Q1 2022 Array Technologies Inc (Dover) Earnings Call

May 10, 2022

Operator 1: Hello, and welcome to the Array Technologies First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Cody Mueller, investor relations, Array. Please go ahead.

Operator: Hello, and welcome to the Array Technologies First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Cody Mueller, investor relations, Array. Please go ahead.

Hello and welcome to the Array Technologies first quarter 2022 earnings call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Koli Mueller, investor relations array. Please go ahead.

Hello, and welcome to the right technologies first quarter 2022 earnings call.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

As a reminder, this conference is being recorded.

It is now my pleasure to turn the call over to Kurt Mueller Investor Relations. Please go ahead.

Cody Mueller: Good evening, and thank you for joining us on today's conference call to discuss Array Technologies Q1 2022 results. Slides for today's presentation are available on the investor relations section of our website, arraytechinc.com. 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, the comments made during this conference call, or in our latest reports and filings with the Securities and Exchange Commission, which can be found on our website, arraytechinc.com. We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures.

Good evening, and thank you for joining us on today's conference call to discuss Array Technologies first quarter 2022 results. Slides for today's presentation are available on the investor relations section of our website arraytechinc.com

Good evening and thank you for joining us on today's conference call to discuss the right technologies first quarter 2022 results slides for today's presentation are available on the Investor Relations section of our website <unk> Dot com.

During this conference call, management will make forward-looking statements based on current expectations and assumptions which are subject to risks and uncertainty.

During this conference call management will make forward looking statements based on current expectations and assumptions, which are subject to risks and uncertainties.

Cody Mueller: 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, the comments made during this conference call, or in our latest reports and filings with the Securities and Exchange Commission, which can be found on our website, arraytechinc.com. We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures.

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, the comments made during this conference call, or in our latest reports and filings with the Securities and Exchange Commission, which can be found on our website or raytech.com.

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. The comments made during this conference call or in our latest reports and filings with the Securities and Exchange Commission, which can be found on our website <unk> dot com.

We do not undertake any duty to update any forward-looking state.

We do not undertake any duty to update any forward looking statements.

Today's presentation also includes references to non-GAF financial measures.

Today's presentation also includes references to non-GAAP financial measures you should refer to the information contained in the company's first quarter press release for definitional information and reconciliations of historical non-GAAP measures to the comparable GAAP financial measures.

Cody Mueller: You should refer to the information contained in the company's Q1 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 Kevin Hostetler, Array Technologies CEO.

You should refer to the information contained in the company's first quarter press release for definitional information and reconciliations of historical non-GAAP measures to the comparable GAAP minute.

With that, let me turn the call over to Kevin Hofstetler, Array Technologies CEO . Thanks, Cody, and good evening, everyone.

With that let me turn the call over to Kevin Hostettler array technologies CEO .

Kevin Hostetler: Thanks, Cody, and good evening, everyone. Thank you for joining us on today's call. In addition to Cody, I'm also joined by Nipul Patel, our Chief Financial Officer. I'm excited to join you on my first Array Technologies earnings call and on day 23 as the CEO of Array. Now, there is still a lot of work I need to do and much more time to be spent with employees, customers, suppliers, and investors in order to give my full assessment on the state of the company. But I did want to provide some early observations about the company and the industry before turning it over to Nipul for a more detailed discussion of the quarter and our revised outlook for 2022. First, and I think this is critical context for everything else that is going on, my decision to come to Array was largely influenced by two fundamental factors.

Thanks, Cody and good evening everyone.

Thank you for joining us on today's call.

In addition to Cody, I'm also joined by Nipah Patel, our Chief Financial Officer.

In addition to Coty I'm also joined by Nipple Patel, our Chief Financial Officer.

I'm excited to join you on my first array technologies earnings call and on day 23, as the CEO of array.

I'm excited to join you on my first Array Technologies Earnings call, and on day 23 as the CEO of Array.

Now, there is still a lot of work I need to do and much more time to be spent with employees, customers, suppliers, and investors in order to give my full assessment on the state of the company.

