To kick things off, we'd like to thank our sponsors for this room, Blueshirt Group and Sustain SoCal. Of course, we have our entertainment tonight, Third Eye Blind. Don't miss that. With us today, we have Yann Brandt. He's the CEO of FTC Solar. FTC is a tracker manufacturer and has a great story in our view. Well, Yann, welcome, and thanks for joining us.
Great to be here.
Okay. You guys reported your Q4 results recently. You announced two major deals. One was 1.8 GW. Another one was 840 MW. You know, in the tracker landscape, you know, you have some very large players, right? Nextpower, Array, GameChange, and you guys are climbing the ladder there as well. These are some big deals to kinda get you there. Give us a little more color. These are MSAs, right? They're not in backlog per se, but what's the timing of that? I think they stretch over three years, but when do you think the first projects could actually hit your backlog?
Great question, Phil. There was actually two that we announced. One we announced prior to earnings, an 800 MW MSA in South Africa. These are private projects, so these are actually a little bit healthier from a margin perspective, and you know, typically have the higher level of developers and EPC attached to them than the public projects. We announced one where we didn't name the customer at the earnings call, a 1 GW MSA. Since then, we had announced an expansion of 1 GW with Strata Solar, that we had a 500 MW 2P MSA that we announced a couple in 2023-2024.
Now we have used most of that and have expanded it by another gigawatt to include 1P and 2P trackers. That's a good trajectory for us. All of these MSAs, you know, largely the market is not into the volume commitment agreements anymore, the VCAs. You know, most people felt pretty burnt by them. They, you know, the view in the 2020 era of the VCAs having to get into supply chains, et cetera, or be left out sort of didn't come to pass. They were pretty friendly to the suppliers. You know, MSAs create an environment where we work hand-in-hand with these EPCs and IPPs, preferred relationship, you know, preferred priority around design work, et cetera, and that allows us to work together.
You know, some of the projects happen pretty quickly, as you've seen with Strata. Some of them are multi-year, where we're helping get projects through interconnection queues, et cetera, so we'll see those burn off over the next couple of years.
Great. The thing that you highlighted there was the Strata deal is for 1P and 2P. Originally it was just 2P, so you're making progress there. How many more of these other MSA deals do you think you could have in the coming, you know, six months?
Well, I mean, I hope many. You know, it's part of our strategy to pick and expand our customer class, you know, and go wider, right? For those of you that aren't 100% familiar with FTC, we are and were the and went public as being 2P, the leader in 2P trackers, right? Two in portrait. The module architecture, et cetera, you know, really made 2P more of a niche product. We still sell it. We still do R&D on it. We still support it, and we're pretty much the only 2P tracker provider. There are other options, but for the most part, when someone has a 2P projects, they come to FTC. About two years ago, we expanded into 1P, right?
These MSAs are an important part of our strategy to get people into the 1P backlog with FTC. It creates a great option for them in terms of diversifying their supply base. You know, we want to do a lot more of them because it's not just about getting a lot of POs with one customer, right? Some tracker suppliers in the market, some of our peers are very focused on, you know, going very deep with one or two. We really, you know, we view our value proposition to customers and the platform that's built sort of the R&D and the IP to be, you know, really favorable on a lot of different types of projects.
We wanna have as many MSAs as we possibly can and support accordingly across the market. That's certainly part of our early relationship building with the IPPs and EPCs.
Great. I'd like you to expand a little bit more on that. Specifically, you know, help us understand on what basis you're winning, right? Nextpower, GameChange, Array, I mean, they have dominant market shares. They have their ways of winning their business. You have your approach. How do you crack that market? You're doing it, you know, with some of these customers already, but one thing you've highlighted is customer diversification. The concentration with certain vendors is so high now that they wanna actually diversify. Just expand a little bit more on how you win and that diversification trend.
The market share leaderboards, you know, I think a lot about this question because I think about market share on a go-forward basis. Market share leaderboards, when people do calculations, they look at revenues, which are really a lagging indicator to, you know, the purchase orders that were coming in. The way that trackers are procured by EPCs is, especially tier one, the top 10 EPCs, they're buying trackers a year or two out, and they're selecting trackers pretty early on. We're just getting into that cycle of getting our piece of it. I think about our market share going forward.
