Thank you for standing by. My name is Louella, and I will be your conference operator today. At this time, I would like to welcome everyone to the FTC Solar Third 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] Please be advised that today's conference is being recorded. I would now like to turn the call over to Bill Michalek, Vice President of Investor Relations. Please go ahead.

Thank you, and welcome, everyone, to FTC Solar's third 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've not yet reviewed these documents are 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 Business Development. 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 we 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 measures to the nearest applicable GAAP measure. With that, I'll turn the call over to Yann.

Thank you, Bill, and good morning, everyone. I'm pleased to speak with you all today on my first official earnings call as CEO. I'll focus my comments on the state of FTC Solar and my observations overall as well as a few updates and then turn it over to Cathy to review the financials. Throughout my career, which is taking me across the solar and storage industry, people seem to primarily only remember how things end up and the successes we realized, not necessarily how they started. In the case of FTC Solar, I see my tenure starting with a company with a solid foundation made up of a great team and complete portfolio of tracker products and the potential to be enormously successful. While revenue is at an inflection point with gaps to be filled in with customer additions, both individual and portfolio projects, I believe the company is in an enviable position in many respects. This includes having a product set with features that customers love, a business they enjoy working with and a cost structure poised to enable strong margin growth and profitability. In addition, the company now has a compelling and expanded product set in the 1P or 1 Panel and Portrait market that opens up the vast majority of the market that wasn't available to the company in the past. In aggregate, I believe the company is in a strong position as it relates to some of the most critical aspects of the business, and has had some recent business successes. Here at about the 90-day mark of my tenure at FTC Solar, I've met with dozens of customers, prospective investors and of course, employees. I want to thank all of those constituencies as well as the Board of Directors for the fantastic welcome and…

Thanks, Yann and good morning everyone. I’ll provide some additional color on our third quarter performance and our outlook. Beginning with a discussion of the third quarter, revenue came in at $10.1 million, which was just above the midpoint of our target range. This revenue level represents a decrease of 11.3% compared to the prior quarter and a decrease of 66.8% compared to the year earlier quarter due to lower product volumes. GAAP gross loss was $4.3 million, or 42.5% of revenue, compared to gross loss of $2.3 million, or 20.5% of revenue in the prior quarter. Non-GAAP gross loss was $3.9 million or 38.3% of revenue, which was within our target range, although a bit below the midpoint in part due to a product and service mix. The result for this quarter compared to a non-GAAP gross loss of $1.9 million in the prior quarter. GAAP operating expenses were $10.7 million on a non-GAAP basis, excluding stock-based compensation and certain other costs, operating expenses were $8.1 million down from $13.2 million in the same quarter last year. 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 $8.3 million in the prior quarter. GAAP net loss was $15.4 million or $0.12 per diluted share compared to a loss of $12.2 million or $0.10 per diluted share in the prior quarter and a net loss of $16.9 million or $0.14 per diluted share in the year ago quarter. Adjusted EBITDA loss, which excludes an approximate $3.2 million net loss from stock-based compensation expenses and other non-cash items was $12.2 million, which was better than the midpoint of our guidance range. This compared to losses of $10.5 million…

[Operator Instructions] Your first question comes from the line of Sameer Joshi with H.C. Wainwright. Please go ahead.

Yes, good morning. Thanks for taking my call, Yann, Cathy, Patrick. Just a quick question on the 1P revenues. What proportion of the backlog or the current backlog is coming from that? And then just in terms of feedback from customers, just like 2P, are you getting feedback about the ease and safety of insulation as well for 1P products?

Sure. Thanks for the question. This is Yann. About 70% of our signed purchase orders today are in the 1P category, so we’re going to start seeing revenues come in from the 1P category. As I mentioned in the prepared remarks, it’s part of the inflection point that we’re starting to see. About 16% and 18% in Q2 and Q3 came from the 1P category, and that’s going to continue to grow over time as those projects get to the start of construction. The feedback on the 1P has been excellent. As I mentioned, I’ve been visiting with a lot of EPCs, the contractors that have to install it, as well as the investors that are going to own the project. There are some key features that make the system easier and faster to install, as well as safer. It’s an advantage of being the last 1P product to the market is that our team was able to build innovations on top of the products that were in the market, working hand in hand with potential customers to drive those innovations. The category that’s interesting about FTC’s 1P product is that it’s not just a monolithic piece, I mentioned, we have the high wind solutions all the way up to 150 mile an hour. Especially with growth in solar in the Southeast and obviously the expansion of where hurricanes are hitting, we have some trade following features. So it’s not just the individual aspects of the product, but also how wide the product portfolio can span, which allows us to increase our share of wallet with customers regardless of where they’re investing.

Thanks, Yann, for that. I was going to go there in terms of the geographic diversity you mentioned. Can you just like qualitatively describe how your projects and your new projects are distributed geographically?

Yes, our geography is pretty diverse. Obviously we have a strong focus on the U.S., but also in some international markets. But in the U.S., we’re seeing strong growth in the Northeast, which has its own challenges with terrain, the value of land. So density is really important. Less focus on wind and hail for example. But the strong markets continue to be the Southwest and Texas. But we’re seeing strong growth in the Northeast as well as now with a high wind product we see a good opportunity in the Southeast.

Got it. And then just in terms of the macro environment, not the interest rate environment, but the political environment, do you expect to see any headwinds, any tailwinds based on what happened last week in the elections?

Yes. I mean, look, the – we don’t – solar is going to continue to be strong. Politically speaking, solar continues to thrive. And I want to remind everyone, from 2017 to 2020 solar had nearly 100% growth, right, growing from about 11 gigawatts up to 20 gigawatts in 2020. We’ve seen tariffs and ITC extensions, tax credit extensions when both parties were in power. So, solar has headwinds and tailwinds regardless of who’s in the White House and who has control of Congress. There’s obviously a lot of utilization of the solar tax credit as well as the storage tax credits that enable more projects to get done. 85% of the domestic manufacturing in the U.S. is in Republican Congressional districts. And now we have – SEIA put out numbers, about 45 gigawatts of domestic supply being built here in the U.S. So with the data center growth and what the utilities are saying, the base load growth rate is, the energy is going to have to come from somewhere. And solar is the easiest, fastest, cheapest choice as well as being the cleanest and has one of the largest development pipelines out there.

Yes. No, Yann, makes sense. We agree. One last question on the outlook for 4Q. It seems based on the outlook for the non-GAAP gross profit number relative to the revenue outlook, the margin seems to be pretty healthy. Is it because of product mix or some other like pricing or something is at play here?

Yes, let me have Cathy chime in here.

Yes, thanks Sameer. This is Cathy. Yes, it's really driven by the product mix that we have in Q4.

Okay. Thanks. I'll take my other questions offline. Thanks.

Thank you.

[Operator Instructions] Your next question comes from the line of Graham Price with Raymond James. Please go ahead.

Hi, good morning, thanks for taking my question. I guess first one for me. In the past, talked about have a breakeven revenue range of around $50 million to $60 million and you brought up kind of a breakeven point briefly in the comments, I was just wondering if that's still a decent rule of thumb and how that might have changed with the heightened shift towards 1P.

Sure, Cathy?

Sorry, Graham, could you repeat your question? I was getting a breakup?

No problem. I was just asking in the past, you've discussed a breakeven revenue range of around $50 million to $60 million. We're just wondering if that's still holds, especially given the shift to 1P?

Okay, thanks Graham. Yes, that still holds. We are still looking at $50 million to $60 million is our breakeven point. We experienced really pretty similar margins on 1P and 2P, and it really has more to do the – with product mix in terms of timing of the projects throughout the quarter. But yes, $50 million to $60 million is still our breakeven point.

Got it. Perfect. And then maybe one quick one on the guidance. I understand you are not providing 2025 revenue guidance here, but just wanted to get a general sense of the cadence? I assume it's likely be more back-end loaded than this year.

Yes. Graham, good question. I mean look, we have pretty strong time purchase order backlog that we're walking into 2025 and in addition to the commercial traction that we're seeing that we'll add to it. Our expectation is about 60% of the signed backlog is going to start recognizing revenue in 2025. And even though we're in the middle of the annual operating plan process, we do see strong growth potential in 2025, not just on that time backlog, but the expansion of that and the commercial opportunities we're seeing with our existing customers and new ones that we're adding to the roster.

Got it. Thanks. And then last one from my end. Just wanted to check on the Strata supply agreement, I wanted to verify that those are only 2P delivery. I'm just wondering if there could be any future opportunity for 1P on that project? And then maybe more broadly, just your thoughts on opportunities to cross-sell between 1P and 2P.

Yes, absolutely. So the MSA currently is on 2P Strata has been a longtime user and a big fan of the feature set. And a lot of that is driven by the fact that the FTC didn't have a 1P product available to the market until recently, particularly with the same feature set that makes it easier and faster and safer to install. So I think we're going to have more and more opportunities as people look at their product mix and their supplier base for their projects, especially the larger EPCs, they plan out more than three, four quarters at a time. We're having opportunities to bid many of these projects just to give you a sense, in Q3 of this year, our average proposal, 80% of which was 1P, the average project size was 160 megawatts. So we're seeing the inclusion of FTC in that product mix, I think it makes us an obvious top four player here in the U.S. tracker landscape, especially with having access to domestic content, et cetera. So we have strong 2P customers. It's still the majority of our revenue today, but the inflection point is driving clear signal that 1P is gaining adoption, not just we're definitely working on Strata, but many others as well. And 1P and 2P are really product solutions for different project types, right. So the more expensive land cost and density becomes an important factor for consideration. 2P is a really good choice. We're a very clear market leader in the 2P category, not a lot of our peers have a 2P solution. And we obviously have one of the largest track records in the market with our with 2P, you add that to the 1P catalog, provides a technical solution for almost every project in an investor's portfolio.

Understood. Thank you very much. I’ll get back in the queue.

You bet.

[Operator Instructions] Ladies and gentlemen, seeing as there are no further questions. That concludes today's call. Thank you all for joining. You may now disconnect.