Now there is still a lot of work I need to do and much more time to be spent with employees customers suppliers and investors in order to give my full assessment on the state of the company.

Kevin Hostetler: But I did want to provide some early observations about the company and the industry before turning it over to Nipul for a more detailed discussion of the quarter and our revised outlook for 2022. First, and I think this is critical context for everything else that is going on, my decision to come to Array was largely influenced by two fundamental factors.

But I did want to provide some early observations about the company and the industry before turning it over to NEPL for a more detailed discussion of the quarter and a revised outlook for 2022.

But I did want to provide some early observations about the company and the industry.

Before turning it over to nipple for a more detailed discussion of the quarter and our revised outlook for 2022.

First and I think this is critical context for everything else that is going on my decision to come to array was largely influenced by two fundamental factors one.

First, and I think this is critical context for everything else that is going on, my decision to come to array was largely influenced by two fundamental factors. One, the world is transitioning to renewable energy.

Kevin Hostetler: One, the world is transitioning to renewable energy. Combating climate change is no longer a niche pursuit by a few. It is now core to the identity of the world's largest governments, corporations, and asset managers. There is simply no feasible way to meet the stated goals of these entities without significant increases in the amount of solar energy produced. Two, Array is positioned incredibly well to be a global leader in this solar energy transition. Array has differentiated products that more and more customers are selecting. It has the bankability of over thirty years in the industry and has an asset-like business model that enables quick and nimble scalability.

The world is transitioning to renewable energy.

Combating climate change is no longer a niche pursuit by a few. It is now core to the identity of the world's largest governments, corporations, and assets.

Combating climate change is no longer a niche pursued by a few.

It is now core to the identity of the world's largest governments corporations and asset managers.

And there is simply no feasible way to meet the stated goals of these entities without significant increases in the amount of solar energy produced.

And to <unk>.

ARRAY is positioned incredibly well to be a global leader in this solar energy transition.

Array has positioned incredibly well to be a global leader in the solar energy transition.

Array has differentiated products that more and more customers are selected.

Array has differentiated products that more and more customers are selecting.

It has the bankability of over 30 years in the industry and has an asset-like business model that enables quick and nimble scalability.

It has the bank ability of over 30 years in the industry.

It has an asset like business model that enables quick and nimble scalability.

Kevin Hostetler: Now I recognize these are not new statements to many of you, but I start there because despite some of the near-term challenges within our industry, when I think about the long-term horizon and companies and industries that are poised to make a lasting change in the world, while at the same time driving shareholder value, Array operates in a unique space. Since joining, I have not only experienced firsthand these differentiated capabilities, but have also been able to deepen my appreciation for the complexity of the problems we are solving and the employees who are solving them.

Now, I recognize these are not new statements to many of you, but I start there because despite some of the near term challenges within our industry.

Now I recognize these are not new statements to many of you, but I start there because despite some of the near term challenges within our industry.

When I think about the long-term horizon and companies and industries that are poised to make a lasting change in the world, while at the same time driving shareholder value, array operates

When I think about the long term horizon and companies and industries that are poised to make a lasting change in the world.

At the same time driving shareholder value.

<unk> operates in a unique space.

Since joining, I have not only experienced firsthand these differentiated capabilities, but have also been able to deepen my appreciation for the complexity of the problems we are solving and the employees who are solving.

Since joining.

Joining I have not only experienced firsthand these differentiated capabilities, but have also been able to deepen my appreciation for the complexity of the problems, we are solving and the employees who are solving them.

Kevin Hostetler: As many of you know, I have now spent decades leading engineered product companies, and I will tell you, experience has taught me if you can find a great product serving a growing and necessary market, supported by a skilled and dedicated workforce, you have the key elements of a formula to drive strong shareholder value. This being said, it's also important to realize we must execute in the near term in order to continue to build the trust of our customers and investors, which we will need for the opportunity to make that lasting change. Over the last year, an extremely volatile cost and logistics landscape, coupled with an uneven and constantly shifting demand profile, has made execution a bit more challenging. Let's be clear, over the next few quarters, the landscape is not going to get much easier.

