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FTC Solar, Inc. (FTCI) Q4 2022 Earnings Call Transcript

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FTC Solar, Inc. (NASDAQ:FTCI) Q4 2022 Earnings Conference Call February 28, 2023 8:30 AM ET

Company Participants

Bill Michalek - Vice President-Investor Relations

Sean Hunkler - President and Chief Executive Officer

Phelps Morris - Chief Financial Officer

Patrick Cook - Chief Commercial Officer

Conference Call Participants

Philip Shen - ROTH Capital Partners

Donovan Schafer - Northland Capital Markets

Jeff Osborne - Cowen

Pavel Molchanov - Raymond James & Associates

Kashy Harrison - Piper Sandler

Maheep Mandloi - Credit Suisse

Alex Figueroa - Bank of America

Operator

Good time and convey you for opinionated by. Welcome to nan FTC Solar Earnings Conference Call. At this clip each participants are successful a listen-only mode. After nan speakers’ presentation, location will beryllium a question-and-answer session. [Operator Instructions] Please beryllium advised that today’s convention possibly recorded.

I would for illustration to move nan convention complete now to your speaker for today, Bill Michalek, You whitethorn spell ahead.

Bill Michalek

Thank you, and welcome, everyone, to FTC Solar’s 4th fourth 2022 net convention call. Before today's call, you’d apt had opportunity to reappraisal our net release, supplemental financial accusation and descent presentation, which were posted earlier today. If you’ve not yet reviewed these documents, they are disposable connected nan Investor Relations conception of our website@ftcsolar.com.

I’m joined coming by Sean Hunkler, FTC Solar’s President and Chief Executive Officer; Phelps Morris, nan Company’s Chief Financial Officer; and Patrick Cook, nan Company’s Chief Commercial Officer.

Before we begin, I punctual everyone that today’s chat contains forward-looking statements based connected our assumptions and beliefs successful nan existent situation and speak only arsenic of nan existent date. As such, these forward-looking statements see risks and uncertainties and existent results and events could disagree materially from our existent expectations. Please mention to our property merchandise and different SEC filings for much accusation connected nan specific consequence factors. We presume nary responsibility to update specified information, isolated from arsenic required by law.

As you’d expect, we will beryllium discussing some GAAP and non-GAAP financial measures today. Please statement that nan net merchandise issued this greeting includes a afloat reconciliation of each non-GAAP financial measurement to nan nearest applicable GAAP measure. In addition, we’ll talk our executed statement and awarded orders collectively referred to arsenic backlog, and our meaning of this metric is besides included successful our property release.

With that, I'll move it complete to Sean.

Sean Hunkler

Thanks, Bill, and bully greeting everyone. As I bespeak connected my first afloat almanac twelvemonth arsenic CEO successful 2022, I americium proud of really nan squad navigated galore outer challenges. The twelvemonth began pinch historically precocious logistics and alloy costs followed by a alternatively challenging regulatory marketplace successful nan U.S., which arsenic you cognize has historically represented nan superior root of our revenue. The squad has responded good to nan challenges, utilizing nan downturn to attraction connected what we tin control, amended our competitory positioning, and look arsenic a stronger company.

As we adjacent retired nan year, I judge we're connected a importantly improving trajectory. We delivered 4th fourth results, showed important betterment and exceeded nan midpoint of our guidance connected each metrics. We besides continued our operational improvements, which I'll talk successful much detail, 1 of which includes improving our world exposure, which will let america to return advantage of adjacent word opportunities, while we hold to unlock our afloat backlog erstwhile nan Uyghur Force Labor Prevention Act aliases UFLPA constraint afloat resolves.

Today, I'll concisely locomotion done nan marketplace and operational betterment categories we've been discussing to summarize what we accomplished during nan first 9 months of nan twelvemonth and really we closed retired nan twelvemonth connected a coagulated trajectory successful Q4. Starting astatine nan marketplace level and possibly nan 1 changeless during nan year, nan semipermanent request trends look awesome and proceed to improve. They person apt ne'er looked better.

According to nan IEA, renewable are group to go nan superior power root for energy procreation globally successful 2027, accounting for astir 40% of full energy output and overtaking coal. Despite higher module pricing, inferior standard star is nan lowest costs root of caller energy procreation successful astir countries worldwide and accounts for much than 60% of each renewable capacity description .

The debased costs to instal coupled pinch further semipermanent request drivers for solar, that see existing authorities policies including renewable portfolio standards and nan existent ITC, firm consciousness and technological improvements is only further enhanced by existent precocious fossil substance pricing discussions of power information successful galore countries and nan caller transition of IRA successful nan U.S. So, we person an incredibly affirmative marketplace backdrop and tailwinds from semipermanent world growth. The 1 gating point required to unlock nan imaginable wrong nan U.S market, which represents overmuch of our backlog, remains star module availability.

Looking astatine nan U.S regulatory scenery during nan first 9 months of 2022, we saw 80 CBD and WRO concerns transitioned to 1 remaining rumor successful UFLPA. In nan 4th fourth and much recently, we person seen immoderate early signs and reports of improvement. These see affirmative trends successful waste and acquisition import data, marketplace reports of mini module shipments being released from customs, immoderate module proviso agreements being inked and optimism from immoderate that we are getting person to a much important betterment successful nan backmost half of nan year.

There person besides been respective announcements astir caller module capacity extracurricular of China, which is an fantabulous motion for module readiness successful 2024 and beyond. Overall, we're hopeful that we'll spot much important betterment successful module travel later this year, but arsenic we'll discuss, we don't request to hold for UFLPA solution to execute improving financial performance.

From a proviso concatenation and procurement standpoint, we started 2022 astatine historically precocious prices for alloy and logistics, but person since seen betterment successful some alloy is now good disconnected its highs and logistics is fundamentally backmost to humanities norms. Given nan betterment successful logistics, we person afloat transitioned backmost to containerized shipping from nan brake bulk solution we had implemented to upwind nan precocious and uncertain marketplace conditions.

With that market, regulatory and proviso concatenation backdrop. I'll move now to our operational improvements. As I person mentioned connected caller calls, we person not stood idle done nan marketplace uncertainty and person utilized nan clip to attraction connected what we tin power to champion position ourselves for nan coming recovery. One area of important attraction has been connected improving our costs and gross separator profile.

In nan first 9 months of nan year, we maximized our creation to worth initiative, allowing america to return much than 20% of nan alloy contented retired of our locator systems. This helped america create a merchandise costs building that will alteration double digit gross margins connected early projects. We besides launched a distributed procreation business, which has a precocious separator floor plan and will beryllium a affirmative summation to nan business.

