Thank you for standing by. At this time, I would like to welcome everyone to FTC Solar's Second Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to Bill Michalek, Vice President of Investor Relations. Please go ahead.

Thank you, and welcome, everyone, to FTC Solar's second quarter 2024 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 have not reviewed these documents, they're available on the Investor Relations section of our website at ftcsolar.com. I'm joined today by Ahmad Chatila, a member of our Board of Directors and the company Founder; Yann Brandt, the company's incoming CEO; Cathy Behnen, the company's Chief Financial Officer; and Patrick Cook, the company's Head of Capital Markets & Business Development. Before we begin, I remind everyone that today's discussion includes 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. In addition, we'll discuss our backlog, and our definition of this metric is also included in our press release. With that, I'll turn the call over to Ahmad.

Thanks, Bill, and good morning, everyone. As you've likely seen, we recently announced that Yann Brandt has been named the new CEO of FTC Solar and will start on August 19. Yann is an exceptional leader with great depth of experience in the solar industry from running all operations for a downstream solar company to CEO of a solar racking company, a Board Member of SEIA to being CFO and CCO in a leading-edge storage company that he helped grow very significantly to profitability, just to name a few. He has excellent hands-on experience and a wealth of relationship throughout the industry. We're looking forward to having him onboard and know he will make an immediate impact. While he hasn't officially started yet, and I believe he's traveling overseas, we're fortunate that he was able to dive into this call to say a few words to this group. So let me turn it over to Yann. Yann?

Thanks, Ahmad. I appreciate the generous introduction and the opportunity to drop in and say hello to everyone. So first, good morning to all of you. I'm excited to be speaking with you even before I started my new capacity. I think you'll find that I like to move quickly, and I'm not always big on formalities. As Ahmad mentioned, I've been in the solar industry for nearly two decades now. I've been in different roles and had varying mandates, whether as a developer, a supplier or industry advocate, but always while maintaining a consistency and perspective for building relationships and helping to foster the long-term growth of the solar industry. I've been familiar with FTC Solar since its founding and have tracked its progress. At the outset, I knew the company and the strong team behind it had developed great technology that would make you take notice when they came to market with their 2P offering. When you break into a new market with long-term entrenched players, you need to have something unique and value-added to get noticed. FTC quickly secured a spot as a leading provider in that market segment. Even from my perch, I would hear anecdotes about the technology, the constructability and the relationship the company has with its customers. Now leveraging this technology strength into the 1P segment, I hear similar feedback from the market about the opportunity ahead for FTC. I know many professionals across the industry, whether from my various operating roles, my position on the board of SEIA or through the newsletter that I've run with thousands of readers. Based on my conversations, the company has developed a strong brand in the industry that far exceeds its current financial footprint. Yes, the company at one point found itself as the 2P leader in an increasingly 1P market. But the company has nicely filled product gaps and has the broadest and most comprehensive offering to date. So I see a company with excellent technology, a top-tier brand, relationships with top developers and EPCs in the industry and a clear path to continue improvements in product and overall cost efficiency. I installed a Chief of Staff here nearly three weeks ago, who has been doing some legwork to help ensure the smoothest possible transition and help me be as impactful as possible on day 1 at FTC. And I'm looking forward to getting started. I believe the company has the opportunity to be a leader in the market and can enable success for EPCs and asset owners. I'm genuinely excited about the team, the technology and the position of the company in this great industry. And I couldn't be more pleased to take on the CEO role. I'm very much looking forward to working closely with all of you in a very transparent way and will look to demonstrate this company's capability. Thanks again. Ahmad, I'll turn it back to you.

Thanks, Yann. I appreciate you joining us early and from the road. We're very much looking forward to having you onboard. Turning to the results, I'll make a few overarching comments and then turn it over to Cathy to review the financials. At a high level, there are three main takeaways for me this quarter. One, our second quarter financial results were in line with the targets we provided. Two, we continue to remain well positioned for growth and profitability and continue to make further enhancements across the business that will pay dividends in the future. And three, our business, as well positioned as it is, is still currently subscale in revenue and, therefore, impacted to a greater degree by customer project delays. While we still expect a better second half relative to the first half, our second half results will unfortunately be lower than our prior expectations. So let me start with that last point. We have seen project delays from customers relating primarily to interconnection and financing. Specifically, three large projects that we are expecting to start construction has now moved to Q4 start dates. Project delays in the construction business are common, and we have seen these types of issues throughout the industry in recent quarters. When you're at scale, you have layers of overlapping projects and more opportunities for compensating adjustments. Unfortunately, we're just not there yet, and the delays have more of an impact. In our case, it looks like a delay of more than a quarter, which will cause our third quarter to be relatively flat again sequentially, push the start of the revenue recovery to the fourth quarter and our goal of achieving breakeven to 2025. While the delays are certainly disappointing, I do believe we are positioned quite well for a strong…