As many of you know I've now spent decades, leading engineered product companies and I will tell you experience has taught me. If you can find a great product, serving a growing and necessary market supported by a skilled and dedicated workforce you have the key elements of a formula to drive strong shareholder value.

As many of you know, I've now spent decades leading engineered product companies, and I will tell you, experiences taught me if you can find a great product serving a growing and necessary market. Supported by a skilled and dedicated workforce, you have the key elements of a formula to drive strong shareholder value.

Yeah.

This being said it's also important to realize we must execute in the near term in order to continue to build the trust of our customers and investors, which we will need for the opportunity to make that lasting change.

This being said, it's also important to realize we must execute in the near term in order to continue to build the trust of our customers and investors, which we will need for the opportunity to make that lasting change.

Over the last year and extremely volatile cost and logistics landscape, coupled with an uneven and constantly shifting demand profile as made execution a bit more challenging.

Over the last year, an extremely volatile cost and logistics landscape coupled with an uneven and constantly shifting demand profile has made execution a bit more challenging.

And let's be clear, over the next few quarters, the landscape is not going to get much easier.

Let's be clear over the next few quarters, the landscape is not going to get much easier.

Kevin Hostetler: The AD/CVD investigation has placed uncertainty around the timing of some of our projects and has vastly increased the complexity of managing our supply chain and logistics. Adding to this, the conflict in Ukraine has slowed supply chains throughout Europe, and we're seeing the direct impact of this on projects in Europe as component supplies are rerouted. While these issues will reduce our outlook for 2022, they are far from unmanageable. My experience, coupled with the steps the newly reformed senior leadership team have already taken, leave me confident we will execute on what is within our control. This includes managing not only our material and logistics costs, but also aligning our SG&A spend with changing volume levels. It also means we will need to have a laser focus on working capital management to ensure we don't incur inefficiencies as projects shift left and shift right.

The ADCBD investigation has placed uncertainty around the timing of some of our projects and has vastly increased the complexity of managing our supply chain and logistics.

The a D. CVD investigation has placed uncertainty around the timing of some of our projects and is vastly increase the complexity of managing our supply chain and logistics.

Adding to this, the conflict in Ukraine has slowed supply change throughout Europe , and we're seeing the direct impact of this on projects in Europe as component supplies are rerouted.

Adding to this the conflict in Ukraine has slowed supply chain throughout Europe , and we're seeing the direct impact of this on projects in Europe as component supplies a reroute it.

Yeah.

While these issues will reduce our outlook for 2022, they are far from unmanaged.

While these issues will reduce our outlook for 2022, they are far from unmanageable.

My experience, coupled with the steps the newly reformed senior leadership team have already taken, leave me confident we will execute on what is within our control.

My experience coupled with the steps the newly reformed senior leadership team have already taken leaves me confident we will execute on what is within our control.

This includes managing not only our material and logistics costs.

This includes managing not only our material and logistics costs, but also aligning our SG&A spend with changing volume levels.

but also aligning our sGNA spend with changing volume levels.

It also means we will need to have a laser focus on working capital management to ensure we don't incur inefficiencies as project shift left and shift right.

It also means we will need to have a laser focus on working capital management to ensure we don't incur inefficiencies as projects shift left and shift right.

Kevin Hostetler: This near-term market uncertainty presents an opportunity for us to further differentiate ourselves from our competitors. To this end, we will focus intently on working with our customers to solve their module challenges by playing an active and flexible role in their rapid system redesign efforts, all while delivering our products on time with an unparalleled customer experience. Finally, it is also an opportunity to identify and focus on customers and suppliers who are truly willing to be partners. Industry challenges like this require collaboration and a sharing of risk. We are certainly ready to do our part, and we'll be evaluating which partners are willing to do the same. Array has made a lot of progress since becoming a public company a little over a year and a half ago, but we still have room for improvement.

This near-term market uncertainty presents an opportunity for us to further differentiate ourselves from our competitors.

This near term market uncertainty presents an opportunity for us to further differentiate ourselves from our competitors.

