FTC Solar(FTCI) - 2023 Q4 - Annual Results

Executive Summary & Recent Developments FTC Solar's Q4 2023 results align with targets, marked by substantial backlog growth, key strategic initiatives, and a CEO search Fourth Quarter Highlights and Recent Developments FTC Solar announced Q4 2023 results in line with targets, highlighted by significant additions to its backlog and ongoing progress in key strategic initiatives, including the search for a new CEO - Approximately $213 million has been added to backlog since November 8, bringing the total backlog to approximately $1.7 billion[3][5] - The Board has initiated a search for a new CEO, focusing on highly qualified candidates from within and adjacent industries, with a shortlist already identified[3] - Anthony Carroll has been appointed Chairman of the Customer Advisory Board[5] Summary Financial Performance: Q4 2023 vs Q4 2022 FTC Solar's Q4 2023 revenue decreased by 11.5% year-over-year to $23.2 million, while gross margin significantly improved from a prior-year loss to positive figures Q4 2023 vs Q4 2022 Summary Financial Performance | Metric | Q4 2023 (GAAP) | Q4 2022 (GAAP) | Q4 2023 (Non-GAAP) | Q4 2022 (Non-GAAP) | | :---------------------- | :------------- | :------------- | :----------------- | :----------------- | | Revenue (in thousands) | $23,201 | $26,220 | $23,201 | $26,220 | | Gross margin percentage | 3.0% | (7.3%) | 4.8% | (3.4%) | | Total operating expenses (in thousands)| $12,428 | $17,947 | $10,848 | $9,971 | | Loss from operations (in thousands)| $(11,736) | $(19,861) | $(10,050) | $(10,976) | | Net loss (in thousands)| $(11,177) | $(20,501) | $(9,657) | $(11,499) | | Diluted loss per share | $(0.09) | $(0.20) | $(0.08) | $(0.11) | Key Initiatives and Strategic Focus The company is actively pursuing several strategic initiatives to drive future growth and profitability, including accelerating project execution, enhancing product margins, and improving operational efficiency and customer satisfaction - Accelerating contracted projects through improved customer engagement and an enhanced product portfolio[6] - Improving gross margin potential by reducing product cost[6] - Further lowering the breakeven revenue level through continued operating efficiencies[6] - Improving business processes across the business with particular emphasis on customer engagement, customer satisfaction, and purchase orders[6] Financial Results - Fourth Quarter 2023 Detailed Analysis This section provides a detailed analysis of FTC Solar's Q4 2023 financial performance, covering revenue, gross profit, operating expenses, and net loss Revenue Performance For Q4 2023, total revenue was $23.2 million, with product revenue showing a slight increase year-over-year, while service revenue experienced a significant decline Q4 2023 Revenue Breakdown | Revenue Type | Q4 2023 (in thousands) | Q4 2022 (in thousands) | YoY Change | | :----------- | :--------------------- | :--------------------- | :--------- | | Product | $20,945 | $20,083 | +4.3% | | Service | $2,256 | $6,137 | -63.2% | | Total Revenue| $23,201 | $26,220 | -11.5% | Gross Profit and Margin GAAP gross profit for Q4 2023 was $0.7 million (3.0% of revenue), a substantial improvement from a gross loss in the prior-year period. Non-GAAP gross profit also turned positive at $1.1 million (4.8% of revenue), driven by better product direct margins and reduced indirect costs - GAAP gross profit was $0.7 million (3.0% of revenue) in Q4 2023, compared to a gross loss of $1.9 million in Q4 2022[7][18] - Non-GAAP gross profit was $1.1 million (4.8% of revenue) in Q4 2023, a significant improvement from a non-GAAP gross loss of $0.9 million in the prior-year period[7] - The improvement was primarily driven by significantly improved product direct margins and lower warranty, retrofit, and other indirect costs[7] Operating Expenses GAAP operating expenses decreased to $12.4 million in Q4 2023 from $17.9 million in Q4 2022, mainly due to a significant reduction in general and administrative expenses. Non-GAAP operating expenses were $10.8 million Q4 2023 Operating Expenses (GAAP) | Expense Type | Q4 2023 (in thousands) | Q4 2022 (in thousands) | YoY Change | | :----------- | :--------------------- | :--------------------- | :--------- | | R&D | $1,450 | $2,411 | -39.8% | | Selling & Marketing | $4,924 | $1,766 | +178.8% | | G&A | $6,054 | $13,770 | -56.0% | | Total Operating Expenses | $12,428 | $17,947 | -30.7% | - Non-GAAP operating expenses were $10.8 million in Q4 2023, compared to $10.0 million in the year-ago quarter[8] Net Loss and Adjusted EBITDA GAAP net loss improved significantly to $11.2 million ($0.09 per share) in Q4 2023 from $20.5 million ($0.20 per share) in Q4 2022. Adjusted EBITDA loss also narrowed to $10.1 million from $11.0 million in the prior-year quarter - GAAP net loss was $(11.2) million or $(0.09) per share in Q4 2023, an improvement from $(20.5) million or $(0.20) per share in Q4 2022[9][18] - Adjusted EBITDA loss was $(10.1) million in Q4 2023, compared to $(11.0) million in the year-ago quarter[9] - Adjusted diluted loss per share was $(0.08) in Q4 2023, compared to $(0.11) in Q4 2022[4] Financial Outlook This section outlines FTC Solar's financial projections for Q1 and full year 2024, including revenue expectations and targets for Adjusted EBITDA breakeven and profitability Q1 2024 and Full Year Guidance FTC Solar anticipates Q1 2024 revenue to be the lowest point for the year, with expectations of sequential revenue growth thereafter, heavily weighted towards the second half. The company targets Adjusted EBITDA breakeven in Q3 and profitability in Q4 2024 - First quarter 2024 revenue is expected to be between $10.0 million and $15.0 million, representing the trough for the year[10][11] - Beyond Q1, the company expects continued sequential revenue growth for the remainder of the year, with revenue weighted toward the second half[10] - FTC Solar expects to approximate breakeven on an Adjusted EBITDA basis in the third quarter and achieve profitability in the fourth quarter of 2024[10] Q1 2024 Guidance vs Q4 2023 Actual | Metric (in millions) | Q4 2023 Actual | Q1 2024 Guidance | | :------------------- | :------------- | :--------------- | | Revenue | $23.2 | $10.0 – $15.0 | | Non-GAAP Gross Profit| $1.1 | $(3.8) – $(1.8) | | Non-GAAP Gross Margin| 4.8% | (38%) – (12%) | | Non-GAAP operating expenses | $10.8 | $8.0 – $8.9 | | Non-GAAP adjusted EBITDA | $(10.1) | $(12.6) – $(9.8) | Company Information This section provides an overview of FTC Solar Inc., details investor relations, and includes important disclaimers regarding forward-looking statements About FTC Solar Inc. FTC Solar, founded in 2017 by renewable energy veterans, is a leading provider of solar tracker systems, technology, software, and engineering services. Their innovative tracker designs significantly boost energy production and offer a competitive installation cost-per-watt advantage - FTC Solar is a leading provider of solar tracker systems, technology, software, and engineering services[13] - Solar trackers increase energy production by dynamically optimizing solar panel orientation to the sun[13] - The company's innovative tracker designs provide compelling performance, reliability, and an industry-leading installation cost-per-watt advantage[13] Investor Relations Information regarding the Q4 2023 earnings conference call and investor contact details are provided for stakeholders - A webcast of the Q4 2023 earnings conference call is available on FTC Solar's Investor Relations website, with a replay available for 30 days[12] - Investor contact is Bill Michalek, Vice President, Investor Relations[16] Forward-Looking Statements This section clarifies that the press release contains forward-looking statements based on current expectations, which are subject to risks, uncertainties, and assumptions. Actual results