FTC Solar - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 revenue was $20.0M, down 3.9% q/q and up 74.9% y/y; GAAP diluted EPS was $(1.18), and Adjusted EBITDA loss was $(10.4)M, at the high end of guidance due to tight OpEx control.
• Results were impacted by a $4.0M accrual related to a JV minimum purchase commitment; excluding this, non-GAAP gross profit would have been positive ~$0.5M and Adjusted EBITDA loss would have been $(6.4)M, the smallest since IPO.
• Wall Street consensus for Q2 expected revenue ~$20.06M and EPS $(0.72); FTCI delivered a slight revenue shortfall and a larger EPS loss, driven by the JV accrual and mix, while reiterating a stronger revenue ramp in Q4 and initiating Q3 guidance midpoint up ~5% sequentially.
• Strategic financing of up to $75M closed initial $14.3M on July 2, with $23.2M expected in Q3; management sees this balance-sheet strength as a catalyst for backlog conversion and customer wins.

What Went Well and What Went Wrong

What Went Well

• Cost discipline: Non-GAAP OpEx fell to $6.5M, the lowest since 2020, marking the seventh consecutive quarterly reduction; Adjusted EBITDA landed at the high end of guidance due to tight OpEx.
• Product innovation: Management introduced an 80° automated hail stow capability via SunOPS and announced an extra-long tracker tailored for 2,000V systems, expanding value and future readiness.
• Financing and commercial traction: Announced a scalable $75M facility with Cleanhill Partners, which is “already opening doors to new business,” and maintained contracted backlog of ~$470M.

What Went Wrong

• JV accrual: A $4.0M JV-related accrual not contemplated in guidance increased gross loss and pressured EPS; excluding it, non-GAAP gross profit and EBITDA would have improved materially.
• Mix and margin: GAAP gross margin was (19.6%), down q/q, with non-GAAP GM (17.4%); product/service mix timing and the accrual drove underperformance versus expectations.
• Regulatory uncertainty delayed bookings decisions and project financing closes; management cited safe harbor clarity and Treasury rules as gating factors, tempering Q3 midpoint growth to ~5%.

Transcript

Speaker 3

Today, and thank you for standing by. Welcome to the FTC Solar Second Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press *11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Bill Michalek, VP of Investor Relations. Please go ahead.

Speaker 1

Thank you and welcome everyone to FTC Solar's Second Quarter 2025 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've not reviewed these documents, they're available on the Investor Relations section of our website at ftcsolar.com. I'm joined today by Yann Brandt, the company's President and Chief Executive Officer, Cathy Behnen, the company's Chief Financial Officer, and Patrick Cook, the company's Head of Capital Markets and VP. 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 will 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 Yann.

Speaker 2

Thanks, Bill, and good morning, everyone. It's great to be with you again and give you an update on the continued progress that FTC Solar is making to position the company as one of the leading single-axis tracker providers in the market. As I approach my one-year anniversary with FTC Solar, I can tell you that this has been one of the most dynamic and incredible of my nearly 20 years in the solar industry. My optimism about the company and its future is that in this moment of needing to build solar faster and more efficiently, we believe our tracker installs in less time with fewer people than any of our peers, and we don't think it's even close. The constructability is in our DNA. Fewer parts and better features enable a reimagined solar tracker installation experience.

I urge you to view the videos of our installations that we've posted to see how tasks that may require six or seven people and special tools with competing products are replaced with two people and no specialty tools or drills. Our clients are finding that new installation crews can be trained and operating full speed within minutes of the start of the day. It's just that simple to install. This constructability is protected by IP and inherent in the design that is the latest innovation to the tracker market. While it takes time to educate and advance the conversation with EPCs that have been doing it one way for years, this is exactly the progress we're making every single day. FTC is on more approved vendor lists today than ever in our history, and we're just getting started.