We person received awesome liking pinch first orders and a robust pipeline. In nan 4th quarter, we continued our costs simplification attraction and launched our creation to manufacturing efforts, which purpose to guarantee that our products are not only designed for constructability, ratio and effectiveness, but are besides costs effective to manufacture. As it relates to our merchandise portfolio, successful nan first portion of nan year, we were rather engaged pinch nan improvement of innovative caller products that resulted successful caller merchandise announcements during nan backmost half of nan year.

In nan 3rd quarter, we announced a differentiated caller 1P locator solution called Pioneer, which importantly expands our expertise to service caller markets some successful nan U.S and worldwide. This gives america much opportunities to triumph projects, whether it's a penchant aliases use for 1P. Customer enthusiasm for our caller merchandise has been beardown and arsenic we launched Pioneer on pinch a 500 megawatt statement from a apical EBC. Our pipeline for Pioneers is increasing nicely and we proceed to expect first deliveries successful nan 2nd half of nan year.

In nan 4th quarter, we announced nan preamble of a caller costs effective first star module solution for our 2 P product, which filled a GAAP successful our offering. We person already received orders for this solution and are recognizing revenue. Combined, these caller merchandise introductions grow our addressable market, while besides serving to bolster nan non-UFLPA information of our backlog, arsenic we proceed to turn revenue. In position of geography, we entered 2022 arsenic very overmuch a U.S focused institution successful position of revenue.

However, nan investments we've been making to grow our world footprint started to carnivore consequence early successful nan year. We person since received awards successful 4 caller countries, bringing nan full to 10 countries pinch projects extracurricular of nan U.S. We besides recorded our largest task successful Australia to day astatine 128 megawatts. Just coming we announced that we added 240 cardinal of backlog since early November. Of that amount, much than 80% is from world locations, including 2 much projects successful Australia, putting america astatine much than 25 successful that state truthful far.

We judge our caller 1P locator will importantly heighten our expertise to further turn internationally. International maturation is simply a cardinal attraction for us, peculiarly pinch nan existent regulatory challenges successful nan U.S I'm rather pleased to spot our continued maturation and pipeline and conversion to backlog. We besides precocious announced a U.S manufacturing associated task utilizing home alloy to fortify and bolster our home proviso chain.

With nan transition of nan Inflation Reduction Act, customers are now asking for quotes pinch U.S section content, including projects for transportation successful nan second half of this year. While we still await further specifications from nan authorities connected nan mechanics of nan IRA, we judge this JV will beryllium instrumental successful helping america support our customers' needs successful nan future.

For this JV, we collaborated pinch a known existing supplier. The installation located adjacent Houston, Texas will initially beryllium focused connected torque tubes and is expected to statesman cognition astir mid-year.

Turning to pipeline, successful 2022 we saw robust maturation and respective caller grounds levels including nan world information of nan pipeline, which much than doubled successful nan first 9 months of nan year. Today, we again achieved caller grounds levels successful full pipeline pinch nan world information now up 150% comparative to nan commencement of 2022. International now represents an expanding mostly of our pipeline, and arsenic you tin spot from our adjacent word task awards is expected to dress up a increasing information of our gross guidelines going forward, further diversifying our gross and reducing vulnerability to projects taxable to UFLPA review.

And finally, pinch our continued attraction connected expanding existent customer relationships and forming caller ones, our backlog has continued to turn nicely contempt nan constraints successful nan module marketplace successful nan U.S. As I mentioned, since our past net telephone successful November, we person added $240 cardinal successful backlog, bringing nan full supra nan cardinal dollar people for nan first clip astatine $1.2 billion. The corporate results of these initiatives person led to improved financial capacity arsenic we adjacent nan year.

As we progressed done nan twelvemonth moving connected these initiatives, we completed shipments of our bequest little separator products successful Q3 and reached what we judge was a gross and separator debased constituent successful that quarter, from which we expect to spot betterment going forward.

In Q4, our capacity did amended arsenic expected and we came successful up of nan midpoint of our guidance connected each metrics. This includes gross that grew 58% sequentially, disconnected nan debased Q3 guidelines and non-GAAP gross separator that improved from adjacent to antagonistic 50% to approaching breakeven astatine antagonistic 3.4%. Non-GAAP operating expenses successful nan 4th were astatine nan debased aliases amended extremity of our guidance range, resulting successful adjusted EBITDA besides coming successful amended than nan midpoint.

We are excited to spot nan results of our DTB and different initiatives statesman to show done successful a meaningful measurement successful our results and we spot that continuing. So closing retired connected 2022, we person utilized nan downturn importantly amended our competitory positioning crossed astir each aspects of our business. We now person a beardown merchandise costs building connected existent and early projects, which puts america connected way for double digit gross margins arsenic our gross tally complaint recovers.

We person a much broad merchandise statement that expands our addressable marketplace successful nan U.S and internationally. We are increasing and diversifying successful caller markets and are positioned pinch a strengthened proviso concatenation and we person a grounds backlog and pipeline that shows that customer take globally is expanding arsenic we look up to a marketplace that is not only poised to retrieve but is poised pinch powerful semipermanent tailwinds.

As we look up to 2023, our attraction is solidly connected execution, supporting our customers worldwide, continuing to build connected our advancement and demonstrating nan capabilities of our improved business. We judge we tin proceed to show separator betterment moreover successful a depressed measurement environment, followed by overmuch much important betterment arsenic module readiness and volumes amended successful nan U.S.

With that, I will move nan telephone complete to Phelps.

Phelps Morris

Thanks Sean, and bully greeting to everyone. As a follow-up to Sean's comments, I'd for illustration to supply immoderate further colour connected nan 4th fourth capacity and outlook. So let's statesman pinch nan chat of nan 4th quarter. Overall, I'm happy to stock that we present results that were amended than nan mid-point of our guidance trends connected each metrics for nan quarter. First gross is $26.2 million. While connected a year-over-year ground gross is down 74%. It did correspond a 58% summation versus nan anterior quarter, arsenic we statesman to build immoderate momentum moving up from a little than Q3.

We are starting to spot caller accumulation tied to some world products arsenic good arsenic non-UFLPA projects moving forward. We judge this is simply a motion that nan strategy we discussed past 4th of attacking non-UFLPA impacted projects is opening to use nan company. While we sold Knight's sequential maturation successful revenue, UFLPA's constrain our near-term expertise person backlog into gross pinch a bulk of our backlog, astir two-thirds remaining taxable to UFLPA.

Now connected nan positive side, non-UFLPA a backlog doubled quarter-over-quarter now represents a 3rd of our full backlog. Next, our GAAP gross nonaccomplishment for nan 4th was $1.9 cardinal aliases 7.3% of gross compared to $9.5 cardinal aliases 57.4% of gross successful nan anterior quarter. On a non-GAAP basis, nan gross nonaccomplishment was $0.9 cardinal aliases 3.4% of gross coming supra nan mid-point of nan guidance range.

Compared to our Q3 2022 non-GAAP nonaccomplishment of $8.2 cardinal aliases 49.8% of revenue, we are capable to present an awesome 46 constituent betterment quarter-over-quarter. We are capable to execute this owed to nan following. First, nan bequest debased trading products we discussed successful anterior quarters were completed during Q3.

Second, nan caller products we now present use from our team's efforts connected nan DTV front, coupled pinch a much normalized proviso concatenation costs successful some alloy and shipping. The squad is excited to spot nan early fruits of our labour starting to show successful our results.

On a year-over-year basis, we delivered betterment to Non-GAAP gross nonaccomplishment by $6.5 million, moreover successful nan look of importantly little gross successful Q4 2022 versus nan anterior play successful 2021; $26.2 cardinal this twelvemonth versus $101.7 cardinal past year. The improvements were driven chiefly by improved locator and logistics nonstop margins. Our GAAP operating expenses were $17.9 cardinal connected a non-GAAP basis, excluding nan banal based compensation charges associated pinch nan FCX ineligible colony and definite different expenses are operating expenses was $10 cardinal compared to $9 cardinal successful nan twelvemonth agone quarter.

This was astatine nan little extremity of our guidance range. The flimsy year-over-year summation was driven by an summation successful nan R&D expenses arsenic good arsenic nan absence and credits that we had successful nan twelvemonth agone quarter. We continued to support a keen oculus connected expenses arsenic we managed done nan -- this period. To that end, we executed a targeted headcount simplification during nan 4th representing astir 8% of our labour force.

In addition, we proceed to support a adjacent oculus connected our non-labor spent. Next, GAAP nett nonaccomplishment is $20.5 cardinal aliases $0.20 per stock compared to nan nonaccomplishment of $25.6 cardinal aliases $0.25 per stock successful nan anterior quarter, and compared to a nett nonaccomplishment of $23.9 cardinal successful a twelvemonth agone quarter. Collectively results from our improved margins and observant guidance of operating disbursal and overhead flowed down to our adjusted EBITDA results.

For nan quarter, nan adjusted EBITDA nonaccomplishment pinch excludes astir $9.1 million, including banal based compensation expense, definite consulting and ineligible fees, severance and different non-cash items was $11 cardinal amended than nan midpoint of our guidance scope of $12.3 million. The results represented betterment of $6.7 cardinal compared to an adjusted EBITDA nonaccomplishment of $17.7 cardinal successful nan anterior 4th and compares to $16.4 cardinal successful nan twelvemonth agone quarter.

Finally, regarding liquidity, we ended nan 4th pinch a humble uses of rate and ended pinch $44.4 million. In addition, we proceed to clasp nary indebtedness connected nan equilibrium sheet, person an undrawn in installments revolver, arsenic good arsenic a $100 cardinal ATM program, which we person not accessed to date.

With that, let's move our attraction to nan outlook. Based upon our existent view, we proceed to expect sequential gross maturation successful nan first quarter. We besides expect gross separator to proceed to show betterment quarter-over-quarter and transverse into nan affirmative territory.

Specifically, our targets for nan first 4th telephone for nan following: gross betwixt $36 cardinal and $40 million, representing 37% to 53% maturation disconnected of nan Q4 2022 results. Non-GAAP gross separator betwixt $0.7 cardinal and $3.2 cardinal are betwixt 2 and 8% of revenue, Non-GAAP operating expenses betwixt $10 cardinal and $11 million, and yet adjusted EBITDA nonaccomplishment betwixt $10.3 cardinal and $6.8 million.

And for nan 2nd quarter, we expect to spot further operational improvements. Overall, we proceed to judge nan ingredients are successful spot for a very beardown business betterment and semipermanent growth. The complaint of betterment successful our largest market, nan US will mostly beryllium wished by nan gait of betterment from nan importation of modules. Once improvements do hap astatine scale, we judge FTC Solar is progressively good positioned competitively headdress to capitalize that connected that maturation pinch a little costs building successful nan innovative merchandise line, a grounds pipeline, and much than a cardinal dollars successful backlog.

With that, we reason our prepared remarks and I'll move it complete to nan usability for immoderate questions. Operator?

Question-and-Answer Session

Operator

Thank you. One infinitesimal while we hole ourselves for nan Q&A session. [Operator Instructions]Our first mobility will beryllium coming from Philip Shen of Roth. Your statement is open.

Philip Shen

Hey guys, acknowledgment for taking nan questions. Wanted to commencement pinch your caller bookings.; was wondering if you mightiness beryllium capable to stock really overmuch of nan 240 is 1P versus 2P and besides tin you talk done really overmuch of nan 240 you expect to beryllium delivered successful 2023 and past for nan $1.2 cardinal overall, what percent of that do you besides expect successful 2023 versus possibly 2024 aliases later? Thanks guys.

Sean Hunkler

Yeah, Hey, Phil, this is Sean. Thanks for nan question. So we are -- we are excited astir nan advancement we're making connected non-UFLPA and as, arsenic you described successful nan astir caller bookings. So fto maine -- fto maine move it complete to Patrick and, and fto him supply a small spot of colour connected nan mix.

Yeah, successful position of benignant of 1P and 2P, Phil, we, we didn't springiness america benignant of circumstantial numbers successful position of benignant of nan gross split, but it will beryllium a operation betwixt benignant of our 1 successful image locator and our 2 successful image tracker. And successful position of conscionable benignant of wide gross benignant of operation connected nan non-UFLPA, we, we do expect to commencement recognizing gross for, for those projects successful nan non-UFLPA impacted areas successful the, successful nan adjacent term. And it's not thing that's benignant of elongated out. So we do expect to commencement recognizing gross connected that 240 in, successful nan adjacent term.

Philip Shen

Great. And looking up tin you talk astir what you expect successful position of nan bookings momentum? You've had a really bully tally present successful spite of nan UFLPA module constraints. Would you expect arsenic we get into Q2 and 3 that nan bookings momentum sustained, fixed nan ostentation simplification enactment and your world occurrence there? Thanks.

Sean Hunkler

Yeah, we really, we are very excited astir nan bookings momentum and frankly speaking, I think, we've, we've done a batch of activity internationally as, arsenic we mentioned successful nan remarks, we've besides put a batch of attraction connected our merchandise portfolio and enhancing our merchandise portfolio now having a first star solution for our Voyager 2P and processing our 1P Pioneer product.

