Welcome to the FTC Solar first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during the session, you will need to press star, one on your telephone. If you require any further assistance, please press star, zero. I would now like to turn the conference over to your speaker today, Bill Michalek, Investor Relations. Please go ahead.

Thank you and welcome everyone to FTC Solar’s first quarterly earnings conference call as a public company, this being our first quarter 2021 report. Prior to today’s call, you’ve likely had the opportunity to review our earnings release and supplemental slide presentation. If you’d not yet reviewed these documents, they are available on the Investor Relations section of our website at FTCsolar.com. I’m joined today by FTC Solar’s President and Chief Executive Officer, Tony Etnyre, and Patrick Cook, the company’s Chief Financial Officer. Before we begin, let me remind everyone that today’s discussion contains forward-looking statements based on our assumption and beliefs in the current environment and speak 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 our other SEC filings, including our registration statement on Form S-1 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. In addition, we’ll discuss our executed contracts and awarded orders, and our definitions for this metric is also included in our S-1 and press release. With that, let me hand it over to Tony.

Thanks Bill. Good morning everyone. Thank you for joining our first conference call as a public company. Becoming a publicly traded company is an important strategic milestone for FTC Solar. In the first quarter of 2021, we achieved $65.7 million in revenue, which was just more than double our performance in the first quarter of 2020. Our differentiated product is compelling to our customers, and we’re seeing that translate to continued growth in the business. We secured our first sale of our SunPath software product. After testing and validating the benefits of our software, that client indicated they would consider adding SunPath to all of their projects with us. We followed up that win with an additional project win in Q2. While still very early in the launch of this offering, we’re excited about its long-term potential. We believe the current market dynamics provide the opportunity to accelerate adoption of SunPath as it directly improves project economics. We were awarded two projects in Australia, kickstarting what we expect will be additional international wins in 2021, and finally our executed contracts and awarded orders have grown by 260% on a year-to-date basis through June 1, with another $55 million added since our IPO. Subtracting the amount included in reported first quarter revenue, that brings our new balance to $326 million with $159 million remaining, with expected delivery in 2021 and $167 million currently expected to be delivered in 2022. We’re pleased with our IPO complete. We’ve added $181 million to our balance sheet, which continues to be debt-free. This strong liquidity position allows us to pursue the many significant growth opportunities we see ahead and to continue our growth trajectory. At the outset of this call, let me make one thing very clear. We fully intend to build a value-creating business…

Thank you Tony, and good morning everyone. Before turning to your questions, I’ll take a moment to provide some additional insights to our first quarter results as well as some color regarding our outlook for the remainder of the year. First, I should point out that our year-over-year comparison for the first quarter reflects a significant amount of growth in our personnel and corporate infrastructure that has taken place over the last year to support our growth trajectory as well as operation costs that were necessary in anticipation of becoming a public company, and while we are confident that this investment was necessary and it sets us up well for future periods, it does not make for particularly meaningful comparisons. Now for first quarter 2021, total revenue was $65.7 million, which represents growth in excess of 100% versus the first quarter of 2020. This includes a push of $800,000 of revenue from the first quarter to the second as a result of COVID-related supplier production delays. Our gross GAAP profit came in at $119,000, which was down approximately $7 million from the year-ago quarter. Such year-over-year decline was primarily driven by strong ramp in headcount and other overhead expense to support our growth that hits our gross margin line. In the year-ago quarter, we also had some higher margin Safe Harbor related sales that did not occur in the first quarter of this year. This number was lower than our internal plans due to additional shipping and logistics costs that were unable to be passed on to customers, which we discussed in our May 17 press release, as well as some product enhancement related expenses that carried over from 2020. The other thing I’ll note here is stock compensation expense. GAAP gross profit includes approximately $66,000 in stock compensation expense.…

[Operator instructions] Our first question comes from Michael Weinstein with Credit Suisse. Your line is now open. If your line is muted, please un-mute, Mr. Weinstein.

Sorry about that - yes, I was still on mute. Got it. Thanks for the question. With second quarter freight and shipping costs expected to be higher, or at least with a push out in that quarter, right, from at least that one large customer to avoid such a cost, what gives you confidence that this is still contained to this year; in other words, that you’re not going to see continued push-outs into next year or that freight costs will normalize throughout--by the end of this year?