FTC continues to grow the sales team with EPC experts to help drive understanding of our constructability with our customers. These installation benefits can enable EPCs to offer lower CapEx prices to customers when using FTC rather than with competitor options. Our message to the market is clear. We believe that FTC's tracker installs significantly faster than any other tracker in the market, and that message continues to be our focus every day. Now, let me say a few things on the market and our positioning, and then I'll turn it over to Cathy to provide an update on our second quarter results.

At a high level, the second quarter came in as expected from a financial perspective with results within our ranges and tight OpEx, allowing adjusted EBITDA to come in at the high end, even with some of the most volatile macro environment I have seen during my solar career. The exciting news since our last call was the $75 million financing facility we entered into in July and is already opening doors to new business for us. Having the appropriate balance sheet is key to growing through an inflection point, and this capital supports our growth and an expected acceleration of backlog. We've made excellent progress enhancing our product offering, checking all of the boxes, and leading on creating new innovations that are receiving positive feedback from customers. We remain the fastest installed tracker in the market and continue to push speed while also making it easier.

Overall market clarity is one area where we're hopeful for some incremental positive development, so let me start there. When we spoke a quarter ago and mentioned that there was a fair amount of dynamic motion in the marketplace as it relates to things like tariffs, trade deals, and legislation around the one big beautiful bill. Amid that backdrop, while projects continue to progress through stages of pipeline, there was a slow decision-making as customers looked to ensure that they fully understood the market rules that would impact their projects and had fully incorporated all costs and other variables into their project models. At the same time, the earlier phase-out of the ITC from the budget bill has spurred multiple gigawatts of new inquiries from customers about potential safe harboring of equipment as part of a plan to secure the full ITC.

Whether we see a rush to build solar as we move into 2026 or something more modest, we won't know until the rules on safe harbor come out from Treasury. The good news is that the end of the 45-day review period is scheduled to be coming to an end, so we hope to have additional clarity soon. While the legislation was not ideal for the solar market, the solar industry has shown its abilities to educate and advocate for important aspects of the law that allowed a path forward. With some additional clarity, I expect full speed ahead on project decisions and continued deployment of solar as the cheapest, cleanest, and fastest generation to connect to the grid. On recent calls, I've shared with you all the great progress we've made expanding our product offering. We have the world's most easily constructed tracker.

We leverage that platform to add features every quarter that allow for the tracker to fit the site and increase the value proposition that we enable for our EPC and IPP clients. This has included adding solutions for high wind zones up to 150 miles per hour, compatibility across module types, and with innovative python clips and module-agnostic universal torque tubes, the ability to make module changes late into the design cycle. Incidentally, the last two factors make FTC Solar an ideal tracker solution for those looking to safe harbor for purposes of the ITC, which we outlined in a white paper that we released last week. A key advancement in our 1P lineup includes introducing the widest range of stow in the industry. We are releasing the most advanced hail solution in the market, capable of an 80° stow angle.

Hail can be a key driver of insurance premium, so having a steeper stow capability can give owners and operators additional flexibility in meeting the unique requirements of their project. This high stow angle is combined with the SunOps performance platform, which has integrated weather forecast services and allows the user to fully customize their site and set thresholds on hail probability, size, and the radius of how close an event may be to the site. Most importantly and unique to FTC Solar, our hail stow capability performs in both directions, ensuring that the tracker goes to the nearest hail stow angle available, saving valuable time. Everything is automated, and if you want to adjust the configuration or trigger immediate stow across the site, just click a button from wherever you are, and the software will take care of it.

One other innovation I'm announcing today is an extra long tracker built specifically for 2000-volt systems. The industry is currently at 1500 volts, but is expected to begin to transition to 2000 in the next couple of years. You're already seeing this shift in the inverter market. At 2000 volts, a system can have fewer but longer tracker string lengths, which can reduce EBOS and O&M costs while increasing power capacity by 33%. When customers are ready to make that transition, we are ready to support them from a leadership rather than a follower position. I've alluded to multiple terrain-following features we've added to reduce or eliminate the need for land grading. This can be an important factor in enabling permits, lowering project costs, or significantly speeding a construction timeline.

