FTC Solar Announces Third Quarter 2023 Financial Results and Leadership Transition

Third Quarter Highlights and Recent Developments 

• Revenue of $30.5 million up 84% y/y, down 5.6% q/q
• Continue to improve cost structure, as evidenced by gross margin on sub-scale revenue levels
• Project backlog of approximately $1.6 billion, with approximately $60 million added since August 9
• Leadership transition announced with Sean Hunkler and Phelps Morris departing

AUSTIN, Texas, Nov. 08, 2023 (GLOBE NEWSWIRE) -- FTC Solar, Inc. (Nasdaq: FTCI), a leading provider of solar tracker systems, software and engineering services, today announced financial results for the third quarter ended September 30, 2023, as well as a leadership transition in which Sean Hunkler and Phelps Morris have departed their roles as CEO and CFO, respectively, and will be leaving the company in December 2023.

Leadership Transition
“Much of the last two years has been about repositioning the company to be in the right markets with the right technology and cost structure to enable our profitable return to above-market growth rates,” said Shaker Sadasivam, Chairman of the Board of FTC Solar. “We have made progress on that front and improved our positioning. With a healthy and profitable tracker market, it’s time for FTC’s results to reflect its improved positioning with healthy, profitable growth. As the Board evaluated opportunities to accelerate momentum, we’ve agreed that now is the right time to bring new leadership to FTC Solar as we enter our next phase of growth and execution. On behalf of the Board of Directors and everyone at FTC Solar, I want to sincerely thank Sean and Phelps for their contributions and wish them all the best in their next endeavors.”

Cathy Behnen, who has served as the company’s Chief Accounting Officer since 2020, has been named CFO on an interim basis. Behnen has more than 20 years of financial leadership experience, including serving as CFO and VP of Finance at Penn National Gaming Hollywood Casino San Diego prior to joining FTC Solar. Prior to that role, she served in various finance and operations roles and as a Partner at the accounting firm RubinBrown. She is a Certified Public Accountant and holds an MBA from St. Louis University.

The combination of Executive Leadership members Patrick Cook, Chief Commercial Officer, Sasan Aminpour, Chief Operating Officer, and Behnen will provide steady leadership of the day-to-day management of the company. To further ensure a smooth transition for the Company and its employees and customers during this interim period, the Board will provide increased oversight of those leaders and be engaged on a more frequent basis.

“We’re confident that this team and structure has the capability, along with the right blend of organizational history and new perspectives, to ensure that not only do we not miss a beat but that we accelerate toward our long-term goals. While today’s news represents a change, it also represents a tremendous opportunity for us to accelerate our momentum,” Sadasivam concluded.

Third Quarter Results
The company’s third-quarter revenue was in line with expectations. Of note, the company showed a fourth consecutive quarter of gross margin improvement, as our manufacturing cost reduction efforts continue to bear fruit. Excluding $1 million in benefits to gross margin and a $4 million credit loss charge in operating expense in the quarter that were not contemplated in our guidance ranges, gross margin, operating expenses and Adjusted EBITDA would all have been at the high-end or better than our target ranges for the quarter.

The company’s efforts to improve our product cost structure, which are a key driver for margin improvement, are only one aspect of our initiative to improve our competitive positioning. We continue to see a strong response to our new and differentiated 1P tracker solution, Pioneer, which significantly expands our market opportunity. Our international business continues to gain traction with awards in more than a dozen countries to date. And we are focused on controlling expenses while investing in areas that support and accelerate our long-term growth. The improvements in our competitive positioning, along with a strong backlog, provide a healthy foundation from which to accelerate growth and profitability in 2024 and beyond.

Approximately $60 million has been added to backlog¹ since August 9, with total backlog now standing at approximately $1.6 billion.

Summary Financial Performance: Q3 2023 compared to Q3 2022

Total third-quarter revenue was $30.5 million, coming in above the mid-point of our target range. This revenue level represents a decrease of 5.6% compared to the prior quarter, on lower logistics volumes. Compared to the year-earlier quarter, revenue increased 84.3%, driven primarily by higher product volume.

GAAP gross profit was $3.4 million, or 11.1% of revenue, compared to gross profit of $2.2 million, or 6.8% of revenue, in the prior quarter. Non-GAAP gross profit was $3.9 million or 12.8% of revenue and includes $1 million in benefits not contemplated in our guidance related to better-than-expected margins on a closed project and lower-than-expected inventory costs that we don’t expect will reoccur in future periods. If those benefits were excluded, or on the same basis of our guidance, non-GAAP gross margin would have been 9.5%, relative to our guidance range of 3% to 9%. The result for this quarter compares to a non-GAAP gross loss of $8.2 million in the prior-year period, with the difference driven primarily by significantly improved product direct margins and lower warranty, retrofit and other indirect costs.

GAAP operating expenses were $19.7 million. On a non-GAAP basis, excluding stock-based compensation and certain other costs, operating expenses were $13.2 million, which includes a $4 million credit loss provision relating to a specific customer account that was not included in our guidance ranges. Excluding this charge, our non-GAAP operating expenses would have been $9.2 million. This result compares to operating expenses of $9.1 million in the year-ago quarter.

GAAP net loss was $16.9 million or $0.14 per share, compared to a loss of $10.4 million or $0.09 per share in the prior quarter and a net loss of $25.6 million or $0.25 per share in the year-ago quarter. Adjusted EBITDA loss, which excludes approximately $7.2 million, including stock-based compensation expense and other non-cash items, was $9.7 million, compared to losses of $7.2 million in the prior quarter and $17.7 million in the year-ago quarter.