may differ materially, and the company disclaims any obligation to update these statements unless legally required - Statements are predictions, not guarantees of future performance, and involve risks, uncertainties, and assumptions that are difficult to predict[15] - Actual results may differ materially from those in forward-looking statements due to factors described in SEC filings, including the 'Risk Factors' section[15] - 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[15] Consolidated Financial Statements This section presents FTC Solar's unaudited condensed consolidated financial statements, including statements of comprehensive loss, balance sheets, and cash flows Condensed Consolidated Statements of Comprehensive Loss This unaudited statement provides a detailed breakdown of FTC Solar's revenue, cost of revenue, gross profit/loss, operating expenses, and net loss for the three months and full year ended December 31, 2023 and 2022 Condensed Consolidated Statements of Comprehensive Loss (Selected Data) | Metric (in thousands) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :-------------------- | :------ | :------ | :------ | :------ | | Total revenue | $23,201 | $26,220 | $127,002| $123,066| | Gross profit (loss) | $692 | $(1,914)| $8,307 | $(27,228)| | Total operating expenses | $12,428 | $17,947 | $59,084 | $72,344 | | Loss from operations | $(11,736)| $(19,861)| $(50,777)| $(99,572)| | Net loss | $(11,177)| $(20,501)| $(50,290)| $(99,613)| | Diluted loss per share| $(0.09) | $(0.20) | $(0.44) | $(0.98) | Condensed Consolidated Balance Sheets The unaudited condensed consolidated balance sheets as of December 31, 2023, and 2022, show a decrease in total assets to $123.1 million in 2023 from $134.4 million in 2022, reflecting changes in cash, receivables, and inventories Condensed Consolidated Balance Sheets (Selected Data) | Metric (in thousands) | Dec 31, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Cash and cash equivalents | $25,235 | $44,385 | | Total current assets | $108,508 | $118,690 | | Total assets | $123,070 | $134,398 | | Total current liabilities | $54,665 | $60,340 | | Total liabilities | $60,599 | $67,948 | | Total stockholders' equity | $62,471 | $66,450 | Condensed Consolidated Statements of Cash Flows This unaudited statement details the cash flows from operating, investing, and financing activities for the years ended December 31, 2023, and 2022. Net cash used in operations remained substantial, while financing activities provided a significant cash inflow in 2023 Condensed Consolidated Statements of Cash Flows (Selected Data) | Metric (in thousands) | FY 2023 | FY 2022 | | :-------------------- | :------ | :------ | | Net cash used in operations | $(52,656)| $(54,510)| | Net cash provided by (used in) investing activities | $(397) | $(4,247)| | Net cash provided by financing activities | $33,950 | $903 | | Decrease in cash and cash equivalents | $(19,150)| $(57,800)| | Cash and cash equivalents at end of period | $25,235 | $44,385 | Non-GAAP Financial Measures Reconciliation This section provides definitions and reconciliations of FTC Solar's Non-GAAP financial measures, including Adjusted EBITDA, Adjusted Net Loss, and Adjusted EPS, to their most directly comparable GAAP measures Non-GAAP Definitions and Purpose This section defines FTC Solar's Non-GAAP financial measures, including Adjusted EBITDA, Adjusted Net Loss, and Adjusted EPS, explaining their role as supplemental performance indicators. These measures aim to provide investors and analysts with a clearer view of core operating performance by excluding certain non-recurring or non-cash items - Adjusted EBITDA is defined 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), less contingent gains from the disposal of investment[23] - These non-GAAP measures are presented to assist investors and analysts in comparing performance across reporting periods on an ongoing basis by excluding items not