FTC Solar has multiple options to support customers to reduce and avoid civil construction work, including articulation at the slew drive to allow for a change in the north-south slope at the drive pile, articulation at the line post to allow for variance in the line post elevation, and variable pile or reveal height capability to accommodate variation in slope, which if used in combination could eliminate cut and fill altogether with all of these options available now. We continue to make advances across our entire software platform and adding options and capabilities to make things easier and more efficient for our customers. SunOps is a key part of that. I haven't talked much in this venue about SunPath, which is our tracker optimization software for backtracking and diffuse light, but I believe it will become an increasingly important offering as we move forward.

I actually posted a picture on my LinkedIn yesterday, which a team member sent me. It shows an example of row-to-row shading on the site caused by natural undulation of the ground. The picture makes it super easy to see the production loss from shading, but that's the kind of thing that SunPath can easily fix when using FTC trackers where each row operates and can be customized individually. I often hear people talk about how truly flat solar sites are gone. Our team recently analyzed the last 250 sites that we have bid on, and it turns out that 90% of them contain slopes of three degrees or greater. This is important because at an average slope of five degrees, for example, SunPath on an FTC tracker would give you an additional 2% energy production gain every year over a linked row system.

That's like adding extra months of production to your deployment. As I said at the start, we have a very wide 1P product offering that is fast, safe, and easy to install, underpinned by our highly constructable design. The more customers and prospects that see how easy our 1P is to build, the more they will like it, particularly the estimators. A significant amount of labor costs on the site relate to mechanical installation of tracker and modules. When you see each module on an FTC tracker simply glide into place and be secured in seconds, you can start to estimate how much faster you can build each row and site and how that compounds to material labor savings.

This can result in significant savings for EPCs in any environment, but if there's a rush to build solar even faster, the speed with which you can train workers and install faster is critical to maximizing the available labor force in a tightening market. In addition to improving our position on the product side, as I mentioned, we added significant strength to our balance sheet with the $75 million financing commitment announced last month. In addition to giving us ample runway to achieve profitability, it gives incremental comfort to customers that we'll be supporting them long into the future. It was perhaps not the most conducive market environment to raise capital, so I think it says a lot that CleanHill Partners reached out to us, was getting great feedback from the market, and wanted to make it clear with a large commitment that they are big believers in our prospects.

The feedback from customers has been overwhelmingly positive, and the announcement has already opened doors to new business for us. I believe we're increasingly well positioned in the marketplace with a robust and rather comprehensive product line that offers significant benefits to projects across developer and EPC portfolios. Our engineering and R&D teams have a full portfolio of incremental initiatives in progress to provide additional customer benefits. We're adding multiple gigawatts of new business to our pipeline, which should only be enhanced by the strengthening of our balance sheet. Overall, we remain increasingly well positioned to support our customers and their growth. With that, I'll turn it over to Cathy.

Speaker 5

Thanks, Yann, and good morning, everyone. I'll provide some additional color on our second quarter performance and our outlook. Beginning with a discussion of the second quarter, revenue came in at $20 million, which was within our guidance range of $19 to $24 million. This revenue level represents a decrease of 4% compared to the prior quarter and an increase of 75% compared to the year earlier quarter due to higher product volume. GAAP gross loss was $3.9 million, or 19.6% of revenue, compared to a gross loss of $3.4 million, or 16.6% of revenue in the prior quarter. Non-GAAP gross loss was $3.5 million, or 17.4% of revenue, also within our guidance range. The result for this quarter compares the non-GAAP gross loss of $3 million, or 14.4% of revenue in the prior quarter.

This quarter's result included a $4 million accrual related to our joint venture facility that was not contemplated in our guidance ranges. Excluding this charge, we would have returned to being non-GAAP gross profit positive for the first time since late 2023 at a positive half a million dollars. GAAP operating expenses were $7.6 million. On a non-GAAP basis, excluding stock-based compensation and certain other costs, operating expenses were $6.5 million, down from $8.3 million in the same quarter last year and $6.6 million in the prior quarter. This now represents the seventh consecutive quarter of OpEx reductions and our lowest OpEx level since 2020 as we continue to control cost.