And truthful for the, for nan backmost half of nan twelvemonth we're, we're expecting continued momentum. In addition, we're hopeful that there'll beryllium immoderate shape of alleviation connected UFLPA though we're, we're surely not counting connected it, but we're hopeful that that would, that would besides adhd to nan momentum that we're seeing for nan backmost half of nan year. I, again, I'll -- Patrick Cook, our main commercialized serviceman is here, and I'll fto him supply a small much color.

Patrick Cook

Yeah, Phil, nan measurement I, deliberation astir that is you look benignant of successful nan U.S right? Our, merchandise portfolio set. We've got, nan first star solution. We've sewage our -- we've sewage our 2 p and we person our 1 successful Portrait solutions. We consciousness for illustration we person a beautiful sound portfolio group to spell onslaught not only caller customers, but existing customers and turn benignant of nan stock of wallet, but we talked astir benignant of nan world description that we have.

It's typically benignant of 2 years to revenue, and if you benignant of rewind nan clock, we, we've been successful a batch of these world locations for 2 positive years, and you're starting to spot benignant of nan aforesaid trajectory and inclination that we had successful nan U.S backmost successful 2019 wherever you, commencement getting into 2, 3, 4, 5 different customers. You turn nan stock wallet, you turn nan footprint, and now you've sewage a backlog and pipeline that's dependable for, for benignant of upcoming revenue.

So we're surely excited astir nan momentum that we're seeing successful nan bookings. nan customer excitement astir IRA successful nan U.S is surely highly precocious and, we're looking guardant to, to beryllium capable to benignant of seizure connected that arsenic good based connected our customer relationships and nan customer work that we bring to our customers some successful nan U.S and internationally.

Philip Shen

Great. 1 past 1 if I may. In position of nan circuit 2 subsidy, we put retired location precocious that, it seems for illustration for this twelvemonth nan circuit 2 manufacturers whitethorn unafraid betwixt 30% and 40% of that subsidy. And past you guys should beryllium capable to get nan equilibrium of that and past complete nan coming, 4 aliases 5 years that decrements, possibly by, 5 to 10% a twelvemonth until we get to astir 10% a year, five; does that resonate pinch you guys successful nan IRA agreements that you guys are structuring present successful nan U.S? To what grade does that lucifer and, and resonate pinch you guys? And, and if not, what, what benignant of structures are you guys looking at? Thanks.

Sean Hunkler

So we, we are, we are proceeding akin things and truthful I, I would opportunity that successful so it does resonate pinch america and what we've heard truthful acold and then, and past what our expectations are for our associated venture. So I'd opportunity yeah, we're, we're somewhat aligned. I mean, we're, we're waiting to spot what the, nan last regs each say, but, but your position of things is akin to our own.

Philip Shen

Great. Okay. Thanks very much. Keep up nan bookings momentum and I'll walk it on.

Operator

Thank you. One infinitesimal while we hole for nan adjacent question. Our adjacent mobility will beryllium coming from Donovan Schafer of Northland Capital. Your statement is open.

Donovan Schafer

Hey guys acknowledgment for taking nan questions. So I'm going to benignant of follow-up connected Phil's mobility present and try, and I, I cognize you guys astir apt don't want to get excessively circumstantial connected immoderate of these dynamics that, that thief moving astir nan Uyghur, nan UFLPA, but I'm curious, if we tin talk possibly successful position of like, broader trends aliases benignant of, number mostly of, of benignant of mix.

So if I, if I deliberation astir the, possibly telephone for illustration 3 vectors that springiness you nan elasticity to benignant of activity astir the, nan UFLPA. And truthful I deliberation of those three, 3 vectors arsenic first, having a amended solution now that pairs america first star panels is one, first solar, and past nan 2nd 1 would beryllium nan world sales.

And past nan 3rd 1 that, possibly benignant of, overlaps successful immoderate ways is, is having the, nan 1P merchandise now, cuz possibly that's portion of what enables a definite magnitude of world sales. So, it's excessively overmuch to reply successful 1 question, but you tin ideate we could make for illustration a 3 by a 2 by 3 matrix or, aliases array aliases thing and say, we're first star panels, much than 50% aliases little than 50% of income successful nan 4th fourth and aliases successful nan backlog aliases successful nan pipeline aliases world sales, supra nan 50% aliases beneath nan 50% mark, 4th fourth backlog pipeline, whatever, you're benignant of comfortable talking astir it. Same thing, with, 1P, mostly 1P, number 1P. It sounds for illustration nan 1P won't beryllium coming retired or, aliases beryllium deployed till 2nd half of '23.

So of people that's astir apt not a facet successful Q4 sales, but conscionable betwixt those 3 vectors, first star nan comp, having a first star optimized product, an world sales, and benignant of 1P versus 2 p is, are, are, are you leaning much heavy connected immoderate of those and nan different seems sounds for illustration international, but, and benignant of, greater than 50%, little than 50%, thing benignant of precocious level location conscionable to thief america soma retired benignant of trends and cardinal drivers?

Sean Hunkler

Sure, sure. Donovan, acknowledgment for nan question. I, deliberation those 3 vectors that you identified, first Solar world maturation and nan 1P product, adding, adding that to our portfolio are each captious because arsenic we've said before, we're we, we really person tried to pivot nan institution and, and not beryllium focused on, hey, erstwhile will UFLPA end, but what are nan things we tin control?

How tin we amended nan institution and thrust nan company's occurrence independent of UFLPA? So all, each 3 of these vectors are critical, truthful arsenic you cognize we're shipping for gross pinch a first star Voyager 2P solution and, and arsenic acold arsenic nan 1P merchandise goes, we're going to vessel it successful nan backmost half of nan year. And it's our volition aft we, we vessel nan first CRYSTALIN based product, that we will person a First Solar solution arsenic good for nan 1P vo -- aliases excuse me, pioneer product.

And past international, for illustration Patrick said, world takes immoderate time, but if you, if you deliberation astir benignant of a 2 twelvemonth period, we're successful really bully style successful galore countries and, and we talked about, immoderate of nan awesome maturation we've seen successful Australia wherever we've really invested complete time. And Cameron and nan squad are doing a, a phenomenal job. We conscionable announced our largest task ever successful Australia.

And truthful each 3 of those vectors are, are very captious to us. We're not, evidently we're not guiding for nan year, and, and truthful it's difficult for maine to springiness you immoderate specificity connected nan 3 vectors. Maybe, possibly I'll, I'll inquire Patrick to, to supply a small spot much color, but those 3 vectors are each captious to our strategy to basically, turn nan institution and, and person nan institution thrust occurrence independent of UFLPA

Patrick Cook

Yeah, Donovan, I, I deliberation nan measurement I look astatine it, benignant of, astir Q4 and beyond, I mean, evidently we've had world wins. We talked astir benignant of the, the, nan first star solution. So you're seeing benignant of nan humanities benignant of maturation disconnected nan Q3, we said low's successful narration to america adding those benignant of further pro merchandise portfolio and past arsenic good arsenic benignant of yet expanding internationally. And we're seeing that benignant of successful the, successful nan backmost aliases successful nan benignant of nan beforehand half of nan year. you spot benignant of sequential maturation from what we delivered in, successful Q4 and our, our guideline yet in, successful Q1.

So we're seeing, take of our different merchandise portfolios and yet our description internationally. And that, and that is a, a, a information of our wide -- wide maturation successful spite of what's going connected successful the, the, nan wide marketplace and UFLPA, which is why we talked astir connected our past net telephone that, Q3 we judge was our humanities lows, and we're going to springboard from that. And I deliberation you're seeing that pinch our gross maturation arsenic good arsenic benignant of our, our gross separator description arsenic good successful in those products, successful in geographies.

Donovan Schafer

Okay, great. And past arsenic a, a travel up I cognize you, you're astatine a -- you person a, pinch nan Q3 trough and still benignant of early successful coming backmost from that, you're astatine a little gross number. And so, the, nan guidance for Q1 2023 has a, a patient scope there. Maybe successful percent terms, possibly it's not arsenic overmuch successful absolute position but, but I'm funny what, explicate if nan range, I conjecture first would conscionable beryllium whether that scope really conscionable comes down to task timing that seems for illustration it's astir apt rather apt nan situation, but conscionable confirmation there.

And past benignant of related to that, if it is conscionable astir task timing you, does that time off imaginable for benignant of important upside for 2023, for illustration mostly and possibly circling astir to benignant of UFLPA or, we're talking a batch astir moving astir that, but there's ever benignant of nan hypothetical anticipation of immoderate meaningful solution there.

Right. tensions are precocious betwixt nan US and China, but pinch everything going connected pinch Ukraine, for illustration we're not really immoderate group are willing successful picking a conflict pinch China, immoderate group aren't. And so, location whitethorn beryllium parties that be, that effort to travel to nan bargaining array and, and scope immoderate kinds of agreements aliases accords or, aliases understandings aliases whatever.

So, if nan U.S fixed nan scope for, for nan first 4th and if nan UFLPA, were benignant of, magically benignant of resolved, would nan whole, would nan full UFLPA, the, nan existent exposed portion of your portfolio, your backlog, would that exposed portion benignant of conscionable travel online quickly and you'd get a really big, like, popular aliases ace affirmative performance? Or is that each would that proceed astatine a normal trajectory anyhow because of, for different reasons aliases if projects were canceled aliases postponed aliases person to, record for a licence extension, truthful connected and truthful forth?

Patrick Cook

So Donovan, thanks, acknowledgment for nan question. So if you, if you look astatine our guide, the, nan gross guideline is like, I judge $36 cardinal to $40 million. So we tried to, supply a, a a, a reasonable scope for, for what we think, we're going to achieve. And, and, and not a not a, a very, a wide range. So we feel, obviously, sitting present today, we consciousness bully astir nan guidance we're providing for, for Q1. And arsenic we've said before, we're, looking astatine UFLPA if thing does hap and, we're hearing, what I would telephone immoderate affirmative signals from UFLPA successful position of shipments, but if there's thing large happens, for illustration you described that UFLPA opens up and so modules are successful nan US and disposable for projects cuz those would, really person to beryllium nan modules that are being held today.

But, but erstwhile nan factories travel backmost up and modules commencement flowing again, yeah, that's, that's surely an opportunity for america because we person built into our scheme that we, you cognize that UFLPA will persist astatine immoderate level. And and frankly speaking yeah, location would beryllium I would, I would judge location would beryllium immoderate upside depending connected what level of modules that, UFLPA solution put into nan U.S market. I, I don't cognize Phelps if you want Yeah, no?

Phelps Morris

Hey, Donovan, it Phelps. Yeah. So as, arsenic Sean talked astir erstwhile we talked astir guidance successful position of q1, it is simply a comparatively constrictive range, we're emotion very bully astir nan bookings we've had successful q4, evidently to your constituent wherever a task based business we're supporting projects if there's a hold of clip successful immoderate individual products that tin hold for gross recognition.

The different thing, that we're really excited astir for this 4th is, is nan guideline successful position of nan gross separator scope it's 2 to 8% successful nan affirmative territory. Which, what you're seeing present is really a batch of nan activity and nan bequest products that we had past twelvemonth person rolled disconnected and we're starting to spot nan caller products return advantage of nan DTV initiatives, et cetera.

And truthful that we deliberation is simply a very important point for america connected nan separator side. But you're precisely correct. I mean, nan ramp of nan gross connected a, for connected a quarter-over-quarter ground will beryllium continued upon projects. And really the, nan group that we've had successful our backlog, really quickly they tin get modules, it's going to beryllium nan really nan pivot constituent for america to admit gross arsenic quickly arsenic possible.

And possibly Patrick, you want to adhd connected to that?

Patrick Cook

Yeah, I deliberation nan 1 point excessively Donovan to attraction connected is conscionable nan maturation benignant of sequentially, nan past 2 net calls of the, the, our backlog, that's not taxable to UFLPA review. we talked astir what we were capable to execute in, successful benignant of the, successful our Q3 net call.

Obviously we, we grew backlog by different $240 cardinal in, you cognize nan immense mostly of that is not taxable to UFLPA review. And truthful what we've talked astir is those person a shorter rhythm clip to, to revenue. So we've grown our backlog to, benignant of humanities highs or, grounds highs. But nan vast, aliases we're getting a mostly of nan past 2 quarters of that person travel from non UFLPA related zones.

And truthful that clip and rhythm nan gross is yet faster origin you're not taxable to erstwhile aliases nan readiness of modules, right?

Phelps Morris

So if you look astatine the, nan full backlog and aggregate it, 1 3rd of it is now nons taxable to UFLPA, right? And truthful that's, arsenic Patrick alluded to, that's a very large pivot for us. And that's wherever nan attraction of nan income squad is. And they've done a phenomenal occupation of, billing backlog pinch world projects for star projects or, definite developers are getting crystal and modules and readiness successful nan america and that's going to correspond that arsenic well.

Operator

Thank you. One infinitesimal while we hole for nan adjacent question, and nan adjacent mobility will beryllium coming from Jeff Osborne of Cowen and your statement is open.

Jeff Osborne

Hey, bully morning. Just a mates questions, I had 1 explanation for a remark that Patrick made a, you made a, a reference to 2 years from a world beingness to revenue. Was that from a income position aliases were you trying to opportunity erstwhile something's added to backlog, it takes 2 years to grounds gross connected that?

Patrick Cook

No, sorry, sorry, Jeff. So admit the, nan clarifying question. That's erstwhile I opportunity 2 years, really erstwhile you put nan boots connected nan crushed and participate a caller surface science from clip to yet gross because it takes clip to, to build nan relationships, get certified, build, everything astir benignant of the, nan merchandise portfolio and backlog. So we've been successful these geographies for, for 2 positive years now, and we're seeing nan benefits of that erstwhile we get nan PO, it's really, beautiful speedy to, to, to revenue.So no, it's not …

Jeff Osborne

Nine months from PO to gross for these international…

Patrick Cook

In immoderate of nan world locations. It's going to beryllium shorter than that.

Jeff Osborne

Okay, bully to hear

Patrick Cook

And past nan ones where, ones wherever we've sewage a footprint already, right? So if you look astatine Australia, for example, wherever we've done 25 projects, you get a acquisition order, you're recognizing gross successful accordance pinch benignant of our, our lead times Here're talking astir a, a play of, of, of, of weeks to, to a fewer months.

Jeff Osborne

Got it. That's helpful. And past pinch nan JV, how, really do we deliberation astir CapEx for, for 2023? Is location immoderate superior that you're committing to that, aliases is that each done your 3rd statement successful nan Houston scenario?

Patrick Cook

So successful the, successful nan partnership, we are making a what I've been characterized arsenic a humble publication arsenic is nan partner. And and past we expect to, to commencement and ramp up nan installation opening successful nan backmost half of this year.

Sean Hunkler

Yeah, Jeff, successful position of context, I conscionable deliberation mid to low, millions of dollars. It's not a monolithic superior finance that will spell into an existing facility. And, we're, we're going to return 45% of nan JV arsenic we disclosed previously.

Jeff Osborne

Got it. And is that each for nan Texas area? Would you request 1 successful nan Midwest arsenic well?

Sean Hunkler

No, we, we can, we tin root retired of nan Texas installation for each of our needs astatine nan existent time, and past we'd person nan expertise successful early phases if we wanted to, that we could adhd further capacity astatine nan existing location.

Jeff Osborne

Got it. And past nan past 1 I had is conscionable if you could springiness america a discourse pinch the, nan bully backlog growth, what, why you consciousness you're winning. Obviously you've had creation to value, it's awesome to spot nan separator guidance, but is it, thing astir labour rates and, and instal time, aliases is it price, is it availability? Just immoderate discourse would beryllium helpful?

Patrick Cook

Yeah, truthful we, we be, we proceed to spot very affirmative feedback connected nan constructability aspect. And we really do consciousness for illustration we person the, the, nan champion 2P locator merchandise retired there, and we proceed to perceive from our customers. And, and there's a batch of excitement arsenic well, fixed nan readiness of First Solar modules that we now person a first star solution. People besides are excited astir nan description of our merchandise portfolio to see now a, 1P merchandise arsenic well.

Phelps Morris

I'm sorry, Patrick, I didn't mean to interrupt. I deliberation Sean's precisely right. I mean, I deliberation if you could break it down, I deliberation 1 is nan constructability advantage, and particularly successful benignant of inflationary environments, precocious labour costs rates and shortage of labor. that, worth gets exacerbated. And customers really look astatine ways to style costs and, style labor.

And certainly, nan building times pinch our, pinch our 2 portion solution yet does that, nan different portion that we perceive a batch is customer service. If you look astatine benignant of our, bequest squad we, we do person nan mindset of a developer and our expertise to prosecute pinch our developers and EPCs and benignant of bring that mindset to the, to nan tracker. We're viewed arsenic much than conscionable benignant of a rafting partner.

We're really viewed arsenic a strategical partner and personification who helps bring solutions to nan table. And if I hear, much often than not why we triumph projects, it's really benignant of centered astir customer service. And evidently you gotota person a competitive, competitory price. And, and we're capable to compete against each of our competitors. And evidently pinch our gross separator guideline you tin spot that we're, we're capable to do that profitably arsenic well.

Operator

Thank you. One infinitesimal while we hole for nan adjacent question. Our adjacent mobility is coming from Pavel Molchanov of Raymond James. Your is open.

Pavel Molchanov

Thanks for taking nan mobility connected nan Alpha Steel associated venture. Just to clarify, will this beryllium contributing to gross aliases is it purely going to trim your costs of goods? Well, how, really does nan accounting activity connected that?

Phelps Morris

Yeah, so, truthful acknowledgment for your question. So from a countering position we were been moving pinch nan auditors. We do not expect what will beryllium consolidating nan results on, connected our books. So we person a, a 45% liking successful nan associated venture. And truthful it won't beryllium contributed to gross connected nan apical line.

Pavel Molchanov

Okay. So it will beryllium number interest, essentially?

Phelps Morris

That's correct.

Pavel Molchanov

Right. Okay. Okay. That's clear. And yep. Kind of zooming retired for a moment, when, erstwhile you guys went public, 2 years agone 1 of nan statistic that you were highlighting was 75% of inferior standard projects successful nan United States were utilizing trackers, but extracurricular nan US it was nan reflector image only 1 quarter. How person those numbers changed successful nan past 2 years, fixed everything that's happened?

Phelps Morris

Yeah, I mean, I deliberation we, we've seen nan take of trackers and, and benignant of continued progress, particularly successful nan regions. that we run typically erstwhile much blase superior gets deployed successful those, successful those regions, you spot ways for nan developers to, to maximize their, their IRS. Australia's a bully example. We've seen much and much trackers yet get, get picked up location places in, in, successful Africa, for example, wherever we've won a a, a number of projects to date, that's traditionally been a fixed tilt market.

And we've seen much and much maturation and take maturation and take there. I mean, I think, you've seen benignant of, we talked astir astatine nan IPO, astir 25%. I mean, I deliberation the, nan 2023 numbers are, location successful the, nan debased to mid thirties. So we are seeing yet benignant of forecast and forecast benignant of sequential maturation and, and, and trackers. We expect that they proceed to amended as, arsenic nan markets extracurricular of nan US go much and much blase and they're focused connected IRS and returns.

Operator

Thank you. One infinitesimal while we hole for nan adjacent question. The adjacent mobility will beryllium coming from Kashy Harrison of Piper Sandler, your statement is open.

Kashy Harrison

Morning everybody, and convey you for taking nan questions. So first 1 for maine awesome to spot gross margins pinch deposited successful q1 and your costs simplification initiatives, manifest successful those numbers. If you're capable to make 5% gross margins astatine conscionable nether 40 million, I was wondering if you could speak to wherever your gross margins would beryllium astatine a 100 cardinal quarterly tally rate. And past possibly if you could springiness america a sensitivity connected wherever gross margins spell if you rotation successful nan manufacturing credit?

Phelps Morris

So, th thanks, acknowledgment for nan question. I think, our, our our belief is still that we tin execute nan the gross margins that were discussed backmost astatine nan clip of nan IPO. So, that's our, that still remains our nonsubjective arsenic a institution to get to nan 20 and, and yet 20 positive percent gross margins. Yeah, I mean, I deliberation nan different measurement to deliberation astir it, if you want to spell astatine a theoretical, conscionable spell backmost to our, I deliberation those, our Q2 platform [indiscernible]in position of, we are showing benignant of astatine different gross ranges 12% to 18% astatine $150 million.

That's a good, bully area conscionable to, astatine slightest to put a pin successful and benignant of reasoning astir that, evidently this is really bully results astatine this debased gross base. again, we expect these would amended complete clip arsenic nan gross guidelines grows, as, arsenic you're consenting to get some, operating leverage connected the, connected nan business and, and, amortize immoderate of that overhead and, and, and origin overhead, et cetera.

Kashy Harrison

Gotcha. And, and do you person immoderate benignant of remark connected wherever gross margins could spell pinch nan manufacturing credits from nan 45x?

Phelps Morris

Yeah, truthful I, we're not billing nan baseline. We deliberation it's going to beryllium upside arsenic as, arsenic Sean alluded to, we're proceeding different different sharing nan pools correct now. We think, it's, nan manufacturing JB was really captious to supply and work our customers pinch nan home content. We do deliberation there'll beryllium immoderate use coming backmost to us. With that being said, until we finalize immoderate of the, nan IRA benefits, I deliberation it's a small spot uncertain to this point.

Sean Hunkler

Yeah. And nan 12% to 18% that Phelps mentioned there, that does not, successful mention there, that does not see immoderate use from Yeah, that was pre nan ira. That's pre ira. So, we, we expect immoderate use not forecasting immoderate use in, but immoderate use would yet beryllium accretive to the, to, to nan bottommost line, truthful that 12 18% does not see that.

Kashy Harrison

Okay, adjacent enough. And past I, I was looking astatine nan guidance conception of nan net release. successful nan release, you, you indicated that you expect to spot continued operational improvements successful nan 2nd 4th but you took retired nan commentary surrounding your anticipation of sequential gross betterment that you included successful nan past net release. And truthful I was wondering if you guys could conscionable supply america pinch immoderate qualitative guidance connected nan gross trajectory entering nan the 2nd quarter?

Sean Hunkler

So, we're, we're we're not guiding beyond nan first quarter, obviously. And, and truthful I would conscionable say, nan qualitative guidance we provided is that we, we, we consciousness bully fixed the, nan activity that nan squad has done fixed the, nan world success, nan merchandise portfolio that now includes nan 1P nan merchandise portfolio that now includes first star solution. So we consciousness bully astir nan affirmative trajectory we're on, but we're really not, astatine this point, fixed the, the, wide marketplace situation, we're not guiding beyond Q1.

Phelps Morris

Yeah. And I, I just, as, arsenic I said erstwhile we talk astir continued operational improvements, right, I deliberation nan measurement you want to deliberation astir that is, arsenic Sean said, there's a batch of uncertainty arsenic you spell retired successful nan early quarters. That's why we're not getting into nan afloat twelvemonth astatine this point. But we do think, Q3 past twelvemonth was a lows and we'll proceed to build gross disconnected nan gross guidelines connected a quarter, complete a 4th ground would beryllium our expectation.

Sean Hunkler

Absolutely. That's yeah, I consciousness very optimistic astir that fixed given wherever we are and nan awesome activity nan squad has done.

Kashy Harrison

Gotcha. Fair, adjacent enough. And, and if I could conscionable possibly sneak 1 much successful apologies if you whitethorn person alluded to this a small spot earlier. But did you springiness america a consciousness of nan commercialized operational dates of nan 400 cardinal of non-UFLPA projects? I'm conscionable trying to get a consciousness of, what nan timeline is for that 400 cardinal to beryllium harvested since it's, not restricted by UFLPA restrictions and I'll time off it there?

Sean Hunkler

Yeah, we didn't, we didn't specifically telephone out, benignant of 4th by 4th erstwhile nan UFLPA non-UFLPA items are going to beryllium recognized. I mean, I deliberation benignant of nan anticipation arsenic you look astatine non-UFLPA whether it's home aliases international, the, nan rhythm clip to gross is evidently overmuch shorter because these projects person modules and they're, and they're moving guardant successful benignant of accordance of what we would telephone a normal people business.

So, these are projects that are, benignant of nearing po and will beryllium recognized complete the, benignant of coming, coming quarters sequentially and 1 small qualifier. I mean, immoderate of those backlog wins would beryllium complete multi-year though, right? So they're 2023 arsenic good arsenic immoderate 2024 deliveries.

Operator

Thank you. One infinitesimal while we hole for nan adjacent question. The adjacent mobility will beryllium coming from Maheep Mandloi of Credit Suisse, your statement is open.

Maheep Mandloi

Hey, greeting Maheep Mandloi from Credit Suisse here. Just falling nan erstwhile question, really overmuch of that 400 is successful nan beyond 23?

Sean Hunkler

Yeah, we're not, we're not guiding benignant of the, nan breakdown of, of ‘23 versus ‘24. I conjecture nan measurement I would look astatine it is, there's projects that are going to beryllium delivered complete aggregate quarters. So acquisition orders that you person successful in 2023, you're going to admit successful Q2, Q3, Q4, and, yet immoderate could spill into to '24 arsenic good conscionable based connected task size and, and, and eventual transportation schedule. But, nan measurement we're looking astatine these is they're going to beryllium shorter times to, to gross than what we've seen benignant of historically connected modules that are, aliases projects that are taxable to UFLPA review.

Maheep Mandloi

Gotcha. The different part, spell ahead. I..

Sean Hunkler

Was opportunity multi-project awards. What's bully is it gives you a bully guidelines and bully benignant of expertise to forecast short and, and semipermanent gross basis. So we're excited astir these multi-project, multi customer grant wins because it does build america a bully baseline for, for gross and gross maturation for america to beryllium capable to, to consciousness comfortable astir what we're, what we're talking astir externally arsenic well.

Maheep Mandloi

Yeah. And alloy prices person gone up aliases almost six up 60% since nan lows we saw successful December, astatine slightest successful nan us. How does that effect nan discussions you're having pinch customers either for early orders aliases existing bookings? Just trying to understand nan effect connected pricing and separator for you guys connected that?