What people have realized, and they're telling me and my team pretty directly is when I look at my procurement diversification, I am so much more concentrated than the market share leaderboards would say. That's really, you know, one of the things that we think a lot about in terms of getting onto the right side of. You know, the way that we design our product is to be a platform. We have sort of our base 1P, and it has features that are associated with it. You know, we don't have a terrain-following tracker. We have a 1P tracker that has the ability to implement terrain-following features, so you don't actually have to put terrain-following on the entire site.
You just have to do it where you need on a specific piece of the site that you're installing. Same thing with high wind, with high-angle stow strategies. We really try to create a product that meets as many projects as possible. Our approach to the market, when you look at our peers, three of, you know, the four that you mentioned, you know, the including FTC, are single-row architecture, right? Only two of the four, including FTC, are slew drive with single-row architecture. When you look at sort of the overall market selection of what people are choosing, you know, 50% backwards, upwards of 70%+ forwards is selecting single-row architecture with slew drives, and that's the product that we've built. How do we win?
Obviously, we're the smallest ones from a balance sheet perspective, and we're just getting into the 1P category. We install at such greater efficiency with both the type of labor you need, and the speed that you install, plus the ability to possibly, you know, as people start experimenting with robotics, our platform is much more capable, based on IP, to do, you know, be more labor productive, on a go-forward basis.
Just to help everybody understand, including me, you know, the difference with the slew drive architecture and why customers are migrating to that.
I mean, I think it's just, you know, sort of foundational simplicity in engineering, just having a central slew drive rotating the entire row of torque tubes as opposed to having linear actuators that have to work in tandem. Synchronization is, you know, always has a weakness that if one link is weak, then the entire thing has potential flaws. I'll relay this back to constructability. One of the unique features that we have is how you hang and attach modules to our module rails.
You know, just to kind of draw a picture here, you put the torque tubes onto a tracker, which are the tubes that run from post to post, and then you put rails, which are sort of, that run perpendicular to the torque tubes, and then you put the modules on top, and you attach them from behind. Every other tracker vendor manufacturer a team has to put the modules onto the rails, hold them in place, while a second team has to put the bolts or the rivets in the back at the same time, and so they have to work in synchronization. FTC's IP actually allows you to do those two things in two different steps.
You know, we've taken that synchronization inefficiency out of the tracker build, which has significantly reduced the time you need to install.
Can you quantify the savings that your customers tell you?
You know, this will get very nuanced, but we said some of these numbers on earnings calls, so they, you know. To give you a sense, in order to get from a site that has piles already installed, so you look at a field and all the piles are in, which is a different kind of crew machines that install those piles, to having modules on a rail fully attached, some of the biggest EPCs in the market tell us that their number one crew with the number one tracker installs that at about 0.09 man-hours per module, right? Forget megawatts, just per module, and this is on a standard crystalline module.
When we do it and when we have done time trials with similar teams, we can get that number down to 0.053 man-hours per module. Of that 0.05 man-hours, the portion that takes the most amount of time from an EPC, i.e. where is the majority of their labor going towards, about 40%-50% of that time is going to actually putting modules onto a module rail, which is, you know, it's the simplest in terms of the skill you need to do it, but it just takes an inordinate amount of time, which is why you also see robotics companies really focusing on putting modules on because it's very repetitive, it causes injuries, there's safety concerns, et cetera.
We have brought that time down, and we've actually seen this not in a test lab, but actually on a 300 MW site that we're installing. We have brought that number down to near 0.02 man-hours per module. It passes the eye test, it passes the skill set, you know, being able to train people on it, and the labor teams coming back with positivity. That's what's driving the demand, you know, both in MSAs and bookings, et cetera, and really catapulting us.
That, that's a meaningful savings. I mean, we're talking about 40%+ of time.
Yeah.
With that, you guys have recently been added to, I think, eight out of the top 10 EPCs, right? 'Cause they're starting to see this productivity gain that they can have. Tell us more about, you know, what that means and how that translates ultimately to business. AVLs to the audience is approved vendor lists. In order for Yann and FTC to sell their modules to the EPCs. They have to be approved, so they have to be bankable. They, you know, from the finance institutions and so forth. That's a big hurdle and step just to kinda get to that get on that list, and then from that list, then the EPCs can choose or not choose if they wanna use them.
Give us a little more color on that conversion from now, AVL approved vendor list to more business.
Yeah. The simple way of putting it is you can't bid on a project and you can't contract on a project until the sorta back office at the EPC has said, "Procurement team, you're allowed to go get a price and a bid from FTC." Being on this approved vendor list is a hurdle. It's a barrier to entry, which we've been crossing. It requires having engineering, the third-party reviews, the field teams coming to our sandbox to check things out. It speaks to the sort of broader market positioning. Again, EPCs are looking at their pipelines and looking at their projects on a go-forward basis, right?
They're saying, you know, "Who do I give what projects to?" That's where, you know, to be blunt, you know, the market has really started to constrict on less vendors than what most of the people in the market view as sort of all of the existing single-axis tracker OEMs. FTC's sort of on the ascension in terms of getting into more approved vendor lists, and that's a really important positioning point for us.
If you were to think about these AVLs, and you're on eight out of the top 10 EPCs now. Give us a sense of when you were on the most recent ones, and then how long it might take before we start to see purchase orders.
Yeah. The way I'll answer it is, you know, I joined FTC in 2024. We had a specific EPC that was supportive of us in the 2P category, and then wanted to expand into 1P. We had a goal of getting at least one more large EPC purchase order into our bookings in 2025. We were able to get two of the top 10 booked in 2025. I won't give you the names because my peers love to read our press releases and start attacking that customer base. We're going to expand that. You know, getting into the AVLs was kind of the next step in the funnel. You know, we got some bookings.
Now we need more bookings from more of the top ten EPCs. That's our target for this year. Some of them will happen relatively quickly, where they say, "Hey, here's a project, that, you know, maybe I had assigned for someone else, and I'm making a switch," or, "You know, I got a late win from a project because something else got pushed out." That creates an opportunity for us. It's both. You know, for us, it's not so much about, you know, going from, you know, it's roughly $50 million in 2024, roughly $100 million in 2025. It's not like trying to go from $100 million to something, you know, 10x there. It's to continue to grow and be really part of that sustainable market share going forward.
Great. Okay. All right. We've talked about your business outlook with some of these customers. You know, just bigger picture, we've written a fair amount about the tax equity investor challenges. There are some banks that are pausing Section 48E ITC tax credits for 2025 and 2026, regardless of year. That's causing heartburn in some of your customers or your customers' customers. Their customers are typically EPCs. The EPCs work with IPPs and other developers. The IPPs and developers who are the ones claiming the tax credit may need to be scrambling to find new sources of capital. Was wondering how much is this impacting your business or could impact your business for 2026?
This is certainly part of the process that, you know, keeps some projects from getting to start of construction and fully funded. You know, in some ways, that's a drag on the market opportunity for us. In some ways, it allows us to get into projects that haven't reached the start of construction, right? As the tracker market continues to evolve, it gives us and our sales and commercial teams more ability to get into projects. It's you know, I think everyone's being impacted by it similarly. Overall, there's a lot of projects moving forward. The aggressiveness by off-takers to contract for PPA on projects is enormous. That's allowing projects to be well-funded.
Yeah, I think the fact that some of the large banks have paused has caused this to be a bigger headline than, you know, ultimately the 35+ GW of projects that will actually start construction this year.
Yeah. I mean, ultimately, there will be money available. There's a tax credit transfer market, but it might end up being a little more expensive than the developers and IPPs wanted it to be. If you guys have any questions in the audience, feel free to jump in. There's one right there.
Yeah. Are you taking advantage of the Section 45X credit, and how are you viewing slew drive production as maybe being not qualified-
Repeating the question, do we take advantage of 45X, and what about the slew drive as it pertains to 45X? For the most part, FTC uses contract manufacturers to procure our parts. We did announce last year that we were buying out our joint venture partner on Alpha Steel, which is our manufacturing site that makes some stamp parts, torque tubes, et cetera. At that site, we do claim the 45X and our contract manufacturers, including slew drives, that do qualify. You know, some qualify, some don't. You know, obviously, there's the whole FEOC definitional decision, you know, for some folks. Those that do qualify, they get 45X that's taken into account in the price, and we're able to sell those credits.
Great. Shifting over to the balance sheets. You know, on the Q4 call that just happened a few weeks ago, you guys had a slight covenant issue with a very close investor of yours. I don't see it as a big issue or a big deal, but just want to check in to see if you guys have made any progress on that.