To this end, we will focus intently on working with our customers to solve their module challenges by playing an active and flexible role in their rapid system redesign efforts, all while delivering our products on time with an unparalleled customer experience.

Finally, it is also an opportunity to identify and focus on customers and suppliers who are truly willing to be partners.

Finally, it is also an opportunity to identify and focus on customers and suppliers, who are truly willing to be partners.

Industry challenges like this require collaboration and a sharing of

Industry challenges like this requires collaboration and sharing of risk.

We are certainly ready to do our part, and we'll be evaluating which partners are willing to do the same.

We're certainly ready to do our part and we will be evaluating which partners are willing to do the same.

Array has made a lot of progress since becoming a public company a little over a year and a half ago, but we still have room for improvement.

Array has made a lot of progress since becoming a public company a little over a year and a half ago, but we still have.

Kevin Hostetler: Over the coming months, I'll continue my comprehensive review of Array's operating systems and core business processes to further identify areas in which we can drive operational efficiencies. I look forward to updating you all on the progress of my reviews in our next quarter's call. With that, I'd like to give a heartfelt thank you to the employees of Array, who have been extremely welcoming, and turn the call over to Nipul.

Over the coming months, I'll continue my comprehensive review of arrays operating systems and core business processes to further identify areas in which we can drive operational efficiency.

Over the coming months I'll continue my comprehensive review of the raised operating systems and core business processes to further identify areas in which we can drive operational efficiencies.

I look forward to updating you all on the progress of my reviews in our next quarter's call.

With that, I'd like to give a heartfelt thank you to the employees of Array who have been extremely welcoming and turn the call over to Neepal.

With that I'd like to give a heartfelt. Thank you to the employees of array who have been extremely welcoming and turn the call over to Nick.

Nipul Patel: Thanks, Kevin. Speaking for the management team and employees of Array, we are excited to have you on board. I want to touch on a few topics today. First, I'll walk through the results for the quarter, which finished better than our expectations. Then I'll provide some color on AD/CVD and the work we have been doing over the last few weeks in order to quantify the impact to our business. Lastly, in light of the impact we are seeing from the investigation, I will provide an updated guidance range for 2022. With that, I'll turn to slide six to discuss the quarter. Revenues for Q1 increased 21% to $300.6 million compared to $248.2 million for the prior year period.

Thanks, Kevin.

Speaking for the management team and employees of Array, we are excited to have you on board. I want to

Thank you for the management team and employees of array. We are excited to have you on board.

Wanted to touch on a few topics today.

First, I'll walk through the results for the quarter, which finish better than our expectation.

First I'll walk through the results for the quarter, which finished better than our expectation.

Then, I'll provide some color on ADCVD and the work we have been doing over the last few weeks in order to quantify the impact to our business.

Then I'll provide some color on CBD and the work we have been doing over the last few weeks in order to quantify the impact to our business.

Lastly, in light of the impact we are seeing from the investigation, I will provide an updated guidance range for 2022.

Lastly in light of the impact we're seeing from the investigation I will provide an updated guidance range for 2022.

With that I will turn to slide six to discuss the quarter.

With that, I'll turn to slide six to discuss the quarter.

Revenues for the first quarter increased 21% to $300.6 million compared to $248.2 million for the prior year period.

Revenues for the first quarter increased 21% to $306 million compared to $248 $2 million for the prior year period.

Nipul Patel: The $301 million in revenue reflects $251 million from the legacy Array business and $50 million from the STI business. Revenue in Q1 2021 also included approximately $40 million of ITC-related orders. Excluding those orders, our legacy Array business is up 21% year over year. It also represents the third consecutive quarter of revenue growth and a record for a quarter without any ITC-related orders. Gross profit decreased to $26.6 million from $46.2 million in the prior year period due to the expected impacts of the lower margin backlog in the legacy Array business, as well as a low margin STI project in the US, which had a negative impact. Gross margin decreased from 18.6% to 8.8%.

The $301 million in revenue reflects $251 million from the legacy array business and $50 million from the STI business.

The $301 million revenue reflects $251 million from the legacy array business and $50 million from the Sci business.