Thank you, Michael, I appreciate the question. This is Tony. As I mentioned in some of the actions that we were taking relative to the current market environment, around logistics what we’ve done is implement some different shipping methodologies for which we have greater visibility and control over the costs for the second half of the year, and so that is in alternate shipping methods not relying on container freight where we could be surprised by those kinds of surcharges.

Got you. In terms of the developers that you’re working with, are they--how are they feeling about projects and project delays due to the cost environment? One thing we’ve heard from large developers that we talked to at a conference a few weeks ago is that they are not delaying projects, but evidently at least there is a certain number of them obviously that are. I’m just wondering what you’re hearing across all your customers as you speak to them.

Sure. I certainly can’t speak for the entire developer community. I can only speak to our experience and the discussions that we are having. What we see is for our contracted and awarded projects, we’re seeing those hold; however, we have had conversations with certain developers, and certainly not the breadth of the market, but certain developers who are electing where they have the ability to mitigate COD requirements and timelines to hold projects a quarter or so, and so I think the way I’d characterize it, it’s not a 100% decision across the developer community. It is for specific projects, which may have specific financial challenges that those elections are being made. But as I said, our contracted and awarded portion remains pretty consistent.

Right, but it’s basically just a quarter or two is kind of the thinking that you’re seeing out there, not longer than that so far?

That’s correct.

Okay. Just one last question - how do you think about the opex run rate as you go into the second half? Do you still expect higher costs for new products, such as high wind resistant trackers? When do you expect to reap benefits in that area?

With respect to our cost road map, which is the main driver for the cost structure of the product, as Patrick noted, we believe we’re making good progress there. We’re confident in our ability to drive that cost structure, and the remarks Patrick made around the third and fourth quarter are reflective of that structure benefit. With respect to opex costs, I’ll turn that to Patrick.

Yes, as it relates to opex, as we look to continue to build out our infrastructure, it’s really going to follow the growth. As we’ve talked about, we have a largely built out corporate infrastructure here in the U.S. and abroad. As we continue to grow and expand, we will look to leverage low-cost countries in order to expand our employee base in order to keep opex down while continuing to support our customers and their growing needs.

Right, so it’s really tied to growth and as long as you can manage the growth within expectations, you’ll meet your targets for second half?

That’s fair.

All right, thank you very much. I’ll pass it along.

Thanks Michael.

Thank you. Our next question comes from Pavel Molchanov with Raymond James. Your line is now open.

Thanks for taking the question. Part of the back-end weighted revenue ramp in the current year was always the international dimension of your sales mix. Can you just give an update on the weighting of non-U.S. in your current revenue and what you’re anticipating in your directional guidance for the second half of the year?

Thanks Pavel, appreciate the question. As I noted, in the first quarter we did secure our first international project, those two projects in Australia, and we’re continuing to see pipeline improvements internationally in the growth. We expect to see some conversion of international projects in 2021. With respect to final percentages, I don’t think we’ve had much change since the IPO on that outlook. Patrick, I don’t know if you have any comments to make there?

No. I think the way we look at the international and U.S. markets, predominantly in 2021, the vast majority of our revenue is going to come from the U.S. with wins and expected increased revenue towards the back half of the year, and that outlook remains unchanged.

That’s helpful. In addition to the cost escalation, one of the other dynamics we’ve watched in the last 60 days is one after another, Asian countries, India most notably but Malaysia and others as well are going back into lockdown 2.0. In some cases, manufacturing is among the sectors that are disrupted, and given your geographically diverse supply chain, have you had any component shortages or temporary dislocation because of COVID-related restrictions in Asia-Pacific?

As Patrick noted, we did have in the first quarter a small shift in supplier output, which we moved some material deliveries out. I think your point, Pavel, on the diversity of the supply chain is an important one. We’ve taken steps to make sure that we’re regionally diverse, and that each of those regions has sufficient components second and third sources in it for us to be flexible. In the steel contracting I discussed, that also was done regionally to make sure that we have that diversity of supply going forward. Certainly, we have a large team in India and our team is having to deal with the large second wave, as are some of our suppliers in those regions. The benefit of having that flexible supply chain is our ability to manage that, and to date we haven’t had any significant issues to deal with, with respect to supply.

Good to hear. Thank you very much, guys.

Thank you Pavel.

Thank you. Our next question comes from Philip Shen with Roth Capital Partners. Your line is now open.

Hi everyone, thank you for taking my questions. The first one is on the outlook for these delays. I know you already addressed it a bit, but some of our checks with large developers suggest that it’s not really about projects in ’21 being delayed into ’22, but rather because the large projects are being contracted for today for 2022 COD, there’s risk for 2022 being pushed into 2023. Are you seeing any of that at all in your conversations with customers, where they’re potentially pushing out some of the volume from ’22 into ’23?

