FTCI - NASDAQ

Hello and welcome to FTC Solar Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Bill Michalek, Vice President of Investor Relations. You may begin, sir.

Thank you, and welcome, everyone, to FTC Solar's Third Quarter 2023 Earnings Conference Call. Before the call, you may have reviewed our earnings release and supplemental financial information, which are posted earlier today. If you've not yet reviewed these documents, they are available on the Investor Relations section of our website at ftcsolar.com. I'm joined today by Shaker Sadasivam, Chairman of the Board; and Patrick Cook, the company's Chief Commercial Officer; and Cathy Behnen, the company's Chief Financial Officer. 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 may 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 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 Shaker.

Thank you, Bill, and good morning, everyone. I felt it was important to speak with you directly on behalf of the Board Of Directors about the leadership transition we have announced today. FTC Solar is a company with a great team of employees and innovative and compelling technology and services that customers enjoy. With the start of AD/CVD and supply chain disruptions, a growth trajectory was interrupted, and much of the last two years has been about repositioning the company to be in the right markets with the right technology and cost structure. We have made progress on that front and improved our positioning. The tracker market is healthy and profitable and FTC Solar now needs to accelerate our progress and achieve and enjoy healthy, profitable growth. At the Board level, as we evaluated our opportunities and growth plans ahead, the Board agreed that now is the right time to bring new leadership to FTC Solar as we enter our next phase of growth and execution. As you saw from the press release this morning Cathy Behnen, who has served as the company's Chief Accounting Officer since 2020, has been named our Chief Financial Officer on an interim basis. Cathy has more than 20 years of financial leadership experience, including CFO and accounting partner roles, and has made significant contributions to the company as Chief Accounting Officer and a Member of the executive team. We are excited to have Cathy take on this expanded responsibility. The combination of Cathy and her fellow executive leadership members, Patrick Cook, our Chief Commercial Officer, and Sasan Aminpour, our Chief Operating Officer, will provide steady leadership of the day-to-day management of the company. To further ensure a smooth transition for the company and its employees and customers. During this transition, the board will provide increased oversight of those leaders and be engaged on a regular basis. In particular, Ahmad Chatila will regularly assist in facilitating communication between management and the board to monitor key activities and initiatives in order to accelerate profitable growth. We are confident that this team and structure has the capability, along with the right blend of organizational history and new perspectives to ensure that not only do we not miss a beat, but that we accelerate toward our long-term goals. While today's news represents a change, it also represents a tremendous opportunity for us to accelerate our momentum. With that update, I thank you for your time, and I'll turn it over to Patrick to discuss the highlights from Q3 and the progress we have made.

Thank you, Shaker, and good morning, everyone. As Cathy will discuss our third quarter results largely came in as expected, net of benefits to gross margin and a charged operating expense that were not in our guidance. As we look to the fourth quarter, our slate of projects in aggregate is getting a later start than we previously anticipated as customers continue to experience various project delays. As a result, the guidance we are providing for the fourth quarter is down from Q3. We expect this to be followed by a much more significant revenue growth in the first quarter of 2024 as the delayed projects ramp. We continue to feel good about our future and overall long-term growth prospects. Our confidence is based on our improved competitive positioning and supported by our large and growing backlog. I'll briefly review the positioning improvements that we discussed last quarter. First, we believe our manufacturing cost is now in line with our leading competitors. We're more competitive than we've ever been on that front and will continue to prove with scale. Second, our average new project margins put us on track to meet or exceed the targets we provided in the past. As you may recall, we have previously targeted getting to the 10% to 15% gross margin range on $100 million in quarterly revenue. The fact that we were able to approach the low end of that range or about 9.5% on a normalized basis on only $30 million in revenue in Q3 is an additional proof point that the cost reduction actions we've taken have borne fruit and position us to achieve profitability as we grow revenue and see additional cost absorption. Third, we are now in the market with our 1P solution, Pioneer. We believe the 1P market has done better in this time of restricted module availability and we didn't have a solution until recently. We have had great customer response to Pioneer and our 1P backlog is growing very nicely, including quite a few project additions following RE+ trade show in September. Fourth, we continue to grow our international business. We're gaining traction in new regions, most recently adding awards in Spain and Italy. We've also seen larger awards in existing regions like South Africa and now have awards in a dozen countries outside of the US. Our 1P solution will only enhance our prospects internationally. And fifth and lastly, our backlog has now grown to approximately $1.6 billion, with approximately $60 million added since August 9th. On our last call, we outlined a number of projects that were added which include deliveries in 2024, including in Spain, Italy, and South Africa. We also announced the award of a 1 gigawatt project in Idaho. One project we didn't mention at the time, but was added to our backlog last quarter was another 600 plus megawatt project in the US. Revenue on this project will ramp here in the fourth quarter and continue into next year. The continued growth of our backlog, including the recent additions, allows us to continue to be optimistic about our growth prospects and our goal is now to ensure we're adding more business and converting to purchase orders to support future growth. So in summary, we were pleased to do well relative to our third quarter targets and demonstrate continuous gross margin improvement. Some fourth quarter projects are starting later than anticipated, but we expect to improve revenue performance in the first quarter, along with margin improvement. We're positioned with a product cost structure that will enable our gross margin expansion to continue and reach new highs as revenue grows. We'll keep a tap on operating expenses while investing for future growth, and we expect to cross profitability in 2024. With that, I'll turn it over to Cathy.