Outlook
We expect fourth quarter revenue to be down from the third quarter with gross margin reflecting lower cost absorption. We expect this to be followed in the first quarter by a fairly substantial revenue and margin recovery as projects ramp.

We continue to be optimistic about our growth prospects, supported by our large and growing backlog and improved competitive positioning and expect to cross into profitability in 2024.

Third Quarter 2023 Earnings Conference Call
FTC Solar’s senior management will host a conference call for members of the investment community at 8:30 a.m. E.T. today, during which the company will discuss its third quarter results, its outlook and other business items. This call will be webcast and can be accessed within the Investor Relations section of FTC Solar's website at investor.ftcsolar.com. A replay of the conference call will also be available on the website for 30 days following the webcast.

About FTC Solar Inc.
Founded in 2017 by a group of renewable energy industry veterans, FTC Solar is a leading provider of solar tracker systems, technology, software, and engineering services. Solar trackers significantly increase energy production at solar power installations by dynamically optimizing solar panel orientation to the sun. FTC Solar’s innovative tracker designs provide compelling performance and reliability, with an industry-leading installation cost-per-watt advantage.

Footnotes
1. The term ‘backlog’ refers to the combination of our executed contracts and awarded orders, which are orders that have been documented and signed through a contract, where we are in the process of documenting a contract but for which a contract has not yet been signed, or that have been awarded in writing or verbally with a mutual understanding that the order will be contracted in the future. In the case of certain projects, including those that are scheduled for delivery on later dates, we have not locked in binding pricing with customers, and we instead use estimated average selling price to calculate the revenue included in our contracted and awarded orders for such projects. Actual revenue for these projects could differ once contracts with binding pricing are executed, and there is also a risk that a contract may never be executed for an awarded but uncontracted project, or that a contract may be executed for an awarded but uncontracted project at a date that is later than anticipated, thus reducing anticipated revenues. Please refer to our SEC filings, including our Form 10-K, for more information on our contracted and awarded orders, including risk factors.
2. Includes $1 million benefit to gross margin and $4 million charge in operating expenses that were not contemplated in the company’s prior guidance ranges.

Forward-Looking Statements
This press release contains forward looking statements. These statements are not historical facts but rather are based on our current expectations and projections regarding our business, operations and other factors relating thereto. Words such as “may,” “will,” “could,” “would,” “should,” “anticipate,” “predict,” “potential,” “continue,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates” and similar expressions are used to identify these forward-looking statements. These statements are only predictions and as such are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. You should not rely on our forward-looking statements as predictions of future events, as actual results may differ materially from those in the forward-looking statements because of several factors, including those described in more detail above and in our filings with the U.S. Securities and Exchange Commission, including the section entitled “Risk Factors” contained therein. FTC Solar undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events or changes in its expectations, except as required by law.

FTC Solar Investor Contact:
Bill Michalek
Vice President, Investor Relations
FTC Solar
T: (737) 241-8618
E: IR@FTCSolar.com

Notes to Reconciliations of Non-GAAP Financial Measures to Nearest Comparable GAAP Measures
We present Non-GAAP gross profit (loss), Non-GAAP operating expense, Adjusted EBITDA, Adjusted Net Loss and Adjusted EPS as supplemental measures of our performance. We define Adjusted EBITDA as net loss plus (i) provision for (benefit from) income taxes, (ii) interest expense, net (iii) depreciation expense, (iv) amortization of intangibles, (v) stock-based compensation, and (vi) non-routine legal fees, severance and certain other costs (credits). We also deduct the contingent gains from the disposal of our investment in an unconsolidated subsidiary from net loss in arriving at Adjusted EBITDA. We define Adjusted Net Loss as net loss plus (i) amortization of debt issue costs and intangibles, (ii) stock-based compensation, (iii) non-routine legal fees, severance and certain other costs (credits), and (iv) the income tax expense (benefit) of those adjustments, if any. We also deduct the contingent gains from the disposal of our investment in an unconsolidated subsidiary from net loss in arriving at Adjusted Net Loss. Adjusted EPS is defined as Adjusted Net Loss on a per share basis using our weighted average diluted shares outstanding.

Non-GAAP gross profit (loss), Non-GAAP operating expense, Adjusted EBITDA, Adjusted Net Loss and Adjusted EPS are intended as supplemental measures of performance that are neither required by, nor presented in accordance with, U.S. generally accepted accounting principles (“GAAP”). We present these non-GAAP measures, many of which are commonly used by investors and analysts, because we believe they assist those investors and analysts in comparing our performance across reporting periods on an ongoing basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA, Adjusted Net Loss and Adjusted EPS to evaluate the effectiveness of our business strategies.

Non-GAAP gross profit (loss), Non-GAAP operating expense, Adjusted EBITDA, Adjusted Net Loss and Adjusted EPS should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP, and you should not rely on any single financial measure to evaluate our business. These Non-GAAP financial measures, when presented, are reconciled to the most closely applicable GAAP measure as disclosed below.

The following table reconciles Non-GAAP gross profit (loss) to the most closely related GAAP measure for the three and nine months ended September 30, 2023 and 2022, respectively:

The following table reconciles Non-GAAP operating expenses to the most closely related GAAP measure for the three and nine months ended September 30, 2023 and 2022, respectively:

The following table reconciles Non-GAAP Adjusted EBITDA to the related GAAP measure of loss from operations for the three and nine months ended September 30, 2023 and 2022, respectively:

The following table reconciles Non-GAAP Adjusted EBITDA and Adjusted Net Loss to the related GAAP measure of net loss for the three months ended September 30, 2023 and 2022, respectively: