Q4 2020 Array Technologies Inc Earnings Call
Good evening and welcome to array technologies fourth quarter, and full year 2020 earnings Conference call. Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A.
At this time I'd like to turn the call over to corneal best relations of array technologies. Thank you you may begin.
Good evening and thank you for joining us on today's conference call to discuss the array technology fourth quarter and full year 2020 results.
During this conference call management will make forward looking statements based on current expectations and assumptions, which are subject to risks and uncertainties.
Actual results could differ materially from our forward looking statements if any of our key assumptions are incorrect because of other factors discussed in today's earnings press release and the comments made during this conference call or in our latest reports and filings with the Securities and Exchange Commission each of which can be found on our website array Tech Inc. Dot com.
We do not undertake any duty to update any forward looking statements.
Today's presentation also includes references to non-GAAP financial measures you should refer to the information contained and the Companys fourth quarter press release for definitional information and reconciliations of historical non-GAAP measures to the comparable GAAP financial measures with that let me turn the call over to Jim <unk> array technology.
CEO.
Thanks, Cody and good evening, everyone. Thank you for joining our earnings call and it.
And to Coty I'm joined today by Neil Patel, Our Chief Financial Officer, and Jeff Krantz, Our Chief commercial officer.
And I'm pleased to report that we generated revenues of 181 million from the fourth quarter and $873 million for the full year 2020 exceeding the high end of our full year guidance that we previously provided.
Full year, 2020 revenue increased 35% versus last year, reflecting continued strong growth and the U S solar market, increasing penetration of trackers versus fixed income.
And continued market share gains.
Products.
We anticipate continued strong growth in 2020 one since our last earnings call. There have been several developments that have caused us to set our growth expectations higher.
First the recent two year extension of the solar ITC has expanded the number of solar projects that are viable and we believe it will result, and a substantial increase in demand for our products set.
Second.
Corporate commitments to Decarbonize continues to increase and most companies plan to meet their sustainability goals by buying renewable energy.
Meeting that demand requires a lot more generation and we believe the lion's share of that will be met with solar.
To put some context around that since our last earnings call and the beginning of November 323, global companies, including 59, and North America have announced commitments the source and energy that they use from renewable sources or established targets for emission reductions that rely on using energy from.
Both sources and that's in addition to the 922 global corporations that already had these types of commitments in place.
Third president Bidens election, and combination with Democratic control of Congress increases the probability of major climate change related legislation that is likely to accelerate solar deployments and just the past 10 days. There has been three new bills introduced in Congress that called for increased and.
And as for solar and National Clean Energy standard and a green Bank to fund renewable energy projects among other things.
While we cannot predict what new incentives and regulations will be enacted we are confident that there will be new policy that will further accelerate the growth and solar.
And lastly force competitiveness versus other forms of fossil and renewable generation continues to increase the U S. Energy information administration now projects that utility scale solar projects entering service and 2023 will have on LCL, we under $24 a megawatt hour that's 17.
10% lower and what their forecast for 2022 was only one year ago.
To put some perspective on how meaningful these developments are for the market. We have noted that many independent consultants estimates for U S utility scale solar installations over the next three years have been increased by at least 20% from where they were only a few months ago, that's a huge change and expectations over a relatively short period of time.
And.
While the tailwind behind our business continues to strengthen our goal remains to grow faster than the market.
And to achieve that goal we are focused on three core growth strategies that we outlined on our third quarter conference call continued market share gains and the U S International expansion and acquisition of companies that provide complementary products and services or technology.
And we're already making good progress.
And the U S market, we are continuing to grow our wallet share with existing customers as well as convert new customers to array as demonstrated by our strong order book during 2020, we added 38, new customers underscoring our ability to convert new accounts to array products.
Outside of the U S, where and the process of building the sales of supply chain and fulfillment infrastructure, we need to service international customers.
And with 19 has slowed some of our plans, but we expect to be able to accelerate our international strategy. Later this year as travel restrictions and other challenges created by the pandemic abates.
We believe that by Q4 of 'twenty 'twenty, one and you'll be generating approximately 15% of our sales from markets outside of the U S.