Thanks, Patrick, 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 $30.5 million. This revenue level represents a slight decline of 5.6% relative to last quarter and an increase of 84.3% relative to the year-ago quarter. Growth profits benefited from higher project margins, a better mix of materials versus logistics, and a couple of non-recurring benefits. Specifically, our GAAP gross profit was $3.4 million, or 11.1% of revenue, compared to $2.2 million, or 6.8% of revenue in the prior quarter. On a non-GAAP basis, gross profit was $3.9 million or 12.8% of revenue. That does include a couple of non-recurring benefits totaling $1 million that were not contemplated in our guidance and related to better than expected margins on a closed project and lower than expected inventory costs that we don't expect will reoccur in future periods. If those benefits were excluded or on the same basis as our guidance, non-GAAP gross margin would have been 9.5%, still above our guidance range of 3% to 9%, supported by mixed and improved cost structure. This represents our fourth consecutive quarter of gross margin improvement and our third quarter of positive margin since our IPO. These figures compare to a non-GAAP gross profit of $2.6 million or 8.2% in the prior quarter and a non-GAAP gross loss of $8.2 million in the year ago quarter with the difference driven primarily by significant improved product direct margin and lower warranty and other indirect costs. Our GAAP operating expenses were $19.7 million on a non- GAAP basis, excluding stock-based compensation and certain other costs, operating expenses were $13.2 million compared to $9.1 million in the year ago quarter. The operating expenses this quarter included an approximate $4 million credit loss relating to a specific customer account. Excluding this charge, our non-GAAP operating expenses would have been $9.2 million, which would be below or better than our guidance range and at the low end of what we've seen over the last two years as we continue to look for efficiencies across the company while continuing to invest strategically in areas that support our growth. Next, GAAP net loss of $16.9 million or $0.14 per share, compared to a $10.4 million or $0.09 per share in the prior quarter and had a net loss of $25.6 million or $0.25 per share in the year ago quarter. Adjusted EBITDA loss, which excludes approximately $7.2 million, including stock-based compensation expense and other non-cash items was $9.7 million, compared to losses of $7.2 million in the prior quarter and $17.7 million in the year ago quarter. Excluding the $4 million charge as well as the gross margin benefits, adjusted EBITDA would have been at the high end of our guidance range. Finally, regarding liquidity, we had an operational use of cash in the quarter offset by usage of the ATM facility for which we received $13.4 million of cash in the quarter and we ended the quarter with $31.5 million cash on the balance sheet. We continue to hold no debt on the balance sheet, have a largely available credit revolver, as well as $65 million remaining under the ATM program at the end of the quarter. With that, let us turn our focus to the outlook. Based on our current view and including the project delays that Patrick mentioned, we expect fourth quarter revenue to be down sequentially with margin reflecting the lower absorption. We expect this to be followed in the first quarter by a fairly substantial revenue recovery as projects ramp. As Patrick mentioned, we have a great deal of gross margin runway ahead of us, and we expect the trend, particularly as the revenue grows to largely be up. Specifically, our targets for the fourth quarter call for the following. Revenue between $18 million and $28 million. Non-GAAP gross margins between negative $1.3 million and positive $2 million or between negative 7% and positive 7% of revenue. Non-GAAP operating expenses between $10 million and $11 million and finally adjusted EBITDA loss between $13 million and $2.5 million. For the first quarter of 2024, we expect to see about a 96% sequential revenue growth at the midpoint, with improvements in all categories. Specifically, revenue between $40 million and $50 million, non-GAAP gross margin between $3.2 million and $6.3 million or between 8% and 13% of revenue. Non-GAAP operating expenses between $9 million and $10 million. And finally adjusted EBITDA loss between $7.3 million and $3 million. Looking forward, we continue to feel good about the opportunity for a strong revenue recovery in 2024 and achieving profitability. With that, we conclude our prepared remarks and I will turn it over to the operator for any questions. Operator?

