, you know, fast constructability. And that, I mean, that is really kind of driven by, you know, our engagement interaction with our EPC partner customers. They had a lot of feedback when we were developing our 1P solution. So we wouldn't be a me-too product. We've got some great, you know, competitors in Array and Nextracker, but we wanted to focus on, you know, where the market is going and how can we help our EPC and developer partners?
Go ahead, Cathy.
Yeah, one thing I just wanted to add was, you know, the other thing we've really been focused on too is just the engagement with our customers. And when Patrick's talking about getting feedback, you know, obviously our sales team is heavily engaged with all of our partners. But in addition, executives across the business are engaging with all of our customers to be really the easiest tracker company to work with, and be there to answer their questions and make sure that everything's efficient kind of from the beginning to the end of the project.
Great. So, you know, there's a lot of investors in the audience. They always appreciate quantification. And so, you know, you guys have laid out a very compelling, you know, framework of how to win business. But can you quantify it? So like, you know, you're pitching business on a daily basis. You go in and say, "Hey, you know, we're faster." You know, and they say, "Well, how much?" So can you quantify to how much faster you might be for a traditional, you know, kind of standard postage stamp type, 300-megawatt project?
Yeah, I mean, for Voyager, we're typically about 40%-50% less in terms of constructability timing. And that translates to about $0.015-$0.02 a watt of EPC savings just through the reduced constructability.
So that's kind of eye-popping, right? So like, typical tracker prices are $0.10 a watt. So if you can save them 15%-20%, that's compelling.
Yeah.
So typically, do you think you're pricing kind of in that level kind of below? Well, okay, this is a different question. So with that savings, what kind of price premium or discount do you think you typically need to have relative to the incumbents?
So typically, you know, from the pricing feedback that we get from developers and EPCs that we're in line, you know, there are times where we're slightly higher, but they do give us the constructability benefit. You know, the EPCs that we work really close with, you know, understand the construction benefits that we have and will ultimately price that in. The other thing we have and, you know, we've brought investors out there before as well. And it's really neat. We have a; it's called the STAR facility. It's right outside of Austin where EPC and developer partners come, and they'll bring 15, 20, 30 different of their team. And they just do; they'll take down, pull up rows, take down, pull up rows. And we're going through this process of bidding on a project. It's not an unknown system to them.
So I hand an EPC 400 pages and say, "This is all the constructability benefits that you'll get." You know, their eyes glaze over, and they don't believe it. For us, it's really getting them out there, getting their hands dirty with the overall system. And that's been one of our biggest value propositions in selling is just going out and seeing that, "Hey, I know that." I mean, you can quantify. We drive 55% fewer posts and how long it takes to do a post and the cost to a post. And, you know, that's the easy math. But the fast module attached, the hanging, those they're seeing it, and they're getting their hands on it before they place their first purchase order usually.
Okay, good. So the labor savings is high. And I highlighted earlier, labor is a bottleneck and a source of, you know, tension, difficulty for them, the EPCs. So is EPC capacity. So that's just one component of your overall value proposition. You will have fewer posts, but probably stronger posts with each one. So on balance, when you think about your, you know, 'cause if it were possible for the incumbents to actually use less material and speed up things, that they would probably wanna do that. So, what is your overall kind of real cost savings, when you sell to an EPC? So if you factor in not just labor but everything else, like with the posts and the other components that you guys have.
Right, so we'll use bigger, beefier piles. We're W8x8, W8x6. But we have dampers that ultimately, you know, take a lot of the absorption so that we can drive less of them. The other thing where you see savings is really around kind of civil costs, really kind of broken up into two components. The first one, pile refusals. So if you're out on a job site and you're driving piles and there's, you know, embedment or refusal issues, you're gonna have to probably put those in concrete encasement or do something that's longer. So the fewer piles you drive, the fewer piles that you have to put in concrete encasement or, you know, the fewer longer piles that you ultimately have to do. The second component of that is the civil costs as it relates to land grading.
You know, we're able to build at a 17.5-degree angle, which eliminates a lot of the need for some of the civil costs that you see, ultimately in the market. We've got a software solution that obviously helps with that as well. But that's a rising cost. In addition to labor, civil's becoming a more and more, I would say, impactful piece to the bottom line. And, you know, having those solutions, whether it's software, being able to deliver a different pitch, is a differentiator for us with our customers.
So these guys produce trackers, right? And so you can have their signature model, which is the 2P model, which means two-in-portrait modules on one single kind of axis. Most of the industry is actually single portrait, 1P. So it's just one module. So these guys stack two. So my question for you, Patrick and team, is, do you see similar savings for your 1P model, which is a recent offering for you?
Yeah, I mean, we see similar savings. We have fewer post count per megawatt than our competition. But it's not the 55% just because it's two high versus one high is kind of, you know, what you're seeing. But we do see the constructability benefits as it relates to the module install and module attached. So we have kind of some patents around how we can drag and drape and hang the one panel, similar to what we do with Voyager. But also we have a patent around our Python clip. So how does it affix itself to the torque tube is something that speeds up installation ultimately as well.
Okay. Let me just check in with the audience. Any questions out there? Okay. So remind everybody where your margins are. So with this ramp, right, like, $12 million-$15 million in Q1, a little bit more in Q2, and then, your break-even mod revenue is what, $55 million?
$50 million-$60 million.
Okay, so $55 million for Q3 roughly. And then, profitability in Q4. So that'd be, you know, something higher, maybe some more than $60 million. So what does the margin kind of profile look like, roughly by quarter? If you can't quantify it specifically 'cause you haven't given official guidance, you know, can you maybe just directionally, qualitatively give us a feel for how that ramps?
So we, we haven't given margin guidance specifically. However, we did say that, if you look at Q3 our Q3 was in the on a normalized 9.5% gross margin basis on $30 million in revenue. If you go back to the end of 2021, we were basically at -9% on $100 million. So you can see the margin improvement that we've made. And so if you look at 2024, we said break-even would be around the $50 million-$60 million revenue level. And so, and then we'd, we'd grow sequentially in Q4. And so, our max margins or peak margins would still be above 20%. So I don't know if I can give you any more color on where the margins go.
But if you kind of look at what, with OpEx in the $8 million range, what a gross margin would be on a $50-$60 million revenue, I think you can back into it.
Great. We can back into it. So, thanks for that. So, okay, so now that you have your ramp, and you have this tremendous backlog in awarded orders, it's about $1.7 billion, $415 million of POs. You know, it's just really execution, right? So, right now, you're in a transition for your CEO, right? So, the prior CEO is gone, and now you're looking for a new person. What's the timeline of that process? It sounds like it could be near term, but just curious if you could share some of that color with the audience.
Yeah, I mean, I think the board has talked a little bit about this. You know, they've got several candidates that they're, you know, really kind of assessing. You know, they felt the company, kind of during this transition period with Cathy, myself, and Sassan, our Chief Operating Officer, you know, we've got a lot. We've got orders. We've got the product portfolio. We've got the margin portfolio. So it's really just, to your point, execution. So bringing in a CEO that will ultimately drive or help drive that execution is of the utmost importance. This isn't a situation where, you know, in the board's view or management's view, that it's a complete overhaul or turnaround. So they've been a little bit more selective in who they're looking to ultimately bring in.
You know, as we said on the earnings call, I think, you know, relatively short term, you know, they'll probably be doing some announcement.
Okay. Are they reviewing internal candidates in addition to external, or is it all external?
They're doing internal. They, you know, they'll do a full assessment. You know, the board will look at or the board has been looking at, you know, who can step in and both internal and external perspective.
Okay, good. Anybody out there with a question? Shifting gears to, so you have 2P. You have 1P. You have the U.S. market. You also are addressing the international market. What's the latest there from a booking standpoint? Do you have any international bookings in there that's meaningful? And, what's the international mix expected for 2024?
Well, so.
Revenue.