Yeah, no.
Maybe give people some context of the situation.
It was a unique case where company and lender both agreed that we didn't actually believe that there was a default of the covenant. It was sort of technical in nature, and we've been working diligently on it and expect to have some news on, you know, sort of resolving that, in the near future.
Great. Then as it relates to liquidity, you know, you guys with the same set of investors have access to some facilities and so forth. What's your plan for liquidity for this year? Just help us or remind us what is the free cash flow or cash generation expected? Then do you expect to need to go to the market or between the ATM and some of these things, you guys should be fine?
Yeah. No, I mean, look, in Q4, we had the best Adjusted EBITDA, really close to breakeven, which I'm really excited for the team. We had a good product mix. We were really cautious on our OpEx. We'd made some moves over the past year to put us in a good place. We'll continue to be opportunistic. You know, obviously, the market's moving, the stock price has been moving quite a bit. We did tap into the ATM in Q4, and we'll be opportunistic and take advantage of ways to build our balance sheet, which certainly is something that is helpful in commercial efforts. You know, if we wanna accelerate a few things, we'll take advantage of that.
Okay, great. What else here? You know, you mentioned the Alpha Steel deal, and this is the partner that allows you to or that manufactures a lot of parts for you. So why did you take them a 100%? You bought them completely, right? Give us the rationale for that.
We own just under 50% of the plant and had the right to buy them out. You know, it was really our joint venture partner was a Thai entity. You know, as we sit here today, there's still a question of what's PFE and what's FEOC and what's not. For the sake of our customers and for the sake of just clarity, we didn't want there to be any question about our FEOC compliance at Alpha Steel for torque tubes and our domestic content product. So we made the decision to buy them out, so that we would have 100% clarity to our customers, depending on whatever the definition ends up being.
Yeah, that makes a lot of sense. In terms of revenue and gross margin, what is the right level so that you can generate enough cash to basically fund your own growth?
We've said our breakeven levels is in that $50 million-$60 million range, though in Q4, we were at $32 million and essentially broke even on an Adjusted EBITDA basis. It really comes down to product mix, you know, geography, and so 50-60 remains where we're, you know, we're sort of guiding towards for the breakeven aspect. You know, obviously, our growth aspirations are much greater than that.
Great. For your 2026 revenue guide, how much or what percentage is already contracted in backlog versus, you know, verbal or late-stage negotiation?
Yeah. We haven't broken that part out. You know, we're sitting on $491 million, I believe, of bookings in our backlog. You know, these are projects that have schedules, design criteria. You know, we're working through that backlog and obviously aggressively pursuing to build more of it. You know, we grew about 44% in the back half of last year. We're going to grow or expect to grow faster than the market and certainly faster than our peers because we're coming from. You know, we're a 1P entrant into the market.
We're coming in and expanding both, you know, winning new business in the market, but it's also taking share as our positioning overall versus our peers continues to improve.
Okay, great. As it relates to your software, are you actually generating revenue from your software? You know, we see Nextpower and Array and these guys with their backtracking software. Do you have a suite that you sell as well, and can you talk about the margins?
I mean, you know, it's an impressive sort of feat of magic. You can't sell a tracker if you don't have both ops platforms that allow you to, you know, trigger in hail, et cetera, and you need backtracking. One of the reasons that the market is completely moving to single-row architecture is there's significant loss in backtracking when you don't have single-row architecture. You know, you can move money from one category to the other. You know, you have to have the software as part of it. We have one of the, I would say. I would put ours right at the top with the leaders in the market, both on the op side.
We're doing some really fun and exciting things going forward on the software front. Our backtracking software, when companies dig into it, really like it.
Good. One last quick one before we wind down. 2P, you started life as a 2P tracker manufacturer. What is the mix of 2P next like for 2026 revenue, you think? And then do you think 2P can make a comeback, or do you think it's gonna be relegated to this kinda like 15%-20% type share of your mix?
Yeah. I think 15%-20% is still the right category of how much it is. There's certainly 2P projects coming in, you know, still now. It's not one where it's like an easy just like, let's stop doing it, because we do see big opportunities. It's especially if you have bad soils, you need to pre-drill a lot. 2P has a really good category, and so we'll continue to sell it.
Great, Yann. We look forward to following the story. Let's give him a round of applause. Thank you.