Thank you. [Operator Instructions] Our first question comes from the line of Philip Shen with ROTH. Your line is open.

Yeah, thanks for taking my questions. First one here is on the guidance for Q4 and Q1. I think it came in lighter than what the street was looking for in a meaningful way. You talked about in your prepared remarks that you'll see a ramp up and it's been impacted by module delays. Is it fair to say that you guys have been more exposed to the LONGi detentions as opposed to Jinko, because Jinko has been flowing pretty smoothly for some time now. And then recently only LONGi was able to get their OCI poly module release. And so as that starts to ramp, would you expect much better kind of expectations ahead as a result of that detention release from LONGi. Thanks.

Hey, Phil, so I'll start and then let Patrick continue. So historically in our backlog we did have a fair amount of modules from that supplier that were associated with our projects. Many of those have, during the AD/CVD process, found different modules to move forward with. So it's fair historically, but I think that's been changing. Patrick, I don't know, if you'd add anything there.

Yeah. And Phil, I'd say the other thing, too, when you think about kind of Q4, Q1, we've had some projects kind of move to the right in terms of the overall revenue ramp. The 1 gigawatt project that we'll be delivering here and then the 700 megawatt project that we signed last quarter and are in process of delivering. So you're going to see a lot of that base load revenue get shifted into 2024, which is why we're so optimistic about kind of the future prospects, is because we've got that 1.7 gigawatts plus already kind of in the hopper and delivering. So we're very excited about that.

Great. So we've made a fair amount recently about the challenges with some project delays as a result of, you know, elevated rates for a long period of time and so forth. Can you walk through the rationale for each of those project pushouts? If you touched on it earlier, sorry if I missed it, but just curious if you can give a little more color as to why the gigawatt and the 700 megawatt projects were pushed to the right.

I think from just an overarching perspective, what we're seeing is a rise in financing costs obviously is creating a little bit longer duration as projects reach kind of FNTP or LNTP. And you're seeing, you know, those types of projects move. Interconnection has also been a little bit of a challenge. You're seeing kind of a little bit of grid issues, grid congestion, and that's having those projects ultimately pushed to the right more than what we've traditionally seen in the past. Obviously module availability is getting better, but we're seeing increased rates in financing and interconnection is kind of the current challenges in the market.

Okay. Great. Thanks Patrick. One last one from me and I'll pass it on. As it relates to working capital, you know, you have a healthy amount of cash, 30 million, but you have a bunch of cash tied up in accounts receivables at 71 million and a pretty high data account. Just wondering if you can talk us through balance sheets, working capital, how you expect to manage through. Thanks.

Yeah, so this is Cathy. We feel very confident. Our cash position will be flat to a little improved by the end of Q4. We have some chunky receivables we expect to be coming in Q4. And with the ramp that we're seeing and the move to profitability, we're confident in kind of where that stands on our balance sheet.