Lastly, I'm happy to report that we completed our first strategic transaction in January.
Took a stake and a company with a unique technology that we believe could revolutionize the way utility scale solar is installed.
Unfortunately, I will not be able to elaborate much on our investment on this call given confidential agreements that we have with the company other than to say we are very excited about the prospects for the technology and we are well positioned to acquire the remainder of the company if we choose to.
Cutting across all three of our growth strategies will be product innovation.
We are making significant investments this year and new product development with the goal of addressing common pain points and utility scale solar installation.
Installation constitutes a growing proportion of the total cost of a solar energy project.
And the availability of skilled labor can be a constraint on our customers' grill.
We have several new products product features and installation methods and development. This year that we believe could significantly reduce the cost and labor required to install our tracker system and further extend our technology lead over competitors.
Our product development efforts are focused on four key areas trackers that can be installed and rugged terrain without requiring significant site greatly.
Reducing foundation costs through new installation methods.
Coolest module mounting systems that can cut installation times and improving tracking performance through software.
To demonstrate these new technologies for customers and we recently opened the array technology Research center in Phoenix, which will serve as a proving ground for us to showcase the new product and installation methods that we are developing with.
And we plan to update you on the coming quarters as we establish launch dates from the new products, we have under way.
I'll conclude by saying we're excited about the future the solar market is getting stronger our products are winning over more and more customers and we are taking market share and we still have some tricks up our sleeve in terms of technology innovation, there's more to come now.
Now I'll turn it over to <unk> for an update on the quarter and full year 2020.
Thanks, Jim.
I talk about our fourth quarter results. It is important to keep in mind that our 2020 results were heavily first half weighted as a result of our customers attempt to capture incentive by the federal government related to the 2020 stepped down and the ITC.
This caused our customers to place the bulk of their orders and the back half of 2019, and then take delivery and the fourth quarter 2019, and the first two quarters in 2020.
As a result, comparing a single quarter in 2020 to the same quarter in 2019.
Not necessarily indicative of the trajectory of our business.
The ITC step down skewed revenues in 2020 to Q1 and Q2, while revenues in 2019 more and more evenly distributed.
For the fourth quarter, we generated revenues of $186 million, which was a decrease over the prior year period as a result of these changes and seasonal order pattern. However.
However.
Our revenue has exceeded the high end of our guidance as we had better than anticipated project delivery conversion at the end of the year.
Asps and the quarter were up approximately 2% year over year.
Gross margins and the fourth quarter were 19, 6% lower than the prior year period as a result of having less revenue to absorb fixed costs and project mix, but were in line with our expectations for the quarter.
Operating expenses increased compared to the year ago period, primarily due to a $10 4 million dollar expenses related to the revaluation of contingent consideration mainly related to the earn out obligation we have with our founder and along with higher costs associated with being a public company and <unk>.
Increased and head count.
We recorded a net loss and the quarter up $2 $2 million, primarily as a result of the $10.4 million contingent consideration charge.
It is important to note and we have now paid out the full amount owed under the earn out obligation and will not have any further expenses or payment under that agreement.
Going forward and the expenses recorded to contingent consideration well only be related to the revaluation of the tax receivable agreement.
Adjusted EBITDA was $20 million for the fourth quarter, which was down from $49 $9 million from the prior year, but also exceeded the high end of our guidance.
Now turning to our full year 2020 result.
Revenues for the full year ended December 31, 2020 increased 35% to $872 $7 million compared to $647 $9 million and 2019, driven by the increases and the volume of trackers delivered anchored by the strength and the U S solar industry.
Asps for the year were approximately 2% higher than the prior year period.
Gross profit increased 35% to $202 $8 million compared to $158 million in.
In 2019, driven primarily by higher volume.
Gross margin remained flat at 23, 2% as we had lower costs on purchased materials, which offset higher logistics costs.
Operating expenses increased to $107 $6 million compared to 67 and $24 million.
Last year, primarily as a result of the $26 4 million dollar expense for the contingent consideration discussed earlier.
