FTC Solar, Inc. ($FTCI)

Thank you for standing by, and welcome to the FTC Solar First Quarter 2026 Earnings Conference Call. I'd like to remind everyone that this call is being recorded. [Operator Instructions].   I would now like to turn the call over to Mr. Bill Michalek, VP of Investor Relations. You may begin.

Thank you, and welcome, everyone, to FTC Solar's First Quarter 2026 Earnings Conference Call. Before today's call, you may have reviewed our earnings release and supplemental financial information, which were posted earlier today. If you haven't reviewed these documents, they're available on the Investor Relations section of our website at ftcsolar.com.  I'm joined today by Shaker Sadasivam, Chairman of the Board; Anthony Carroll, the company's newly appointed President and CEO; Cathy Behnen, the company's Chief Financial Officer; and Patrick Cook, the company's Head of Capital Markets and BD.   Before we begin, I remind everyone that today's discussion contains forward-looking statements based on our assumptions and beliefs in the current environment and speaks only as of the current date. As such, these forward-looking statements include risks and uncertainties, and actual results and events could differ materially from our current expectations. Please refer to our press release and other SEC filings for more information on the specific risk factors. We assume no obligation to update such information, except as required by law. As you'd 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 Shaker.

Thank you, Bill, and good morning, everyone. I felt it was important to speak with you directly on behalf of the Board of Directors about the leadership transition we announced today.  I'm incredibly pleased to welcome and congratulate current Board member, Anthony Carroll, on his appointment as the new President and CEO of FTC Solar. Anthony is a truly talented leader with a proven track record of scaling operations and driving value creation. He has served on the FTC Board of Directors since last December and has been the Chairman of our Customer Advisory Board since 2023. He most recently served as CEO of BEV, a division of Lennar, where he was brought into scale operations.   Many of you may also know him from his time as the President of Boeing, the CEO of Power Electronics, or his time at Siemens or Schneider Electric. He has been in the industry for many years, has helped scale multiple billion-dollar businesses, and is well-connected. The Board and I believe that, based on the progress made to date and recent project wins, FTC is at a critical inflection point, positioned with a strong foundation and the potential for very significant growth. Anthony's operational depth, dynamic leadership, and demonstrated success in scaling growth businesses make him exceptionally well-suited to lead FTC Solar into its next chapter.   On behalf of the Board, I would like to thank Jan Brown for his many contributions to the company. Jan stepped into FTC at an important point in time, one that was focused on stabilization and recovery. Under his leadership, the company secured strategic financing completed its 1P tractor introduction and experienced good customer reengagement, resulting in increased AVL list access, pipeline visibility and new project wins. While today's leadership change may not have been expected, the Board and I believe it represents a tremendous opportunity for us to build on the strong foundation that is now in place and to leverage Anthony's capabilities to accelerate momentum, scale the business and achieve profitability. Now I will turn it over to Anthony.

Thanks, Shaker, and good morning, everyone. I'm very excited to be speaking with all of you for the first time in my new capacity as CEO of FTC Solar. As Shaker mentioned, I've had the pleasure of working with the Board of Directors, the management team, and several other FTC Solar employees over the past couple of years in those other FTC Board capacities. And I have seen firsthand all the great work the team has done to position itself for future growth and strong performance. For these reasons, I am so excited to take on this new role. As Shaker alluded, the majority of my career has been in or around energy and renewables, including with leading companies such as Schneider Electric and Siemens, focused on power conversion, solar and energy storage. I have also led other companies, such as Power Electronics and Talen, which became very successful in their respective industries, growing from start-ups to corporations with over $1 billion in revenue in both cases.   I most recently led the real estate and construction company, VeeV, focused on product innovation, manufacturing evolution, and growth. The growth and success there have been rewarding, and it's truly a great team, but I knew I wanted to get back to renewables, and I'm very excited to be at FTC. The team at FTC has done a great job laying the groundwork for a strong future. I couldn't be more pleased to join as CEO and spearhead the next phase of our growth and to work with all of you.  I'll turn it over to Patrick to discuss the highlights from Q1 and the progress that's being made.