indicative of core operating performance[24] - Non-GAAP financial measures should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP[25] Non-GAAP Gross Profit (Loss) Reconciliation This table reconciles GAAP gross profit (loss) to Non-GAAP gross profit (loss) for the three and twelve months ended December 31, 2023 and 2022, detailing adjustments for depreciation expense, stock-based compensation, severance, and other costs Non-GAAP Gross Profit (Loss) Reconciliation | Metric (in thousands) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :-------------------- | :------ | :------ | :------ | :------ | | U.S. GAAP gross profit (loss) | $692 | $(1,914)| $8,307 | $(27,228)| | Depreciation expense | 139 | 117 | 478 | 389 | | Stock-based compensation | 283 | 771 | 1,596 | 3,292 | | Severance | — | 145 | 252 | 145 | | Other costs | — | — | — | 102 | | Non-GAAP gross profit (loss) | $1,114 | $(881) | $10,633 | $(23,300)| | Non-GAAP gross margin percentage | 4.8% | (3.4%) | 8.4% | (18.9%) | Non-GAAP Operating Expenses Reconciliation This table provides a reconciliation of GAAP operating expenses to Non-GAAP operating expenses for the three and twelve months ended December 31, 2023 and 2022, highlighting adjustments for non-cash and non-routine items such as stock-based compensation and severance Non-GAAP Operating Expenses Reconciliation | Metric (in thousands) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :-------------------- | :------ | :------ | :------ | :------ | | U.S. GAAP operating expenses | $12,428 | $17,947 | $59,084 | $72,344 | | Depreciation expense | (99) | (67) | (355) | (242) | | Amortization expense | (133) | (134) | (542) | (269) | | Stock-based compensation | 1,032 | (4,277) | (6,699) | (17,011)| | Non-routine legal fees | (33) | (2,753) | (214) | (8,495) | | Severance | (2,347) | (296) | (4,170) | (1,333) | | Other (costs) credits | — | (449) | (3,241) | (2,251) | | Non-GAAP operating expenses | $10,848 | $9,971 | $43,863 | $42,743 | Non-GAAP Adjusted EBITDA and Adjusted Net Loss Reconciliation This section provides comprehensive reconciliations of GAAP loss from operations to Adjusted EBITDA, and GAAP net loss to Adjusted EBITDA and Adjusted Net Loss for the three and twelve months ended December 31, 2023 and 2022, detailing all specific adjustments and their impact on per-share figures Adjusted EBITDA Reconciliation to GAAP Loss from Operations | Metric (in thousands) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :-------------------- | :------ | :------ | :------ | :------ | | U.S. GAAP loss from operations | $(11,736)| $(19,861)| $(50,777)| $(99,572)| | Depreciation expense | 238 | 184 | 833 | 631 | | Amortization expense | 133 | 134 | 542 | 269 | | Stock-based compensation | (749) | 5,048 | 8,295 | 20,303 | | Non-routine legal fees | 33 | 2,753 | 214 | 8,495 | | Severance | 2,347 | 441 | 4,422 | 1,478 | | Other costs | — | 449 | 3,241 | 2,353 | | Other income (expense), net | 8 | (124) | (257) | (373) | | Loss from unconsolidated subsidiary | (324) | — | (660) | — | | Adjusted EBITDA | $(10,050)| $(10,976)| $(34,147)| $(66,416)| Adjusted Net Loss Reconciliation to GAAP Net Loss | Metric (in thousands) | Q4 2023 (Adj. Net Loss) | Q4 2022 (Adj. Net Loss) | | :-------------------- | :---------------------- | :---------------------- | | Net loss per U.S. GAAP | $(11,177) | $(20,501) | | Amortization of debt issue costs in interest expense | 177 | 177 | | Amortization of intangibles | 133 | 134 | | Stock-based compensation | (749) | 5,048 | | Gain from disposal of investment in unconsolidated subsidiary | (421) | — | | Non-routine legal fees | 33 | 2,753 | | Severance | 2,347 | 441 | | Other costs | — | 449 | | Adjusted Non-GAAP net loss | $(9,657) | $(11,499) | | Adjusted Non-GAAP net loss per share (Adjusted EPS) | $(0.08) | $(0.11) | - Severance costs in 2023 and 2022 were incurred due to restructuring changes, including executive turnover and headcount reductions[29]