Well as a $4 million benefit we reported in 2019 for a bad debt recovery for which we had no comparable benefit in 2020 as well as an increase and equity based compensation and higher payroll costs as we invest and critical resources to enable our future growth.
Net income increased 49% to $59 $1 million compared to $39 $7 million and 2019 and basic and diluted income per share was 49 cents compared to 33 during the same period and the prior year.
And finally, adjusted EBITDA increased 32% to $165 million compared to $121 $8 million and 2019.
Taken as a whole we are very pleased with our financial performance and 2020, having delivered record revenues and adjusted EBITDA. Despite the unique operational challenges created by the pandemic.
Turning now to our guidance.
For the year ending December 31, 2021, we expect revenue to be and the range of one point or two five to 1.1 and two $5 billion.
Adjusted EBITDA to be and the range of $164 million to $180 million.
Adjusted net income per share to be and the range of 82 to 92.
The midpoint of our revenue guidance represents a 23% year over year increase and reflects the strong demand we're seeing for our products.
At December 31, 2020, we had $654 million and executed contracts and awarded orders that are expected to ship and 2021.
And years, where there was no step down and I can see our backlog entering the year typically represented the next six months of shipment.
That's part of the reason, we felt very confident about our revenue growth this year.
And we entered the year with backlog equivalent to 60% of the midpoint of our revenue guidance and our order book has grown since then.
Our adjusted EBITDA guidance reflects lower margins than we achieved last year. There are several reasons for that.
First and Jim discussed earlier, we have made product innovation, a priority and we are investing in it and.
In addition to the research center and you discussed.
And we'll be adding additional engineering resources and investing more in R&D.
These investments have a near term cost as we will be making the investments ahead of the incremental revenues that we expect to generate from new products and.
The long term result should be higher revenue greater market share and.
And increased margin.
Second we are investing and the sale supply chain and fulfillment infrastructure, we need to service our international customers.
Similar to our investment and new product development, we have a short term mismatch between the cost of our investments and the revenues that they were and yield.
Third our 2021 SG&A reflects additional public company costs, which will represent a year over year headwind for us.
And finally.
Commodity prices and freight costs have increased significantly over the past several months as a result of the reacceleration of the global economy, while certain transportation and raw material capacity remains offline as a result of the pandemic.
While we expect prices to normalize and our contracts allow us to pass on these costs to our customers.
And I've taken a conservative approach to our guidance by taking these costs into the low end of our guidance, assuming a delayed return to more normalized pricing.
I'd like to close by providing some key modeling assumptions.
For the full year 2021.
As I mentioned earlier, the two year push out of the ITC step down has impacted how customers time their orders as.
As a result, we will see a different quarterly distribution of revenues and earnings and 2021 than we did in 2000 and 'twenty.
We currently expect to generate 20% to 25% of our annual revenue in Q1 'twenty.
25% to 30% and Q2 'twenty.
25% to 30% and Q3.
And 20% to 25% and Q4.
We expect.
Interest expense to be between $26 million to $28 million.
Diluted weighted average share count for 2021 to be 127 5 million shares.
And our effective tax rate to be 25%.
Now I'll turn it back over to Jim for some closing remarks.
Thanks, and people I'll close by reiterating how proud I am of the array team for all that we accomplished in 2020 from our hugely successful IPO to our strong financial performance to the work we have done to lay a foundation for continued growth in 2021, it was truly an incredible year.
We appreciate the support of our shareholders as we continue to grow our company and.
And with that operator, please open the line for questions.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is and the question queue. You May press there too if you let your move your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys. Our first question comes.
From the line of Brian Lee with Goldman Sachs. Please go with your question.
Hey, guys good afternoon, and thanks for taking the questions.
Good job on the first quarter out here.
Had a couple here I guess with respect to you mentioned and you pull the pricing dynamic for 2020, and you were up 2% average a S. P I think.
How should we be thinking about pricing in 2021, and what's embedded in your outlook here.
Just given some of the comments around cost inflation are you capturing some of that and price and and can you quantify to any degree and then are you able to go out to the market with more price increases if we continue to see inflation sort of.