Thanks for your question, Philip, appreciate it. Good to talk to you again. I think as we noted, we’re kind of seeing potential shifts of individual projects in that one to two quarter range, which in our experience could push projects from ’21 to ’22, and ’22 to ’23. Given the tracker dynamic from a procurement standpoint, most of our focus now is in late stage ’21 and ’22 projects in those conversations, and so as we engage with customers, we’ll continue to work with them on those timelines.

Thanks Tony. You talked about the increased opex due to additional wind tunnel testing to expand your product offering. Can you give us some insight into what those new products might be?

Sure, yes. Thanks for the question. Our base Voyager product has nodes at 105 miles an hour, 120 miles an hour, and 135 miles an hour. The Voyager Plus product, which we released and are installing now at a large site in the U.S. for large format modules, also has those nodes at 105, 120 and 135, and so that wind tunnel testing is all about the validation of that large format module product at all of those wind speeds. We are continuing to work on those higher wind regions to complement that portfolio.

Great, thanks. Then in terms of the Australian projects awarded, can you share the size of those projects - how meaningful were they, and then also as it relates to the awarded and executed projects, I think you had an incremental $280 million to your orders. Is it possible to share what the mix is between awarded and executed? Thanks.

Sure, so from an Australia standpoint, those two projects were both single-digit megawatt projects, high single-digit megawatt projects. What’s important for us in there is getting a footprint in region. In each region, it’s very important to have a proof point, so for us that’s a very important proof point in the Australian market.

As it relates to our contracted and awarded projects, we’re continuing to work with our customers for the ones that are not signed but awarded, to execute those contracts here in the very near term in accordance with the project delivery schedules. As Tony mentioned, we see no delays in those projects towards the back half of the year, and execution and contract will come commensurate with customary project timelines.

Great, okay. Thank you both. I’ll pass it on.

Thanks Phil.

Thank you. Our next question comes from Julien Dumoulin-Smith with BofA Securities. Your line is now open.

Hey, good morning team. Thanks for the opportunity. If I can follow up on the international awards, I think you mentioned a couple projects in Australia. Can you elaborate a little bit more on the additional wins that you alluded to in ’21? How do you think about the composition and specific project awards potentially coming forward, if you think about the back half?

Sure, thanks for the question, Julien. To reiterate, the award wins that we noted are predominantly United States. Those first two wins in Australia represent the first international wins in 2021 for the business. Those are clearly very important for us as a marker for growth, and so as Patrick noted, we still expect in the second half the dominant portion of our revenue to be in the U.S. while continuing to make progress across a couple of regions internationally.

I think the key point on that, Julien, is we do have and deploy boots on the ground in Southeast Asia, sub-Saharan Africa, Middle East, North Africa, Australia, Latin America and Europe. Most of those sales leads have been on the ground for over a year now and have really been instrumental in helping us develop the pipeline over the last year and giving us the confidence in the conversion in the back half of the year for more international wins.

Got it. All right, fair enough. Then if I can ask a little bit more of a higher level question on the cost road map as you see it, how do you think about the inflationary pressures? Obviously the bulk of these are being passed through to customers, perhaps freight a little bit less transparently so. You’ve got some mitigating factors. How do you think about the execution of the cost road map and that translating to sales as you start thinking about bidding in that cost road map into your back half in ’22 backlog, if you will? Should we start to see that acceleration pick up in the back half of the year relative to your peers, if you think about it?

Yes, great question, Julien. We have a very rigorous cost road map process, and so it’s the aggregation of multiple individual projects with detailed timelines, resources and expectations for delivery of savings. We’re able to take that information and be forward looking about how that translates to the overall product cost, and able to use that in our sales process as appropriate for bidding. I think that structure is very important to help us drive that visibility. I think as we continue to drive that cost road map, obviously it has opportunity for margin improvement for our business as well as our continued ability to drive the value of our product in our sales strategy. We believe that the sales strategy of our product is not solely ASP driven. We talked about the additional construction cost reduction benefits of the product, the yield enhancement benefits of SunPath, and so we’ll always look to present the product and its full value to the customer in the sales process. Patrick noted we expect to see sequential improvement in the second half from a revenue standpoint. We believe that’s the aggregate of us continuing to gain traction in the business and us continuing to demonstrating value to the customers.