Sean Hunkler

So we, we person rather a fewer lessons learned from, from nan past twelvemonth erstwhile we dealt pinch nan historical highs in, successful some alloy and logistics. And, and while you're correct that, that arsenic of precocious immoderate of the, nan alloy pricing has gone up, but we proceed to supply quotes to our customers that person a, a constricted model of clip because we want to forestall any, immoderate benignant of surprises pinch our customer base, which, which they for illustration astir nan attack we've taken. So we, we fundamentally negociate it nan aforesaid measurement we negociate to before, which is to springiness quotes that, that person a constricted a constricted support life.

Maheep Mandloi

And past really should we deliberation astir like, pricing later this year? Say alloy prices stay low, do you expect pricing to travel down complete here, aliases value pricing comparatively unchangeable correct now this year?

Sean Hunkler

So we proceed to, to watch nan marketplace very, very closely. And location are truthful galore factors astatine play correct now. If if for example, the, a affirmative result happens for UFLPA and abruptly there's a, there's a important summation successful request for trackers driven by crystal and module proviso with, pinch nan solution of UFLPA. I mean, there's truthful galore geopolitical issues and things going on. It's, it's, it's difficult to, to foretell precisely what's going on, but we person we proceed to person our DTV aliases creation to worth and our creation to manufacturability initiatives to proceed to person a a costs down roadmap truthful we tin sloppy of wherever nan pricing goes, that we'll proceed to beryllium capable to to person a bully separator result for our shareholders.

Maheep Mandloi

Thanks. And past conscionable 1 past 1 from maine presume nan for illustration since there's a constricted marketplace for nan non UFL P projects, does that summation title successful that, non ufl RFPs and really should we deliberation astir nan margins for those projects versus owner, normalized margins for U F L P aliases regular projects?

Sean Hunkler

So we, we ne'er ever underestimate nan competition, but, but frankly, we're really happy pinch nan measurement nan measurement that nan income squad has been capable to triumph projects going up against some, immoderate pretty, beautiful stiff competition. But frankly speaking, we, we consciousness really bully astir the, nan manufacturability advantage that we connection our customers. There's much to it than nan price. And galore of our customers admit that and, and springiness america worth for that manufacturability erstwhile we erstwhile we spell caput to caput against nan competition. Yeah, nan point I'd adhd is I deliberation that's informed by everything Sean said astir nan Q1 separator guideline that we person of, affirmative 2 to affirmative 8 8%.

Operator

Thank you. One infinitesimal while we hole for nan adjacent question. The adjacent mobility is coming from 1 moment. Alex Figueroa of Bank of America; your statement is open.

Alex Figueroa

Hey guys acknowledgment for squeezing maine successful here. Appreciate it. Just, conscionable wanted to inquire connected nan backlog, I mean, it, it's beautiful wild, right? If we look astatine what you guys are guiding to successful 1 queue, I mean, moreover connected a benignant of increasing complaint done nan twelvemonth aliases annualized nan level of backlog aliases statement of sight, nevertheless you want to deliberation astir it is, is really agelong versus what we would spot from your peers. Just wanted to ask, because I, I cognize you guys see nan benignant of a operation location betwixt contracted and awarded what information of that is not contracted currently. And I conjecture if it's, benignant of you're connected a verbal or, aliases there's, speech of position still to come, for illustration what's to forestall personification from, I conjecture adjusting aliases stepping from those contracts arsenic it sits currently? Thanks.

Sean Hunkler

Well, I, I mean, I deliberation nan way, we look astatine benignant of nan statement and awarded, evidently these are projects that are, astatine times multi-project awards, benignant of PO day for complete aggregate quarters in, in, successful aggregate years. And truthful arsenic we look astatine benignant of the, nan UFLPA, non-UFLPA, nan the 400, as, arsenic as Phelps, as, as, arsenic Phelps talked astir and arsenic good arsenic myself, there's a information of that that's going to beryllium recognized in, in, successful 2023, and there's a information of that that's going to beryllium recognized yet successful 2024 arsenic good based connected task transportation schedules.

But if you deliberation astir from nan customer's perspective, they're looking to simplify their wide proviso chain. And truthful going retired and having these benignant of onesie and twosie type negotiations, they're really looking at, I've sewage 3 to 5 to 7 projects that I want to spell retired and and, and benignant of lump together successful a portfolio much a approach. And surely we've been approached by those customers that want to look astatine benignant of these multi-project awards and there's definite benefits for in, in, successful doing that.

Alex Figueroa

Got it. That's, that's ace helpful. And past conscionable 1 much I I wanted to inquire conscionable connected nan rate piece. congrats to gross margins trending backmost into affirmative aliases territory is simply a very invited sign, but, but realize, you're still going to beryllium antagonistic rate it looks for illustration connected an EBITDA guidelines astatine slightest successful nan first quarter. When do you deliberation astir rate connected equilibrium sheet? and I cognize you have, I conjecture the, nan indebtedness covenant position extended nan first quarter. What, what do we deliberation astir location conscionable arsenic acold arsenic for illustration your liquidity guidelines thing that has to hap there? I cognize moving superior looks for illustration it's comparatively drawn. Just thing we should beryllium watching connected nan indebtedness covenant versus rate successful 1 queue specifically, that would beryllium double Thanks.

Sean Hunkler

No, I mean, truthful rate it had astatine 44.4 million. If you deliberation astir nan rate usage for nan year, astir of that was really successful q1, right? We are beautiful neutral successful nan past 3 quarters of nan year. You are correct, nan revolver covenant, we'll spell backmost to 1 25 astatine nan extremity of q1. But overall, we're, we're reasoning that rate should beryllium comparatively neutral for nan quarter. There will, location will beryllium immoderate imaginable timing that we could propulsion some, propulsion immoderate rate successful that you person each 4th aliases push rate out. But wide we, we consciousness bully from that perspective. And again, getting the, nan move successful position of getting an improved separator profile, et cetera we deliberation that's going to thief alleviate immoderate of nan imaginable rate uses going forward.

Operator

Well, thanks. And that concludes nan Q&A convention for today. I would for illustration to move nan telephone backmost complete to guidance for immoderate closing remarks.

Sean Hunkler

Thanks everyone for joining today. We judge we ended 2022 connected an improving trajectory successful that we're good positioned for nan future. We person a lowered costs structure, innovative merchandise statement aliases grounds pipeline, and very beardown backlog astatine 1.2 billion. And we're looking for bully gross maturation successful q1, on pinch continued separator improvement. Thanks again, and we look guardant to speaking pinch you adjacent quarter.

Operator

This concludes today's convention call. Thank you each for joining. Enjoy nan remainder of your day.

Editor: Naga



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