Pressure some of your input costs moving throughout the year and Theres not a normalization.
Yeah, Hey, Brian and Snapple. Thanks, Thanks, Phil asked those questions are what I would say you're right on that too as I mentioned, the 2% prices price increase year on year, we withheld price is relatively flat and we think they're stable. However, we do have the option as a as mentioned as to to go back on the market and we built in that range.
And in our guidance.
To allow us to evaluate case by case, Bryan, but yes, we do have that option.
Okay, that's great and then second.
Second question on.
And the contracts and awarded orders I know you guys arent going to make this a recurring.
And to update per se, but can you speak to it sounded directionally like you've seen some growth and that even after December 31, and 2020 reported level can you give us a sense of where that's where that's at now early on and in 2021, and then kind of what the what the geographic mix is it you said.
15% of sales by Q4, 'twenty, one and I'll be non U S is at 80, 515, and and that kind of contracts awarded order backlog or is it different there. Thank you.
Yeah sure. So hey, so regarding the backlog and <unk> like you mentioned, we decided we're going to provide that once you're on the concrete number and it's part of our annual guidance process, but yes. What we've seen is that it is growing since December 30, <unk> and we will give qualitative measures on that going forward, but.
And we felt pretty good about that the thing that really mentioned about this brian to us.
Even with the ordering pattern changes in 2020 with the ITC being extended we feel really good debt, but we have 60% coverage at year end of our mid point guidance. So we really you know.
Really feel good and it's about that as well as the increase.
From January.
Alright, and then just Nepal and in terms of the mix any kind of geographic color you can provide as it is at that 80 515 or are you seeing more SKU, even toward non U S and and that mix.
Yeah, So what we said Jim and Jim mentioned in his script as we there there's a little bit of a ramp and the international sales and we feel by the end of the year the fourth quarter will be at a 15% mix right now I think for the overall blended I would I would say it's in the and the 90, 10% for the full year.
Okay fair enough. Thanks, a lot guys.
Yeah.
Thanks, Brian.
Our next question comes from the line on sharp Carrizo with Guggenheim Partners. Please proceed with your question.
Hey, good evening guys.
Sure sure.
And so a couple just a couple of quick questions here.
Obviously, you touch on what's driving the lower EBITDA margin in 'twenty, one and sort of that mid point of the new guidance implies you know around 16% and obviously you guys highlight several items like commodity costs public company costs sort of international pushes the driver of some of that compression, but as we sort of think about you know margins.
Maybe in the medium term say post 'twenty, one should we assume some incremental margin compression further from what we're seeing today is you're guiding is lets say you expand internationally or should we assume maybe thats, 16% is a pretty good floor for our modeling purposes, as we think about post 'twenty one.
Yeah, Hey, Hey, Sharp's, Naples and pain.
We.
Given that kind of range and the medium term being 16% to 18% EBITDA and that's where we feel and still is with with the commodity pricing and as it is right now that's why and and the investments we're making consciously for the revenue that will be coming we feel that that is kind of near the floor, where we feel.
Okay. That's perfect I just wanted to make sure that's reiterated and then obviously you people you recently increased the size of your revolver. Just maybe highlight you know why the why you saw that increase and capacity does it sort of organic or inorganic and organic opportunities and I know in the past you've highlighted that you would utilize the revolve.
And for say, let's say some bolt on acquisitions right.
And then just maybe just a quick refresh.
Thoughts on M&A and the near term or are you sort of targeting sort of existing parts of the B O S. Whereas their new other other new innovations that you could look to acquire similar to that technology investment you've made earlier this year.
Sure Hey, sure I'll take the first half of that and I'll pass the M&A question to Jamie.
And as far as the revolver, yes, we're always looking for flexibility and our capital structure, obviously too.
The way and you look at our capital structures and best and high ROI projects, but also look at opportunities for bolt on or inorganic growth and so we provide ourselves we believe the flexibility to expand that's true.
To accomplish both of those Jimmy and I will take on the M&A, Yes, sure. So we're going to continue to keep the pipeline robust and our thesis remains the same you know to the extent, we can tap into additional wallet share.
Whether it's mechanical balance of system or electrical balance of system and most importantly technology.
And that remains really foundational to our strategy on M&A and I think our investment and technology that we noted is really the first step towards that so we remain very optimistic about what we have and the M&A pipeline and we're going to continue to that debt going forward.
Got it and then just lastly from me I'm, just wondering just from a sentiment could be positive it could be negative.
And if you've seen any sort of shift from your customers falling maybe somebody events, we saw on ERCOT, MISO and and the SPP regions from the recent weather events.
And as sort of has that tends that swung any of your sort of your order books and should we think about what we just went through a few weeks ago, a couple of weeks ago and.
No not at this moment shar, but I'm happy to report that we've got nearly 40 sites and the affected region nearly three gigawatts and we have not received any word or any issue on our price. So you know, it's probably too early to tell but.
And nothing notable.
Perfect Congrats on the execution guys.
Thank you sure.
Our next question comes from the line of Paul Coster with Jpmorgan. Please proceed with your question.
Yeah. Thank you for taking my question it wasn't clear to me.
And the impacts of these investments and other expenses during the year. So how it's distributed across gross versus net.
The EBIT margin and so it sounded like it was more below the line.
Operating expenses related and it will store it close can you just sort of give us some sense there.
Yeah. Paul This is Jim it's roughly half and half with half of it going towards the innovation piece and you know, it's it's really about the future here. So this is I.
And I won't I'm not the one that really coined this but certainly doing two things seemingly conflicting at the same time delivering on the short term, while investing and long term. So half of it is on the innovation piece and I'll, let bill comment.
And so on the on the other on the margin side, we built into our range the impact of higher freight and raw material costs.
Really not.
And not abating as quickly and that's really the other half of that.
And at a cost that we have and in our guidance range Paul.
And maybe a little on say the office.
As the pandemic could kind of cleared up more quickly.
And how much of and much more EPS how.
How much EPS who's who's been sort of a full fit as a results and shifting things from some second half and international growth in particular.
And I Couldnt really give you a quantifiable answer on that and my my only wish and desire was that it would clear up faster, but thats just not the reality, yes, and it has delayed and we as we mentioned second half.
Okay last question.
You talked of trying to sort of my okay on most of the big EPC.
Customers, who is your proxies for going into the end market and at least in the United States.
And what proportion of the largest.
And so 10 20 do you think you've now got secure this as sort of regular customers.
Yeah.
Paul I would just lead off by saying, we added 38, new customers eight of which were international.
I would have to get back to you with respect to the mix, which is the IP piece developers versus EPC don't have that readily available, but we can get back to you on that.
Okay, alright, thanks, very much I appreciate it.
Thanks, Paul Thanks, Paul.
Our next question comes from the line of Stephen Byrd with Morgan Stanley. Please see with your question and thanks, So much for taking my questions.
Hey, I wanted to just get your thoughts on the competitive playing field or are you seeing either new and trends changes in and offerings.
And just wanted to also in that context, if you could just speak to sort of the share that you described a little bit on your prepared remarks, just wondering if you could give any more specifics on sort of your your your take on kind of a.
Market share position and and just relative competitive positioning more broadly.
Yeah, Steve I would first say that we respect all competitors haven't really seen any new entrants.
And with respect to market share I would really just point you to our year on year growth and then what we've outlined by way of.
The mid point of our growth going forward into 2021, and then how that falls out with respect to share of demand.
I'll, let you do the math there.
Very good understood and then just lastly.
You talked to kind of the growth internationally and it sounds like just it's just rather it's it's just a bit of a delay it's not as if there's a shift upwards and your cost structure to be able to execute internationally, but more of a of a delay and my sort of breathing that properly.
Yes, that's exactly right. When you think of a delay do you think of it in terms of certain countries travel restrictions. So I couldnt get boots on the ground to really Wow qualify the supply chain fulfillment and things of that nature. So that was that was really a delay.
That's perfect. That's all I had thank you.
Thanks, Steve.
Our next question comes from the line of Michael Weinstein with Credit Suisse. Please see with your question.
Hi, guys.
And I understand that 16% to 18% growth.
EBITDA margin guidance.
As you increase the percentage coming from international does that actually pushed things up towards the higher end of that range or you know is it is it all the same and I'm just curious for the difference between U S and international.
Yeah. So that's you know.
The way, we look at that and we were.
We're still going to maintain the 16% to 18% range, you know and as you as the.
Mix changes there'll be less investments that we're making this year. So we still think we'll be in that range.
Yeah, but I mean, just to follow up with Charles earlier question and as it is international are expected to have higher gross margins, just you know versus the U S.
Yep.
And that Hasnt changed from what we had said before Michael. It is initially we know that theyre going to be a little bit lower margins, but over the longer term, it's going to be at or higher than the domestic because of the input cost.
Gotcha. So whats the if you expect to maintain the range, what's the offset to that.
Well and we're ramping up and see if if you recall and international sales so as the investments abate.
From this year and the international ramps up that's where you get the offset.
Oh, Okay, I see I see.
In terms of the new technologies, and and you mentioned that you're invested in and new technology, that's yet to be revealed.
What are we talking about something that is still going to be and the tracker killed or are we or are you branching out into completely new.
Our solar value creation.
And something new in terms of creating efficiency.
Yeah, I would say look the way to look at it Michael is it's going to be within the tracker itself and utility scale, but certainly we're not limiting ourselves there when we look at technology.
Are you are you still are or are there other investments that you're working on currently also are there additional additional bolt on acquisitions or major acquisitions.
I would just go back to what I said earlier that our pipeline remains very robust and.
As they mature.
We will become apparent.
Maybe you could comment a little bit more on the R&D capabilities that you think will be available in Phoenix and the Phoenix facility.
Yeah, I would just refer you back to what we said earlier some of the pain points that our customers are seeing is that the.
Time to install so labor is an area that we're focusing on and we're also looking at means and ways through which you can minimize grading so have more flexibility foundation accounts. Another how you can generate more output or energy maximize that through software. So that's kind of the age of the Z that we're working on.
But we're real excited about that.
And the Tech Center.
Hey, just two last ones from me and one is is the cost of steel, becoming a problem for you rolled steel and also where internationally, which which continents are you planning on focusing on first and highest priority and which will be the next ones after that.
Yeah.
We obviously manage and monitor all commodities accordingly, and then we build in productivity measures to address that.
Continue to drive our value. If your question was pertaining to our supply chain.
And sorry, Michael could you clarify on this question, yes, sorry.
And your supply chain and me and I'm thinking about the pressure on our margins from cost inputs.
Yeah, I mean, there's always going to be pressure on cost.
It pretty much market agnostic and product agnostic, but that said we.
We've actually built out and we continue to build out our supply chain. We added 15, new suppliers and four new countries. So that's just going to be an area that we remain focused on going forward as we grow both domestic and internationally.
Alright, and also on in terms of your focus on sales you know where where are you going to go next where you were what's the highest priority in terms of continents and countries and.
What's the second after that.
Yeah, I would actually point you back to what we've always said and that is really a strategy of following our customers. You know we added 38 last year eight of which were international and international reach we liked to follow them into the regions that make the most sense since they are the ones that are actually investing and connecting to the grid.
And so you know.
Think you could look at South America, and certain countries were and then there and then.
Western Europe, as well as southeast Asia.
Not necessarily in that order, but those are areas that are our customers seem to be gravitating towards.
Okay. Thanks, a lot guys.
Thanks, Mike Thank you.
Our next question comes from the line of Philip Shen with Roth Capital Partners. Please go with your question.
Hi, everyone. Thanks for taking my questions on.
First ones are around Safe Harbor I was wondering if you might be able to share how many megawatts of safe Harbor we're in.
Q4, and then what you expect in Q1 and and what you expect the overall and the 'twenty one and guidance.
Yeah, Hey, Phil it's people how are you so.
We're gonna and I'm not talking about megawatts on.
And with you on revenue so we had about 40 million and her and her and our Q4 numbers and we expect to deliver of course ITC related now that has expanded about $100 million and now and the first half of the year.
Okay, Great and then should we not expect any and the back half of 'twenty one.
Well, the ITC and extended and also where you know we would we would assume normal seasonal patterns, where Q2 and Q3 are the high build months.
Great.
And then you guys gave the.
Our backlog numbers, you know 705 and 654 for the next 12 months was wondering if you could give those same numbers for what at.
At the end of 2019.
Yeah.
So we didn't track backlog and awarded orders at the 2019, the same precision we're doing it in 2020, but the numbers are roughly similar between the two periods and as you know it doesn't tell the full story because the backlog at the end of 2019 and represented what most of the customers plan for the full year and you saw that manifested by the cash.
<unk> of our revenues and profits and the first half of 2020. So that's why we felt really good backlogs about the same level, but the 654 and then we have this year is really.
Really represents about six months of deliveries and so we feel that that's great debt debt already we are already covered about 60% of our full year midpoint guidance.
Great Yeah. Thanks people and then as it relates to.
Margin guidance.
And outlook.
I know you're not providing official guidance on this but given the.
Cadence of the Safe Harbor revenues being concert and the first half can you talk through what does.
Either the grocery EBITDA margin looked like and first half versus back half.
Okay.
Yeah, it's it's.
And we're about the same throughout so I would just take the revenue split that we had and about the same margin.
Okay, Great and that's all really helpful. Thank you I'll pass it on.
Thanks, Phil.
Our next question comes from the line of Colin Rusch with Oppenheimer. Please see with your question.
Hey, guys. This is Joe on for Colin Thanks for taking our questions.
Given the growth and demand we're expecting to come.
And that's likely going to be from odd lot odd shaped lots or more difficult trains and so could you maybe speak to the dynamics around addressing those sorts of sites.
Yes, Im sorry, collyn or.
Who speak and this is Joe on this is Joe on for Colin.
I think I said Hey, Joe.
Yeah.
And our strategy our product addresses those quite nicely, whether its one 220 megawatts and.
That was <unk>.
And parcel the reason that we went forward with what we did with RPC, yes, because that's exactly what they do well for us. So we don't see any challenges with respect to the terrain flexibility and the Odyssey odd shapes and sizes themselves, we've been servicing that market quite nicely and we plan to do so going forward.
Okay.
Okay great.
And then a little bit.
Back to the question around input costs and supply chain.
And I was looking at any new materials that could potentially reduce your cost of goods sold.
Yes.
<unk>.
Yeah.
No Paul we don't have what they are [laughter].
Yeah.
Okay.
Any color you can give there would be good but.
Yes, we're looking at alternative materials, and that's just part and parcel of what the R&D team does.
Sounds good thanks very much.
Thank you.
Our next question comes from the line of Jeff Osborne with Cowen. Please proceed with your question.
Yeah, good afternoon, and most of my questions and congrats but I'm just going back to the store and so can you remind us roughly what percentage of the bill and that's a real good Calvin on steel.
Yeah, Hey, Jeff, It's nipple, yeah, where we're not.
We don't break out the bill of materials, obviously, you know for competitive products, but you know obviously, we have we have steel and steel is a large component of a commodity that we use and our overall.
Tracker.
And I'm.
Just on credit.
You are talking about and the first half of the year calling for.
On the backlog.
Would you be buying them at school.
It's been moving.
Right.
So if you harken you locked on that but I think you have.
Visibility on the margins or not necessarily so.
Yeah. So we typically I'll just give you our typical order pattern and so you know we typically order material between six and 12 weeks from the date from the shipment. So we so we keep very low inventories so the impact obviously of the Cogs.
On the recent run on prices would impact second half more than it would first half.
Yeah.
Well done on the.
On a new customers and they're not.
And can you talk about any particular geographies outside of Australia and have you hired them and success people and try to ask about continents.
And people can you without naming them talking about what countries on a region or from or is it all in Australia.
No it's not all on Australia, it's still western Europe.
South America as well as parts of Asia. So you can think of Brazil, you can think of Spain, and some other regions as well and western Europe.
Got it and then.
Last one on how does just remind us on.