Thanks, Anthony. I think the key operational takeaway from this call is that even though our Q1 revenue was a bit lower than our expectations, our customer momentum and new business bookings have been exceptional, and we now have greater confidence that we will outpace the market and deliver strong growth in 2026.  So starting with Q1. We did have one key project that was expected to sign and contribute revenue in the first quarter, but it was delayed. Given our current run rate and the expected contribution from that project, that was enough to cause revenue to come in short of our range for the quarter. Operating expenses were better than expected, however, and helped offset some of that shortfall, and all our other metrics were within our target ranges. More importantly, in my view, is the progress we're making in setting ourselves up for the future. And in that regard, I am very pleased with the progress.   On our last call, we shared that our commercial momentum was accelerating on a number of levels, from approved vendor list additions to project bidding, bookings, and contract conversion. These are all leading indicators of where our business is going and that progress continues. In terms of the approved vendor list, last quarter, we told you that in Q4 alone, we were added to 4 ABLs of the top 10 EPCs, bringing the total to 8 of the top 10. We have since added another top 10, in fact, the top 3, bringing us to 9 of the top 10. We are getting visibility into the pipelines of these prospects and customers. And overall, we are bidding with more customers on larger project sizes.   Last quarter, we also talked about how FTC is winning new projects, including bookings from 2 leading EPCs. Since then, we have had some great new wins. One of particular note is a new 1 gigawatt award. It's a safe harbor award from a private equity-backed portfolio company for projects with very high-profile off-takers, including a global Fortune 20 company. The first of 3 equal tranches of the project has already been contracted. These projects are expected to add meaningfully to 2026 revenue and continue into 2027. In total, it's a triple-digit million contributor to revenue. We have had improved net bookings over the past 4 quarters, now with a positive book-to-bill or positive net bookings in Q4 and accelerating in Q1 as we are starting to convert our MSAs into firm orders and book new projects. Since our last earnings call, we have added about $70 million to the contracted backlog, or roughly a $52 million addition net of Q1 revenue.  Over the past seven months or so, our bookings have been running at about a $55 million quarterly run rate.  The leading indicators on the customer front are what are driving this business, and they are looking good, improving, and we are having good momentum.  From MSAs, ABLs, and strong bidding activity, these are clear signals that show that FTC is on the right track.  We have turned the corner on our bookings, and now we want to accelerate the business.  This customer momentum is driven by a great team that is doing great work across the board, from R&D and engineering to sales support and our support teams and is driven by our great products.  We continue to receive excellent feedback on our trackers, supporting our belief that we have what is unquestionably the fastest, easiest-to-install tracker in the marketplace.  And our team is not stopping as we look to achieve another 20% in labor savings.  In an environment where we have an increasing need for new energy supply, combined with labor shortages, our trackers provide incredibly compelling solutions, allowing our customers to build more megawatts in less time at a lower cost.  We have done a great deal to prepare the company and lay the groundwork for strong growth ahead.  We're increasingly optimistic about our future.  While we are seeing a first-half lull similar to others, our strong bookings momentum gives us increased confidence in the full year, and we are providing a bit more detail on our expectations, which Kathy will discuss.  With that, I'll turn it over to Cathy.

Thanks, Patrick, and good morning, everyone.  I'll provide some additional color on our first quarter performance and our outlook. Beginning with a discussion of the first quarter results, revenue was $17.3 million, which was below our target range for the quarter, as Patrick mentioned, driven by a key project that was delayed.  This revenue level represents a decrease of 47.5% compared to the prior quarter and a decrease of 17% compared to the year-earlier quarter.  GAAP gross loss was $1.2 million, or 7.1% of revenue, compared to gross profit of $4.9 million, or 14.9% of revenue, in the prior quarter. Non-GAAP gross loss was $0.4 million, or 2.2% of revenue.  This quarter's results compare to non-GAAP gross profit of $5.7 million, or 17.3% of revenue, in the prior quarter, and a $3 million gross loss in the year-ago quarter.  GAAP operating expenses were $10.8 million. On a non-GAAP basis, operating expenses were $7.8 million, which is better than our target range, as we identified and executed some cost-saving opportunities during the quarter.  This compares to non-GAAP operating expenses of $8.2 million in the prior quarter and $6.6 million in the year-ago quarter.  Moving to GAAP net income, I want to remind everyone that the warrants issued as part of last year's capital raise are subject to liability rather than equity accounting.  As a result, we are required to remeasure the fair value of the warrants each quarter in our GAAP financials.  If our share price goes down during the quarter, as it did in Q1, it will show a non-cash gain, and conversely, a share price increase would result in a loss.  The share price decrease we saw in the first quarter drove a decrease in the fair value of the warrant liability of about $48.7 million. This is a noncash accounting adjustment that does not reflect the underlying business performance or cash flow and will be excluded for purposes of adjusted EBITDA but does impact our GAAP financials. So, including this adjustment, GAAP net income was $32.6 million, or on a per share diluted basis, a loss of $0.72 per share compared to a loss of $36.4 million or $2.40 per diluted share in the prior quarter and a net loss of $8 million or $0.58 per diluted share in the year-ago quarter. Adjusted EBITDA loss was $8.2 million, coming in close to the midpoint of our guidance range as the OpEx management largely offset the lower-than-expected revenue. Adjusted EBITDA excluded approximately $40.8 million net for the change in fair value of the warrant liability, certain transition costs, as well as other noncash items. The contracted portion of our backlog now stands at $543 million, with a net of approximately $52 million added since March 5. In terms of liquidity, we ended Q1 with about $5.6 million in cash, although that was due to the timing of customer payments, which came in shortly after the quarter end. Given the new cash that has come in and the cash expected from new business, including the Safe Harbor project, we do not intend to utilize the ATM going forward, and we'll take actions to terminate the program. With that, let's turn our focus to the outlook. Our targets for the second quarter call for the following: revenue between $22 million and $26 million, non-GAAP gross profit between negative $1.4 million and positive $1 million or between negative 6.4% and positive 4% of revenue; non-GAAP operating expenses between $8.4 million and $9 million; and finally, adjusted EBITDA loss between $10.5 million and $7.4 million. We continue to expect the first quarter to represent the low point in revenue for the year, with sequential quarterly growth for the remainder of 2026. The commercial momentum we've been seeing since the last call gives us even more confidence that full-year revenue will outpace the market in 2026 and represent growth of approximately 40% relative to 2025. With that, we conclude our prepared remarks, and I will turn it over to the operator for any questions. Operator?