Got it. Lastly, any further strategic thoughts on repositioning here? You’ve got cash on balance sheet, etc. Any elaboration on--I know it’s recently accrued here, but any initial thoughts?

Julien, none to speak of or share with you today. I’d say as part of our ongoing process, we’re always looking for opportunities to find ways to increase shareholder value through M&A or other avenues. We have a team and a rigorous process that we continue to outward look and evaluate those opportunities as they come up; however as of today, we have no specific opportunities to speak of.

All right, I’ll leave it there. Thank you all. Best of luck.

Thanks Julien.

Thank you. As a reminder, to ask a question, you will need to press star, one on your telephone. Our next question comes from Moses Sutton with Barclays. Your line is now open.

Hi, congrats on the first quarter as a public company. Looking at the comments in the press release, is there a specific steel index you’re using or looking at or benchmarking against? I’m just looking at a Bloomberg composite steel price index and it’s flat from April 30 IPO to now, it went up, and then retraced. Just trying to bridge that with the release where you note a 19% or 18% increase in steel since the IPO.

Yes, thanks for the question, Moses. Because we are a procurer of steel from multiple regions, we look at the steel pricing from those three main regions, from India, from the U.S., and from China, which is a good proxy for our Southeast Asia business. What we’re looking at is the hot rolled coil mix for costs in each of those individual regions that’s representing that growth, or increase.

That’s very helpful. Then with the project backlog, the 326 split almost evenly ’21 and ’22, can you explain the--it seems almost counterintuitive for that much to be in 2022. How much is one big order or was a large project, some of it the delay that you’ve already been referring to? Maybe you could provide some color there on the split.

Yes Moses, I can answer that. In term of the project and the split in 2022, there are several projects--it really gets broken out in two camps, a couple large projects that are slated to start construction in Q4. Part of the revenue will be recognized in Q4 with a continuation into 2022. Now we do have a couple of discrete projects that are in 2022 on a standalone basis, made up of some relatively large projects, but it’s a little bit of a mix between carryover from 2021 into three projects in 2022. Most of the revenue is tied to carryover from 2021.

Okay, that’s very helpful. Of the 159 and 167, can you provide percentages, or maybe just of the total, that are final project contracts versus they’re still open orders that you need to go through the contracting process?

Moses, as we talked about, where we are with some of these projects, we do have in certain timelines, project timelines, we do have the contracted assets. As it relates to some of the ones that are in Q3 and Q4, we are in current negotiations to ink those contracts in accordance with those delivery schedules, so that is the documentation portion that we’re working through in order to ink those back half of the year projects that are currently sitting in the awarded bucket.

Got it, that’s very helpful. Increasing pricing on those new contracts, can you give any directional amounts you’ve already been able to pass through, even if it’s in a few cases, maybe on a cents per watt basis or any metric that you think would sort of give us help here? Just trying to think through--I know you gave comments overall in the business to hit profitability by 4Q, but just trying to get a sense on how to bridge this on a margin basis even a little bit more.

I think, Moses, I pointed to a couple different initiatives that we took that gave us clarity. We went out, as Tony mentioned, went to a steel--procured steel for the majority of the back half of 2021, and so that gives us clarity on our overall cost structure of steel through the back half, as well as logistics. We came up with and implemented an alternative solution that allows us better visibility and better control on our overall cost structure through the back half of the year as well in an uncertain environment.

Got it. Just last one, maybe to clarify the last question a little bit, can you give maybe a directional amount on the percent that you’ve increased your price?

Well, it’s a customer by customer communication and conversation based on the long term relationships and pipeline of those customers, and so it’s a--I think it would be unfair to give one number as that would be--it’s not consistent from customer to customer. But I would just say if you reflect on the price increases that we noted in the markets, we’re looking to make sure that we are passing those through to customers to make sure that we’re continuing to drive the profitability of the business.

Great, very helpful. Congrats again.

Thanks Moses.

Thanks Moses, appreciate it.

Thank you. I am not showing any further questions at this time. I would now like to turn the call back over to management for closing remarks.

Thank you very much, and thank you to everyone for joining us today and for your interest in FTC Solar. I’d like to extend a special thanks to all of our employees across the company for their hard work, dedication and determination in helping us get to this point. I want to thank you for rising to meet every challenge, every day as we support our customers and work as one team to create value for our shareholders. Thank you very much.

This concludes today’s conference call. Thank you for participating. You may now disconnect.