Great. Thanks, Cathy. And then in terms of why are the receivables so chunky at this point? I mean or why are they so high? Are there some other kind of reflection of what's going on in the market where some of your customers might be trying to preserve cash?

Yeah, I think that's exactly what we've seen. And some financing changes on our customer side also making the -- has pushed out some of the receivables. So we have some that are a large receivable that we're expecting to see come in Q4.

The receivable that we mentioned a lot that we expected to come in last quarter. It actually looks like it's going to come in now this quarter, so that's the bigger chunk of it.

It moved to the right.

Got it. And do you have a credit facility? And can you talk about the capacity available?

Yeah. We have a revolving credit facility right now. It's $100 million. We've got about one and a half to 2 -- pretty de minimis amount that's ultimately utilized. It's traditionally used for letters of credit to support projects. As we've gotten more credibility within the market, we haven't had to tap in and ultimately utilize it. So it's remained undrawn and untapped so we've got you know more than $95 million available under the line.

But as of quarter end.

Great. Thanks for all the detail. Sorry, go ahead.

I can say -- throughout the quarter we can utilize the full amount and then as of quarter end there's 5 million available left on the revolver.

Okay, thanks, guys. I'll pass it on.

Thanks, Phil.

Thank you. Please stand by for our next question. Our next question comes from the line of Donovan Schafer with Northland Capital Markets. Your line is open.

Hey, guys. So thanks for taking the questions. I first want to ask you know with the transition of the CEO and the CFO kind of wondering Shaker is still on, maybe we can get a response from him on this. But if the issue here is kind of the way everything, the way you guys are describing it and all these dynamics that are out of your control, it seems, or at least being framed that way, but also lined up for acceleration. I think the word acceleration was used a lot in the prepared remarks. If all that is lined up that way and unfolding as best as possible within what you can control, then why replace the CEO and CFO? Or otherwise, more candidly, what is the board's view of what's going on here? And tied to that, why should we continue to put faith in, you know, Q1 guidance, you know, the Q1 guidance, Q4 guidance, and even the backlog at this point? You know, has all that been, you know, reviewed and re-reviewed by the board, any clarification would be helpful.

So in terms of the guidance, I'll let Cathy speak to this, but the -- I think the view is to derisk the guidance. That's why you saw some lower numbers. And I think the company feels comfortable with what we're putting out for Q4 and Q1. And Cathy, I don't know if you want to add to that?

Yes, the answer is yes, we've gone through it project by project. And my goal is to provide guidance that I can be confident in, and that's what we've done. And we have a very clear view into the ramp in Q1. So very confident with that.

Okay. And then with the actually, sorry, did anyone else want to comment on that question? Okay. Well then, as a follow-up, talking about -- if module imports have improved, we've talked before about that really being the hang up and the backlog being skewed to 2P projects and that those tend to be more complex sites. And so those would move to the back of the queue. Since module supply has improved so much, it feels like those waiting in the wings should have been able to kind of kick in the gear and start going. Or otherwise, that narrative is kind of broken down. If it's just interconnect and financing now. Is there a reason on those aspects why you guys would be disproportionately impacted? I mean, some peers have -- it's not that peers haven't been impacted at all, but it seems like you are still being disproportionately impacted. So if it's not the modules and how is the disproportionate impact landing in you guys around financing and interconnects?

So I'll talk to the module piece. We are seeing modules ultimately come in. And Donovan, you're right, 2P sites are inherently ultimately more complex. But if you think about developers and how they engage with the EPCs, they're building out their kind of construction schedule. So a lot of the 1P sites are still continuing to get done and some of the 2P sites, just based on EPC availability are still kind of forecasted to go mid to late 2024 and into 2025. And those schedules are being set in Q3 and Q4, ultimately, of 2023 as they build some of these 150 to 200 megawatt sites.

And to that, in general, we've seen some of the same things that industry have seen around financing, panels, labor, permitting, renegotiating PPAs. I mean those sides of things we have talked about last quarter are seeing a general pushout in backlog. Around the 2P, we have a number of projects that if they were scheduled to move forward with the project, but they didn't have modules. They've renegotiated from now. So a project that would have been scheduled to go six months ago, maybe it's now going to go in late '24 and '25. And so that's the new schedule for that particular project. But that's the only other thing I'd add there.

Bill and Donovan, this is Shaker. I'm sorry, I had trouble with the audio, and I can address the question with the leadership change. And Donovan, again, thank you for the question. We talked in the prepared remarks about repositioning the business that we have -- the work that we've done in the last two years. And essentially, a lot of the work we've done has improved our cost structure and the competitive positioning. The organization is also a lot leaner, and we have filled gaps in our product portfolio. And really, in the April May time frame, we were very optimistic on the business outlook. But really, what was happening is we were not getting the POs. So the Board really started getting into the details, and we found a lot of opportunity for improvement in just the basic blocking and tackling and execution issues. In particular, we found our opportunities to accelerate decision-making and how it was coordinated across the organization, closing gaps with product portfolio faster and increasing customer interaction, so there's better linkage between revenue forecast and PO attainment. So that's the reason for the change. And hopefully, that answers your question.

Okay. That is helpful. And then just if I can get one last question -- one last more in on the credit charge. So with the $4 million credit provision tied to one customer. Can you clarify, is that a case where the -- you guys and the customer, there's agreement or they share your understanding around the idea of what is the total amount of monies owed for goods and services provided? Or is there actually -- and they just don't have -- and they're just not paying it? Or is it a case where they're actually in some way disputing or they don't share your view and they don't think they or have reason for withholding that $4 million?

Hi, Donovan, thanks for the question. No, there's no dispute. The customer understands the value of the receivable, it's strictly collectibility and ability to pay issue.

Okay. That's very helpful. Okay, thank you guys. We'll take the rest of my questions offline.

Thank you. Please standby for our next question. Our next question comes from the line of Amit Dayal with H.C. Wainwright. Your line is open.

Thank you. Good morning, everyone. Most of my questions have already been addressed. But I was just wondering if you had any projects that have been canceled? I know backlog is a little bit higher, but are there any project cancellations that are impacting near-term results and outlook?

No, we haven't seen -- thanks for the question. We haven't seen any projects that were -- that have been canceled, just pushed to the right.

Okay. Understood. And in non-UFLPA orders, I think you guys gave a number last quarter. I don't see it this time. Maybe I missed it. Could you tell us what that number looks like?

Yes. I mean in terms of the non-UFLPA for the awards that we signed up this quarter, all of those are not subject to UFLPA and all of the projects have panels.

Okay. Thank you for that. So given you have a pretty positive outlook for 2024, do you think you potentially could see sequential improvements through the year-end 2024 after the bounce back, say, relative to Q4 '23? Or do you not have any visibility at this point to kind of give us that kind of outlook?

So we haven't guided -- beyond Q1 for 2024. But we had indicated in the last call that we expect the ramp to start in Q4 and now you're seeing that ramp start now here in Q1. So as these projects, particularly the almost 700-megawatt project is one example that Patrick called out, that's one that's going to contribute here in Q4 and ramp into next quarter. So that kind of give you an indication of how the -- we'd expect things to start to ramp on those projects that we talked about last quarter.

And I think the one thing to kind of piggyback off that is, if you look at a gigawatt project and a nearly 700-megawatt project, once those projects start flowing, you're getting kind of that recurring base load of revenue. So the project isn't having this like stop and start. So there's kind of a linear progression of revenue that's going to stretch over multiple quarters. So now that we've got some of these larger projects that are ultimately delivering, it gives us a further visibility on how much revenue that we're going to get in any given quarter from those projects. And then it's just adding new projects kind of along the way that are ultimately going to start. So converting from our current contract and award and finding new projects in conjunction with these two large projects plus several others that are ramping at the end of Q4 -- in Q4 and into 2024.

Right. So we could potentially be in a situation where we see year-over-year improvements through all four quarters next year?