GAAP net loss was $15.4 million, or $1.18 per diluted share, compared to a loss of $3.8 million, or $0.58 per diluted share in the prior quarter, and a net loss of $12.2 million, or $0.97 per diluted share post-split in the year-ago quarter. Adjusted EBITDA loss, which excludes approximately $5.1 million for a loss from the change in fair value of the warrant liability, certain transition costs, and other non-cash items, was $10.4 million. This was at the top or better end of our guidance range, driven by the lower operating expense and compared to adjusted EBITDA losses of $9.8 million in the prior quarter and $10.5 million in the year-ago quarter. Excluding the accrual I referenced earlier, adjusted EBITDA loss would have come in at $6.4 million and represented our smallest adjusted EBITDA loss since becoming a public company.

Overall, from a financial perspective, we have continued to optimize our cost structure and remain well positioned to see considerable margin leverage as revenue levels grow. Regarding the balance sheet, as Yann mentioned, subsequent to quarter end, we announced a new $75 million strategic financing facility with CleanHill Partners and other investors. The facility provides for an initial term loan financing of up to $37.5 million. Of this amount, $14.3 million closed and funded on July 2nd. The balance of $23.2 million of the initial financing is expected to close in the current quarter, subject to shareholder approval on the issuance of associated warrants. The facility also provides for up to an additional $37.5 million in funding to be available to the company as may be needed in the future upon mutual agreement between the company and the investors for a total potential financing of $75 million.

With that, let us turn our focus to the outlook. Our targets for the third quarter call for the following: revenue between $18 million and $24 million. At the high end, it would represent 20% growth sequentially. However, we have set the midpoint at up 5% with the second quarter, reflecting the impact of market uncertainty on our customers' projects. Non-GAAP gross profit between -$2.4 million and positive $600,000 are between -13.4% and positive 2.5% of revenue. Non-GAAP operating expenses between $7.2 million and $7.9 million, and finally, adjusted EBITDA loss between $10.8 million and $6.8 million. We continue to expect to see a significant ramp in revenue in the fourth quarter. With that, we conclude our prepared remarks, and I'll turn it over to the operator for any questions. Operators?

Speaker 3

Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Please stand by while we compile the Q&A roster. Our first question comes from Philip Shen from ROTH Capital Partners. The floor is yours.

Speaker 0

Hey, guys. Thanks for taking the questions. First one's on the outlook for bookings. I think you guys said that the regulatory uncertainty has slowed some customer project planning. That said, we were just on the Scholes call, and their bookings are accelerating. I think they're at a $1.2 book-to-bill, and I performed on their bookings, and we've seen some of the other players do the same. I wanted to see if you could help us understand perhaps the difference with your outlook versus what they're delivering. Is it an exposure to a different set of customers, or what might be different or the same as well? Thanks.

Speaker 2

Yeah, no, great question, Phil. Appreciate that. I mean, look, I think ultimately we're transitioning into a marketplace of 1P, and I can't speak to the rest of the market peers, but certainly some of them are a lot more established with existing players and more tier one EPCs and IPPs. That's obviously what the setup is for FTC Solar in terms of getting to the bookings. As we roll out the 1P, we have to really position the company for success, which I think we're making a lot of traction to do, including the $75 million raise, putting the sales team in place, and obviously getting our roadmap finalized with the product. Now the bookings are expected to come in in order to get additional growth in this 1P inflection that we're transitioning into.

Speaker 0

Okay, thanks, Yann. Appreciate that. As we look ahead, when do you think we could see an acceleration of bookings? Should we think about it for this quarter, or do we need to get past the executive order? I guess that's coming around soon, so do we see an acceleration Q3, Q4, or should we look at it more in 2026? Thanks.