Thanks, Ahmad, 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 $11.4 million, which was within our target range, although below the midpoint. This revenue level represents a decrease of 9.2% compared to the prior quarter and a decrease of 64.7% compared to the year-earlier quarter on both lower product and logistics volumes. GAAP gross loss was $2.3 million or 20.5% of revenue compared to a gross loss of $2.1 million or 16.7% of revenue in the prior quarter. On a non-GAAP basis, gross loss was $1.9 million or 16.8% of revenue, better than the midpoint of our guidance range. This compares to a gross loss of $1.7 million or 13.7% in the prior quarter. While our project margins remain healthy and our costs are much improved, the revenue level in the second quarter was not high enough to absorb the indirect costs. We continue to believe that we have significant margin upside when our revenue levels recover. GAAP operating expenses were $9.6 million. On a non-GAAP basis, excluding stock-based compensation and certain other costs, operating expenses were $8.3 million. This represents the lowest level in more than three years as we have found efficiencies across the company while continuing to invest to support growth. This result compares to non-GAAP operating expenses of $8.7 million in the prior quarter and $9.7 million in the year-ago quarter. GAAP net loss was $12.2 million or $0.10 per share compared to a loss of $8.8 million or $0.07 per share in the prior quarter and a net loss of $10.4 million or $0.09 per share in the year-ago quarter. Adjusted EBITDA loss, which excludes an approximate $1.8 million net loss from stock-based compensation…

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Philip Shen with ROTH Capital Markets. Your line is open.

Hi, this is Matt Ingraham on for Phil. For the contracted portion of the backlog of $505 million, how much of that could be recognized in the next 12 months? And what are the catalysts that you need to see to release more of the backlog sooner? And then secondly, how do you expect bookings to trend over the next few quarters? And then I have a follow-up.

Cathy?

Thanks, Ahmad. This is Cathy. Thanks for the question. So in terms of the $500 million of contracted purchase orders, we've given the guidance for Q1 and talked about it growing in Q4. And we're not giving guidance yet into 2025. But those projects, the catalysts for those projects is just -- is really the customer execution, right? Those projects are all lined up and ready to go. And as customer execution, if they move those through, then those will move through our revenue numbers.

And then how do you expect bookings to trend going forward?

Go ahead, Cathy. Yes, go ahead.

Well, I just want to say that we've had the -- really an addition of a really strong sales team. Ahmad talked about the fact that we've added Alberto for the international market and we've added Tamara for the U.S. market. And then in the addition of having Yann joining us as the CEO with really great relationships in the industry, we really expect to see continued acceleration of the bookings.

Okay, great. Thanks for that. And then we know that these like interconnection and permitting challenges have been adversely impacting industry and pushing projects to the right. But have you seen any impact from the new Southeast Asia AD/CVD causing module availability constraints and adding an additional headwind on top of the rest of the headwinds that are out there right now?

Yeah, this is Ahmad. We hear a lot about it, but we have not seen it specifically on our projects, although we hear a lot about the industry-wide issues. But on our current projects, we have not seen this issue to surface yet.

Okay. Thank you. I’ll pass along.

Thank you.

Next question comes from the line of Pavel Molchanov with Raymond James. Your line is open.

Yeah, thanks for taking the question. So appreciate the fact that you're not giving guidance for '25, but you said that EBITDA should be -- should turn positive in '25. So what revenue and gross margin run rate is that predicated on?

We need revenue to be between $50 million and $60 million per quarter, Pavel. And our current expenses between operating expense as well as overhead is in the $14 million range without bonuses and around $16 million, $17 million range with bonuses. So at $50 million, we break even without bonuses, but $60 million, we'd break even with bonuses.

Okay, that's helpful. In Q4 of this year, do you expect gross margin to be positive?

Cathy?

Yeah, we aren't providing that guidance. But if you kind of look at how we've been progressing and we've been talking about the strong project margins that we have, as the revenue grows, you definitely see increases in our gross margin. So you'll see improvements as that revenue grows quarter-to-quarter.

Okay. And then Cathy, as you were talking about the balance sheet, you mentioned that you have no plans to pull on the ATM program. But when we look at cash, $10.8 million, and if EBITDA is a negative -- call it, negative 10%, wouldn't you need to bring in some fresh capital this quarter potentially?

When we look at our forecast and timing of deposits and cash collections on receipts and so forth, the way our projects are set up was we get down payments on the projects and how we have the timing of our payments to our vendors, we don't need to fund the projects through the balance sheet. So that's how we see it playing out based on the forecast that we're looking at now. I mean, we're always -- we have not replaced the revolver yet, but we do, we are in discussions on opportunities like that. But that's not how we have this forecasted.

So in other words, the working -- you had a benefit from working capital in Q2, which was nice to see. Do you anticipate more inflows from working -- cash inflows from working capital in the second half of the year?

Yeah, we do.

All right. Thanks very much.

Thank you for your questions.

[Operator Instructions] There are no further questions at this time. This concludes today's conference call. You may now disconnect.