[Operator Instructions] And your first question comes from the line of Philip Shen with ROTH Capital Markets.

Shaker, I was wondering if you might be able to provide us a little more color on why now is the right timing for this CEO change. And then Anthony, welcome as the new CEO of FCI. And I was wondering if you could help us understand your vision for where you would like to take the company next. And what might be the contrast with what Jan was doing and what you would do either differently or the same, and so forth?

Thank you, Philip. And I'll take the first part of the question. The company has made great progress over the last couple of years. We have a comprehensive 1P product line, a strong pipeline, and good positioning with customers, and several new wins, and you heard some of that in Patrick's opening remarks, there are a lot more on the horizon. And so we have a significant opportunity to really accelerate the growth of the business. And the Board saw a need to bring in a CEO with a lot of experience scaling businesses. And we felt this was the right time to bring Anthony in as the CEO, and he was available. It allows us to leverage his significant strength and experience in scaling businesses as we enter the next phase of our growth. He's been in the industry a long time. He has extensive industry contacts, scale, multiple billion-dollar businesses, and he also brings good global experience, which will be important for us in the future. So we felt this was the right time, and hence, the Board made the decision. I'll turn it over to Anthony now. Thank you.

Thank you, Shaker, and thank you, Philip, for the question. I think I've known FTC for multiple years now, and it was clear to me that I wanted to be part of this project. And as Shaker said, I think there are a few things about my background that are especially connected to what FTC wants to do.  One is to become a global leader in the tracker industry, and I have that global experience. Another one is scaling the business. And you mentioned what has been achieved by Yann and what we want to build on.  I think the company has great foundations. Like from a product perspective, a few years ago, the company didn't have the 2P and the 1P variety to choose from and didn't have as much traction with the customers as they do have now and didn't have an operational pillar like they do have now.  So the team has been able to do great things. And now I'm just very pleased that the Board considered that I could be a good candidate to take the company to the next level.   On top of that, you asked me why FTC and why now? I think we all agree that solar is growing globally and is an unstoppable source of energy, whether it's for providing power to hyperscalers or providing affordable power.  So this is really the time to join a company in this industry. And FTC's product is very unique. It's fast to install, and it's safe. I've been in touch with the EPCs, developers, and utilities that are familiar with the product, and the feedback has been very consistent during the time that I was on the Board and on the Customer Advisory Committee.  So this gave me the excitement and the momentum to trust the company. And as Shaker said, the Board believes that I was the right person at the right time, and I'm extremely excited to take this role.

Shifting over to some of the news from the quarter. You guys announced this 1-gigawatt award.  I think you guys said that there could be projects that add meaningfully to 2026 revenue. So I was wondering how many megawatts might be able to hit in '26. If you could give us a little more color on the award and maybe how you guys won it versus maybe the competition. And then I think you guys said for Q1, there was a project that was pushed out. I was wondering if you might be able to share a little bit of color on why that project was delayed and if that could be an issue for other projects as we get through '26?