We definitely feel good about our growth prospects in 2024 and definitely revenue growth and margin improvement for sure.

Okay. Thank you. Just one last one, on the 1P offering, how much of the backlog or how much backlog for that product in the overall backlog number?

The majority of, I mean, if you look at the kind of contracting awards, the majority of the backlog is our two imports of tracker. And that really ties to the fact that the two imports of trackers have been around since 2017 and we brought it to market in 2019, and we didn't bring the 1P pioneer until late Q3. And so we haven't had the time to build that 1P backlog that we have with 2P. Now we are seeing a lot of being offered to bid on projects, a lot of activity around Pioneer and the constructability benefits of it. And we expect to start building out our backlog of our 1P as kind of get through Q4 and into the coming quarters.

Okay. Understood. Thank you, guys. That's all I have. Appreciate it.

Thank you. Please standby for our next question. Our next question comes from the line of Pavel Molchanov with Raymond James & Associates. Your line is open.

Yeah, thanks for taking the question. Can we get an update on your manufacturing joint venture, which I think is now maybe a quarter or two since it started operating?

Yes, I'll start on that one. So all the equipment is installed and we've been doing qualification runs. We've got some revenue facility in the current quarter here in Q4 and get larger in 2024. And Patrick, I don't know if you have anything to add.

And is there --

Sorry, Pavel, go ahead.

No, please. Go ahead.

No, I would say Bill is right. I mean, that facility is up and running. We've got projects going through it currently. And if you look at the -- some of the projects that are in delivery or in shipment in Q4 into 2024, the anticipation is that we'll be utilizing that facility. And when we're going to market with new bids or new quotations, used in production of that facility is kind of at the forefront right now.

Is there an uplift in gross margin that you are anticipating once that is -- that facility is fully ramped up?

So at this point, we're not making any benefit from 45x into the -- in our current guidance. Cathy, is there anything else you want to add to?

No, we're -- we do expect to see continued improvement in our margin, and that facility will support that as well.

Okay. I know you're not giving formal guidance yet beyond Q1. But as you sort of zoom out on 2024 as a whole, do you anticipate being a cash user or a cash generator?

Well, we're moving -- we see a crossover into profitability in 2024. So we expect to be generating cash in 2024.

All right. Thanks very much.

Thanks, Pavel.

Thank you. [Operator Instructions] Please standby for our next question. Our next question comes from the line of Jon Windham with UBS. Your line is open.

Hey, great. Thanks for taking the question. I guess the first one, just quickly. Any commentary from the Board on the status of a CEO and CFO permanent replacements and the parameters of which it internal versus external candidates? And what sort of time frame investors should expect on permanent replacements? Thanks.

Jon, this is Shaker. Thank you for the question. So the Board, like I said, we have been involved with details of the company over the last three months and trying to understand what's going on. And for now, we feel that the best team to take us forward is Patrick, Sasan and Cathy with oversight from the Board. And we do not want to rush into a CEO succession primarily because there is an urgency with which we need to get things done, and we need to take our time in finding a good CEO. And so for both those reasons, we will be very deliberate to make sure we have positioned the company well. We have -- the team that we have now has got a tremendous amount of operational depth. They're also going to be guided by a Board with a lot of operational depth. Ahmad is going to act as a facilitator and he played a similar role at phase between 2017 and 2020. So I think we feel good about the team that we have, and we want to take our time in getting the CEO in place. In terms of CFO, Cathy is a very accomplished person to take that role. And we will decide on a replacement, either internal, external or to have Cathy going forward in the subsequent months. Hopefully, that answers your question.

Yes, did. Appreciate it. And then on a completely separate topic. Obviously, there's, I think, a healthy amount of skepticism around the $1.6 billion backlog. It's essentially the same size as a competitor that has 13 times the annual revenue. Is there any thought about taking an opportunity to provide more transparency, specifically what's in the backlog, like specific projects? Is there anything that stopped the company from disclosing specific projects? Again, I think just a little bit of comfortability with just a portion of the backlog would provide a lot of peace of mind for investors. Just your thoughts on that, and I really appreciate taking the questions. Thanks.

