FTC Solar, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. FTC Solar provides solar tracker systems, software and related engineering services. Financial amounts below are in U.S. dollars; figures are rounded.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $12.6 million | $40.9 million | Down 69.2% |
| Gross profit (loss) | $(2.1) million | $2.0 million | Margin fell to (16.7%) from 5.0% |
| Operating expenses | $10.4 million | $14.4 million | Down 28.0% |
| Operating loss | $(12.5) million | $(12.4) million | Broadly unchanged |
| Net loss | $(8.8) million | $(11.8) million | Loss narrowed |
| Basic and diluted loss per share | $(0.07) | $(0.11) | Improved |
| Adjusted EBITDA (non-GAAP) | $(10.7) million | $(7.2) million | Loss widened |
| Operating cash flow | $(11.9) million | $(8.3) million | Higher cash use |
Product revenue was $10.9 million, down 66.5%; service revenue was $1.7 million, down 79.8%. Management attributed the decline mainly to customer project delays and lower activity. Megawatts produced fell 72%; product average selling price rose 20%, partly offsetting lower volume. Service average selling price declined 20%.
Cost of revenue fell 62.2%, less than the revenue decline. Management said lower production left fixed overhead underabsorbed and service revenue did not cover related shipping, transportation and warehousing costs. Cost per megawatt produced declined 40%, which management attributed largely to design-to-value efforts and lower remediation, inventory-provision and stock-compensation costs.
At March 31, cash and cash equivalents were $14.0 million, restricted cash was $1.9 million, working capital was $45.7 million and total assets were $115.0 million. The company reported no debt outstanding. Accounts receivable, net, was $66.4 million, including a $9.2 million allowance for credit losses. Stockholders’ equity was $55.2 million.
Cash, cash equivalents and restricted cash decreased $9.3 million during the quarter. Investing activities provided $2.6 million, including $4.1 million of proceeds from the Dimension investment and a $1.0 million Alpha Steel contribution. Financing activities provided no cash in Q1 2024; the prior-year period included $5.5 million of net financing proceeds, primarily from stock sales.
Material changes and unusual items
- A $4.1 million gain from contingent payments related to the 2021 sale of Dimension supported reported net income; the comparable prior-year gain was $0.9 million. These payments are not recurring operating revenue.
- Operating expenses declined, including general and administrative costs down 39.2%, partly due to lower stock compensation, payroll, insurance and legal costs. Selling and marketing expense rose 39.6%, mainly because of credit-loss provisions.
- Q1 2024 included a $0.3 million share of Alpha Steel’s operating loss. FTC Solar holds a 45% interest and contributed approximately $1.0 million during the quarter.
- Shares outstanding at March 31 were 125.95 million, compared with 125.45 million at December 31, 2023. No shares were sold under the ATM program in Q1; approximately $64.9 million of program capacity remained.
Outlook, risks and contingencies
The filing provides no numerical revenue, margin or earnings guidance. Management said it expects improved market conditions, timing of customer project activity (including large project awards received in 2023), and margin initiatives to support profitable growth and positive operating cash flow over the next twelve months. Management believes available resources, including cash received in April 2024 and potential ATM proceeds, will fund operations for at least one year from issuance of the financial statements. It also cautioned that project activity or market recovery could take longer than expected and said it is exploring additional financing for longer-term needs.
- Customer agreement after quarter-end: A major customer owed approximately $30.8 million at March 31. Under an April 3 amendment associated with the customer’s sale of projects, FTC Solar retained equipment valued at approximately $13.2 million in exchange for forgiveness of receivables up to that value. The purchaser paid $9.0 million for foundation piles; further amounts are expected for storage and delivery, anticipated by Q4 2024. The company had approximately $9.0 million of credit-loss reserves related to this customer at quarter-end.
- Credit facility: The $100 million revolving facility was unavailable at March 31 because FTC Solar failed its $125 million minimum-liquidity covenant. The facility expired unused on April 30, 2024. It had $1.9 million of outstanding letters of credit, supported by restricted cash.
- Nasdaq listing: The company had not met Nasdaq’s $1.00 minimum bid-price requirement. The initial compliance period ran through June 19, 2024; failure to regain compliance could lead to further requirements or delisting.
- Alpha Steel commitments: FTC Solar may be required to contribute up to $1.6 million more. It also has minimum purchase commitments; failure to meet them could result in payments capped at $4.0 million in aggregate. Approximately 6% of 2024 purchase commitments had been met at March 31. FTC Solar was also contingently liable for approximately $5.2 million of Alpha Steel vendor obligations.
- Customs assessments: CBP assessments on imported torque beams totaled approximately $4.85 million. FTC Solar disputes the assessments, filed protests and recorded no accrual, but adverse outcomes or additional duties could materially affect results, financial position or liquidity.
- Other risks: Customer concentration and collection risk, project delays, dependence on contract manufacturers, steel and logistics costs, tariffs and trade rules (including UFLPA and AD/CVD matters), and access to additional capital. Management cited a history of operating cash outflows and possible need for financing beyond the next twelve months.
Most important facts for investors to verify
- Progress on collections and remaining payments under the April customer amendment, and the treatment and recoverability of the retained equipment.
- Cash burn, customer project timing, production volumes and whether gross margins return to positive territory.
- Current liquidity and funding plans following expiration of the revolving facility, including any ATM issuance or other financing and its dilution impact.
- Nasdaq bid-price compliance status and the outcomes of the CBP protests and any related tariff exposure.
- Alpha Steel’s production, financial needs, FTC Solar’s remaining purchase and contribution obligations, and related-party balances.