Yes, Phil, this is Patrick. Thanks for the question. I think it relates to the 1-gigawatt safe harbor award that we announced. And as we said in my opening remarks, we signed the first tranche of that project. We do expect it to create meaningful revenue in the back half of the year and into early 2027, just given the project schedule. And so we're really excited about it. And I think when you look at why FTC versus some of the competition, I think it piggybacks on a lot of the things that Anthony just said. They really like the constructability aspect of the system, the ease to install. Quite frankly, it was the customer service that we provided. This is a big project for this developer and the EPC, and we were able to be in lockstep with them throughout the process and give them comfort that they're going to hit their deadlines.   Given that this is tied to safe harbor, timelines are of the essence. So we really partnered with this private equity group to deliver the expectations that they want in order to achieve their project. On the project that got pushed out in Q1, it was really nothing material or major. It was more just delays in the project scheduling. We still expect that project to move forward here in the very short term, but there were just some delays in construction progress timing.

One more for me, and then I'll pass it on. We've written a fair amount about this tax equity pause, and I was wondering what you guys might be seeing out there as it relates to how this pause might impact you guys, especially in '26. Do you see things adversely impacted? Or is it too early to say at this point with the 4 major banks pausing on Section 48E? And maybe help us, if you can, understand what percentage of your business for 2026 and '27 might be dependent on 48E as opposed to the Section 48 ITC?

No, it's a great question. I think part of it is that it's too early to tell. A lot of what's going on in Washington, I think it obviously creates some ambiguity on tax capacity or the timing of certain things. However, the near-term projects that we have secured their tax equity financing and feel confident about the project schedules ultimately going forward. And that's the one nice part about continuing to grow the international business. We have continued wins in Australia and South Africa that we talked about, and those will contribute to our revenue on a go-forward basis.  So we're not really contingent on just making sure that the U.S. market is solid. But as it relates to the ITC, I think we're watching it closely, and we'll see how it ultimately progresses. But we're in contact with all the major tax equity banks.

Your next question comes from the line of Sameer Joshi with H.C. Wainwright.

Welcome, Anthony, to the new role. Can you remind us of the historical geographical distribution of your revenues and how it matched with the 1Q revenue, and how it figures in the outlook for the rest of the year?

Yes. I think as it relates to our revenues, obviously, we're very kind of U.S.-centric when it comes to the near-term revenues. Obviously, we continue to build out the team in Australia, Europe, and certain parts of Sub-Saharan Africa. But as it currently stands, there's a lot of revenue in the U.S. But as we continue to grow and scale, and with Anthony's background, we expect the international sector of our market to continue to gain momentum and speed.

And just a little bit on the delayed project. Was that closer to a $3 million delay or closer to an $8 million delay? And I think you mentioned it will be executed over the next 12 months or so. Just wanted to see what the actual dollar impact was from this delayed project.

Yes. So our expectation that we were expecting in Q1 was in the $3 million to $4 million range. But the project is a good, solid project, and we're expecting that execution to hit soon and continue to drive revenue into 2026.

And then one more. I think you mentioned bookings are at a $55 million quarterly run rate.  Contrasted to the revenues of around $20 million to $30 million on a quarterly run rate for you guys. Is this activity because of the safe harbor action? Or is it that you are getting designed in earlier in the project cycle?

Yes. The safe harbor, while it's a great win for us, and we're excited about it, only makes up a portion of the $55 million quarterly run rate that we're talking about. Where we're seeing traction and momentum is if you think about the evolution of engaging with new customers, the first is to get on the ABL. And as we talked about on the last earnings call, we were on 8 of the top 10. Today, we told you we're on 9 of the top 10. Now we're able to participate in RFPs, participate in the designs, and really partner with these larger EPCs and even developers who are ultimately buying the project, which allows us to really showcase the constructability of the tracker, the ease of install, the safety, and then also our engineering shops as well. And so, really partnering with these EPCs earlier in the design process has really allowed us to showcase who we are and what we can do and how we can really partner with these folks, and it's really gaining traction and momentum.

And that concludes our question-and-answer session. I will now turn the conference back over to the management for some closing remarks.

Thank you. I think, just as closing remarks, I wanted to reiterate my excitement for joining FTC. The solar market is unstoppable. We see some respectable competition, but we believe FTC has a very strong positioning in the market. I'm very familiar with the product, the speed, and the quality, and also with the customers, utilities, EPCs, and developers, both in the U.S. and globally. And I'm very sure that we're continuing to grow that penetration into these customers. As I said, I'm very excited to lead the company, and I'm going to be investing not just my time but also continuing to invest in the company. I appreciate your time. Thank you very much.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.