We've actually gotten that question recently and have -- we actually did some work on that for doing that. We didn't present it this quarter given the changes that we announced, but that's something that over the next few months is something we can either put out or mentioned in our next call. But it's definitely something that we're looking to do in some

Great. Be well.

Thank you.

Thank you. Please standby for our next question. Our next question comes from the line of Julien Dumoulin-Smith with Bank of America. Your line is open.

Hey, guys. It's Alex Vrabel on for Julien. Maybe just actually a follow-on to that question on sort of the makeup of the backlog and the opportunity, I'll frame it as, I guess, to provide a little bit more transparency. I know you guys obviously talked about UFLTA or I guess, non-UFLTA orders, but also international as sort of being a shorter cycle, faster ramp than some of the stuff you're seeing in the US. Just curious what's the status of that piece of being? Clearly things still look a little bit challenged. And just curious, I mean, as far as the slippages, are you seeing the same thing internationally versus the US where obviously the rate environment is still high, but a little bit more muted depending on kind of where your exist? Thanks.

Yes. I mean I think if you look -- thank you for the question. I mean, I think if you look in the regions in which we operate, obviously, the US is the largest portion. That's where we've had the longest kind of sustained presence and some of the new geographies that we're seeing, certainly, there's interconnection and financing challenges. We haven't seen it to the extent that we've seen it ultimately in the US but that's a function of kind of our early entrants into those markets. So we haven't been in them for four or five years, where you're working on large 500, 600, 700-megawatt projects traditionally in places like Spain and Italy, where there's not a lot of free use land. Most of the projects are sub-100 megawatts. So those move forward then take the PO a little bit faster. But if you look at places like Australia, they have interconnection issues ultimately as well. But it's more exacerbated here in the US that we've seen.

Got it. Makes sense. When you guys think, I guess, moving forward, I mean, clearly, some recovery contemplated for Q1 at least. I think what's interesting is you guys, obviously, to your point, Patrick, started as the 2P company sort of shifted to doing both at this point and also sort of broaden the commercial base outside of the US. It seems to us that there's a little bit of a -- I don't know what you're on call it a flight to quality or to certain EPCs or players in the space. There's a little bit of a have and have not. I'm curious, I mean, as you guys look to sort of reposition the business for growth off of a higher margin base, how do you think about sort of targeting that more directly? Is it -- we just need to win more 1P? Again, is it, hey, international looks more attractive than the US. How would you sort of frame the strategy from here? I guess, beyond converting the existing backlog?

Yes. No, it's a great question. I mean I think, obviously, we're very excited about the US market. We're excited about the 1P pioneer that we have to offer. And certainly, the top EPCs are the ones that are getting a majority of the business, and we're penetrated with those accounts. And the one nice part is we're able to sit down with those top-tier EPCs and ultimately, developers and really design a project that's agnostic between 1P and 2P and really maximize the site based on the goals of that EPC or developer. And I think that's been a differentiator for us. Continuing to expand, I mean, double down in the US continue to win projects. That's what we're -- that's a big focus for us. But continuing to grow our footprint internationally as well. So if you think about how we -- our boots on the ground strategy for the US, you win several projects and then they grow and get bigger and you've developed kind of a base load revenue and you've got kind of a fact pattern out there. We did the same thing in Australia, where we've done over two dozen projects there, and we're relatively well penetrated. We recently won awards in Spain and Italy, and we plan on delivering those in early 2024. So that gives us a stronger foothold in Europe and a proof point for us to build a base around. And then also, as Bill mentioned, continuing to expand in markets like South Africa, where we've delivered several large projects and expect to continue to grow that market ultimately as well. And the commonality amongst those are its markets in which our value proposition of constructability and quality hold true, and that allows for the margin expansion. We're not looking to participate in markets where we aren't able to achieve profitable growth. And that's echoed by the comments that Shaker made in his opening remarks.

Got it. That makes sense guys. Appreciate the time.