Speaker 2

Yeah, we're certainly optimistic around the bookings accelerating significantly. Obviously, we're coming from a 1P base that's relatively low and breaking into a market that has strong peers. The executive order, I think, will determine what the pace and scale is of safe harbor, whereas the existing projects that we've been working on for quite a bit, those projects getting financial close and getting the financing in place to build. I think when we talk about the dynamic nature of the legislative environment, not every IPP and asset owner looks to hold the asset beyond development stage. It was really difficult for those kinds of clients, which tend to be a large portion of ours, from closing and ultimately getting into construction when they're uncertain around how tax equity, et cetera, will play.

I think that portion being behind us, safe harbor will be some version or have some influence on timing of scale, but we think ultimately we're well situated for both. On safe harbor in particular, our ability to be agnostic on module with our torque tubes plays really well with asset owners being able to safe harbor something while not having all of their material supply figured out.

Speaker 0

Okay, got it. Thanks. One last one for me. I know you don't have any guidance for 2026 and can't guide there, but I was wondering if you could talk through how you expect the year to play out and maybe provide a bit of a margin kind of trajectory between now and a year in 2026, if you guys can, or if not, perhaps just a little bit of color on how to help us frame the situation. Thanks.

Speaker 2

Yeah, I'll stay away from specifics, but let me frame it. 2026 is shaping to be the pivotal year for FTC Solar. Our roadmap is where we want it to be. Our sales force and sales team in the U.S. and globally have built these relationships that speak to the constructability. In a world where the labor market is super tight and there's so much solar to be built, saving a significant % on the installation speeds is what really puts FTC Solar's value proposition in the forefront, both for bookings, top line, and margin. We're really optimistic around where we stand. We'll have more to say in the coming quarters, but that's the path we're marching down and executing against. We now have a lot of the base, the foundational pieces in place, including the balance sheet that we needed in order to be able to do that.

Speaker 0

Yep. Congrats on the $75 million deal, and I'll pass it on. Thanks.

Speaker 3

Thank you for your question.

Our next question comes from Jeff Osborne at TD Cowen. The floor is yours.

Speaker 0

Hey, thank you. Maybe just to follow up on Phil's line of questioning, what is the sort of voice of the smaller IPPs and EPCs? Is it just solely waiting for clarity from the July 7th executive order, or is there challenges in getting financing and moving the projects forward? I'm just trying to bridge the gap. My sense is that the third quarter guidance is probably less than you were anticipating maybe two, three months ago. What gives you the confidence that, assuming it's that group of customers that have been a bit paused here, they're going to move forward in the fourth quarter?

Speaker 2

Yeah, no, the confidence comes from we're working really closely with them. Obviously, a lot of our team has been in and around project finance for many years. I would say strategically, the main thing that's happened in capital raise for smaller project developers is putting capital in place not just for individual projects, but for the broader pipeline, given the strategy on how to maximize the value of those assets sort of came to the forefront with less years on the ITC window. The executive order is going to impact the size and scale of safe harbor and the strategy around maybe earlier stage projects in the pipeline. Our confidence comes from the fact that there's usually not just one term sheet from major players that want to buy these developed solar assets. We see those projects transacting and getting to close.

Obviously, that will then roll into being actionable revenue opportunities for FTC Solar.

Speaker 0

Got it. Maybe for you, Yann, or someone else, if we could just flesh out the $4 million charge in the quarter, was that associated with the CELI facility and then the associated FEOC rules that were implemented? Maybe just describe, A, what the $4 million is related to, and now that FEOC is out in the July 4th bill, how is the CELI, what's the ownership structure of CELI relative to what's needed with the new rules?

Speaker 2

Yeah, let me have Cathy answer the $4 million. I'll come back and answer the tail end of your question.

Speaker 5

Okay, sure. Hi, Jeff. The $4 million was related to an agreement that we had in the JV on minimum purchase commitments with Alpha Steel. We entered that before the facility ever opened. That's what the $4 million accrual is related on. There are kind of a lot of different components to it, and we're still in discussions with the team, but $4 million is the maximum potential impact, and we haven't made any payment at this point.