Yeah, so I mean, from our perspective, our big focus markets is where do we create value for our customers? And it's not in low OpEx regions where, you know, labor is, you know, effectively cheaper. So Australia, you know, we've done, you know, north of 30 projects there. We see that as a growing market for us. We've had kind of boots on the ground for the last two, well, about three and a half years now. South Africa, you know, we've developed and are looking to execute on some projects there. Our most recent, I would say kind of target in terms of geography is Europe, specifically kind of Spain and Italy. We, you know, we announced the 350-megawatt portfolio of projects with 5E.
and we've got a team there that's been, you know, kind of employed FTC-badged employees for about a year and a half now. You know, and we'll look at other areas and kind of, you know, the Middle East, North Africa where we see that we can extract value. But that's really where we're focused, kind of in the short and medium term is really developing those growing markets. And we're seeing really good return profiles on the projects that we have, rather than just trying to chase, you know, low, low-margin, high-revenue business.
Great. So back to the last part of that question. International mix for 2024, how much could it be 15%, you think, from a revenue standpoint?
Probably yeah, I mean, I think probably, you know, around 15% is probably a good, good and, and then ultimately growing. I think, you know, the U.S. is still gonna be a big market for us. I mean, that's where we're, you know, we have our, you know, we've deployed, you know, multiple gigawatts in the U.S. The customer base knows us. It's a large and growing market. That's still gonna be a, a large market for us. But we do expect the mix, you know, as we get into the further years to, to be a little more international.
Okay, good. So we talked about 2024 a fair amount. Let's kind of get into 2025. So we did a poll recently of our U.S. utility-scale solar industry contacts, and 9 out of 20 of them have reduced their 2025 outlook. And so on an aggregate basis, I think our 17 their 17 gigawatts of COD expectation kind of went down by maybe 15%. Are you seeing that at all for your 2025 kind of perspective?
I mean, I think from our perspective you know, we're coming at this with a you know, a relatively low base. So you know, the growth potential that we see in the U.S. is higher because of the you know, the growth that we see and the customer expansion that we've ultimately seen. You know, that being said, you know, the market continues to have you know, kind of macro challenges for growth at times, whether it was UFLPA, AD/CVD, WRO, IRA, you know, interconnection financing, etc. We are seeing you know, some customers you know, look to you know, make sure that they have certainty around the timeline of some of these projects. And it's certainly something that we're focused on.
But we do see a good growth opportunity in 2025 for us as it relates to our revenue.
Okay. You, you mentioned MSA agreements earlier. Hey, and tech team in the back, please. We still have more time, right? So the we there should be yellow time of like two minutes, right? Three minutes? So.
We have five minutes for Q&A.
That's right. But it says zero here, so please help out. Thank you. We have three minutes left, I think. So, as it relates to MSAs, what are the terms? Like, can you know, the way Nextracker defines it, you know, they have specific projects, deposits, and start dates. Array defines it differently. But for your MSA with Primoris, like, are you are they locked in? Like, have they given you deposits on that MSA? Or is it more of a, "Hey, in spirit, we plan on doing 500 megawatts over the next two or three years"?
So it really depends. You know, certain ones, they could give deposits. Certain ones, they don't. It really just depends on kind of the timeline of projects. But, you know, in most instances or, you know, the ones that I'm referring to here, there are specific projects that are ultimately tied to it with.
With deposits?
With some, some do. Some do not. But there are specific projects ultimately tied to that, to those agreements. And so, you know, it and, and rough indicative timing, right? It's gonna start in April of 2024. We all know how, you know, development happens. There are certain project delays. But it is tied to, you know, certain, certain individualized projects. And we do have a kind of a best, best start date for some of these. And those still go 2024, 2025, as, as well.
Okay, so that has been a bit of a complaint by investors, you know, that you see this $1.7 billion backlog, but then the deposits aren't fully there on your balance sheet. And so when you think about, you know, the deposit level on the balance sheet relative to megawatts that might represent, can you share what that might be?
The amount of deposits on the balance sheet? So the.
Yeah.
So to remind us, what is the millions of dollars of deposits on the balance sheet? So of the total backlog, people don't usually give the deposit till they get closer to the time they need the project anyway. And so what you're seeing also now is some additional lead time being built into the backlog. So people whether it's to build to lock in capacity or for other reasons. So there's milestone payments. So it's not gonna be fully reflective on the balance sheet right now.
Okay. Well, I think we are out of time. I look forward to seeing great things out of you guys in the coming year or two, actually. So let's give FTC a round of applause. Thanks.
Thank you.