And Europe Iceland.
And 111 times whenever the number and you're not talking about ROE on the Bluebird costs with this investment that you made and you remind us what the labor cost with a utility scale solar projects is roughly a dollar or what what what would you think.
Direct labor attributable to specifically the tracker.
And to lower.
Yeah, I Couldnt give you an absolute number.
Jeff simply because every site every project has its own DNA.
Depending on what the site construct looks like.
And number of modules per row, and things of that nature. All I can say is just reinforce that the technology that we're looking at a substantially reduces that so we're quite excited about that.
Thank you.
Yes.
Our next question comes from the line of Martin Malloy with John Rice with Johnson Rice. Please proceed with your question.
Oh good afternoon.
Hey, Marty.
Hi, could you give us an update maybe on the on your.
Strategy from monetizing the software.
Yeah.
Yeah, Hi, Marty so the strategy remains kind of threefold here and that is first and foremost to the extent, we can use that to create greater value at the point of sale with our tracker.
That will always be included and we're very pleased with the uptake that we currently have on our smart track. The second one would be with respect to and the event. The customer has already a array tracker out there and is interested in purchasing that by way of license and or annuity going forward.
We are working with several customers on that front and then thirdly would be to the extent there is opportunity for us to deploy and then to deploy the software at a later date, depending on the customer's request and commissioning we have that means as well, we're still very early and the throes of deploying.
On the software solution, but are certainly quite excited about the uptake that we've seen thus far and the performance gains and that is providing to customers where we have deployed.
Great.
You very much.
Thank you thanks Mark.
Our final question comes from the line on Kashi Harrison with Simmons Energy. Please proceed with your question.
Good evening and thanks for taking my questions.
And so when the guidance on you highlight your expectation that commodity prices and freight charges to normalize over time.
Just curious what drives that normalization and view and then how long it would take a how long the costs would need to remain elevated and before you seriously decided or considered passing it on to customers and then how to think about any concerns surrounding implications to demand from customers from you know higher higher costs.
Hey, cash its and April how are you.
So as far as that first part of the question as far as how long we think it is and obviously it's unknown.
We're in unprecedented times as far as the and commodity prices are increasing and and it's really just that it's a lot of the and.
And as the economy begins to reopen there's a lot of pre pandemic.
Capacity, that's still remains idle so.
And we're thinking second half and late second half is when it's coming back online and as far as your second half of the question, we're always evaluating all our pricing on and on.
Our projects and we know that we have that ability and we'll look at it on a case by case basis. So.
Okay Fair enough and then on the M&A front I know I know you know there's not a lot you can talk about but I was just wondering if you could at least give us a timeline on when you think you might be able to buy the technology company that you referred to the remaining portion.
And I Couldnt give you a definitive timeline other than we have certain milestones that need to be met by way of technology assessment and things of that nature.
And as they pan themselves out we will check the box and then proceed accordingly, but I couldnt give you a definitive timeline because theres a elements that need to be satisfied as we go through the process.
I guess I guess, maybe asking it a different way do you think this is a 'twenty 'twenty, one and then maybe or is it probably longer term.
Yeah, I couldn't tell you.
And I couldnt commit to a date on that.
Okay.
Fair enough and then and then the last one from me.
Good to see all investing in R&D for the future of the business.
I was just wondering if you could talk about you know the four innovations that you highlight on on that separate press release, how to think about the impact to asps over the medium term and that's it from me. Thanks.
Yeah, and medium term I don't think Youll see.
A large ore and impact on medium term. This is long and this is a longer players. We deploy you could think of it all out and the out years of 'twenty to first half 'twenty two and beyond.
Got it that's it for me thank you.
Thanks Kathy.
We have reached the end of our question and answer session I would like to turn the call back over to management for any closing remarks.
Yes. Thank you.
Again, I just want to reiterate how proud I am of the array team for all that we accomplished last year.
We're certainly excited about our performance and plan to carry that forward into 2021 and.
And where we are certainly excited about our growth going forward, so with that I'd like to thank everyone.
Yeah.
And with that this concludes today's teleconference. You may now disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
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