Speaker 2

Yeah, FEOC doesn't impact the $4 million accrual. There's obviously going to be a lot of motion across the landscape of manufacturing. We're looking at the options for us. We have a great partner in that JV, so there's a few options. It's not a large facility, so from a material assistance perspective, it's really de minimis. We're working through it, but we have a good partner and expect to be able to continue the work there.

Speaker 0

Got it. My last one was just on the capital raise. Great to see, but just what was the sort of the logic or rationale of going that route with the warrant structure relative to, I think you had a $60 million ATM that had been untapped for quite some time. What was the trade-off? Did you need the two tranches within short order and just the amount of time it would have taken to come up with the $37.5 million relative to using the ATM? Was less pressure on the stock? Was that the industrial logic or what was the thought process?

Speaker 2

Yeah, I think it was opportunistic. I mean, we have now a great partner in CleanHill Partners. It really signifies the positioning that FTC Solar is in relative to the market and our peers and the differentiated technology. It's hard to be innovative in something like trackers, right? Especially the step change that we were looking to achieve in terms of the labor savings and constructability. The opportunity arose to do something larger with CleanHill Partners. We looked at that versus the other options that were on the table. Based on what our optimism says is ahead for us, we wanted to make sure that we had the right balance sheet in place. Our customers have been really positive, like I said in the prepared remarks.

It's opened doors just in the last couple of weeks of customers that were looking at watching FTC Solar's growth and sort of bring us back to the table and bidding work that we were hopeful to get but weren't expecting to get this quickly. We anticipate that this balance sheet enhancement at that scale is going to get us to the point we want to get to a little bit faster.

Speaker 0

Perfect. That's all I had. Thank you.

Speaker 2

Thanks, Jeff.

Speaker 3

Thank you for your question. At this time, as a reminder, to ask a question, you will need to press *11 on your telephone. One moment, please. Our next question comes from Samir Joshi, H.C. Wainwright. The floor is yours.

Speaker 4

Good morning, and thanks for taking my questions. Just digging deeper into sort of the revenue mix between products and services, obviously this quarter product revenues were lower, service were higher. Was that question one, was that just seasonality, or should we read something more in that? Part two, how do you see 3Q product mix or revenue mix?

Speaker 0

Yeah, Cathy, can I ask you?

Speaker 5

Yes, absolutely. On services, it's really just a mix of project and project timing. In services, we have all of our logistics and delivery services for all of our projects. It's a timing of production versus delivery. Plus, we do some engineering services contracts. It's kind of the timing. We had a pretty large engineering services contract during Q2. I think you'll see as we move into Q3, you'll see a little bit more tilt towards the production side of it as you go into Q3.

Speaker 4

Understood. As a corollary to that, the guidance or rather the outlook for 3Q gross profit is higher than what you saw in 2Q. Is that again because of revenue mix, or is that because of elimination of certain accrual charges you talked about?

Speaker 5

Yeah, it is a combination. It's a combination of revenue mix. It's also the $4 million impact of that $4 million accrual in Q2.

Speaker 4

Understood. Thanks for that. Just following up on previous questions regarding the financing, do you expect this timing of the drawdown to be alongside your expected bookings? Also, can you just help us understand relative to a project being installed and constructed, what is your revenue recognition timeline on that?

Speaker 2

I think your first question is the correlation between the second tranche of the capital drawdown. That doesn't have relation to anything project-related. It's just a function of meeting the shareholder vote. Cathy, do you want to give some light on the revenue recognition to the extent that we share that?

Speaker 5

Yeah, Samir, our revenue recognition, I think, similar to all of our competitors, we're recognizing revenue over time as a project progresses through the production lifecycle of the project. Once execution begins and production begins, we recognize it based on percentage of completion throughout the project.

Speaker 4

Got it. Understood. Thanks for taking my question.

Speaker 3

You're welcome. Thank you for your question. At this moment in time, I'm showing no further questions. I'd like to go ahead and conclude the call. Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.