Revenue in the first quarter of 2021 also included approximately $40 million of IPC-related orders. So excluding those orders, our legacy array business is up 21% year over year.

Revenue in the first quarter of 2021 also included approximately $40 million of ITC related orders. So excluding those orders are legacy array business is up 21% year over year.

It also represents the third consecutive quarter of revenue growth and a record for a quarter without any IPC-related orders.

It also represents the third consecutive quarter of revenue growth and a record for a quarter without any ITC related orders.

Gross profit decreased to $26.6 million from $46.2 million in the prior year period due to the expected impacts of the lower margin backlog in the legacy array business as well as a low margin STI project in the U.S. which had a negative impact.

Gross profit decreased to $26 6 million from $46 2 million in the prior year period due to the expected impact of the lower margin backlog in the legacy array business as well as a low margin STI project in the U S, which had a negative impact.

Gross margin decreased from $18 six to eight 8%.

gross margin decreased from 18.6 to 8.8 percent.

Nipul Patel: Gross margin for the legacy array business was 8.5% and represents the second consecutive quarter of margin improvement as it is up 380 basis points from Q4. The STI business had gross margin of 10.7% in the quarter, which was negatively impacted by higher labor costs in projects where it was providing the construction. This was especially true of a large project in the US, where it had significant construction cost overruns. Additionally, the war in Ukraine slowed supply chain availability in Europe, which necessitated a change in the location where material was procured, raising the logistics costs. Operating expenses increased to $58.7 million compared to $30.8 million during the same period in the prior year.

gross margin for the legacy array business with 8.5% and represents the second consecutive quarter of margin improvement as it is up 380 basis points from the fourth quarter.

Gross margin for the legacy array business was eight 5% and represents the second consecutive quarter of margin improvement as it is up 380 basis points from the fourth quarter.

The SDI business had gross margin of 10.7% in the quarter which was negatively impacted by higher labor costs in projects where it was providing the construction.

The SDI business had gross margin of 10, 7% in the quarter, which was negatively impacted by higher labor costs and projects, where it was providing the construction.

This was especially true of a large project in the U.S. where it had significant construction cost overruns.

This was especially true of a large project in the U S had significant construction cost overruns.

Additionally, the war in Ukraine slowed supply chain availability in Europe , which necessitated a change in the location where material was procured, raising the logistics cost.

Additionally, the war in Ukraine slowed supply chain availability in Europe , which necessitated a change in the location of our material was procured raising the logistics costs.

Operating expenses increased to $58.7 million compared to $30.8 million during the same period in the prior year.

<unk> expenses increased to $58 $7 million compared to $30 8 million during the same period in the prior year.

Nipul Patel: The higher expense is primarily related to a $16.7 million increase in amortization expense related to the STI acquisition. Excluding that impact, the increase is primarily due to the addition of STI Norland, in addition to higher payroll-related costs due to an increase in headcount, as well as higher professional fees associated with the acquisition. These increases were partially offset by a reduction in contingent consideration expense of $3.7 million. Net loss attributable to common shareholders was $33.7 million compared to a net income of $4.6 million during the same period in the prior year, and basic and diluted loss per share were -$0.23 compared to basic and diluted earnings per share of $0.04 during the same period in the prior year.

The higher expense is primarily related to a $16.7 million increase in amortization expense related to the STI acquisition.

The higher expenses, primarily related to a $16 $7 million increase in amortization expense related to the Sci acquisition.

Excluding that impact the increase is primarily due to the addition of STI Norland. In addition to higher payroll related costs due to an increase in head count as well as higher professional fees associated with the acquisition.

Excluding that impact, the increase is primarily due to the addition of STI norland in addition to higher payroll related costs due to an increase in headcount as well as higher professional fees associated with the equity.

These increases were partially offset by a reduction in contingent consideration expense of $3.7 million.

These increases were partially offset by a reduction in contingent consideration expense of $3 $7 million.

Net loss attributable to common shareholders was $33 7 million compared to a net income of $4 6 million. During the same period in the prior year and basic and diluted loss per share for negative <unk> 23, compared to basic and diluted earnings per share of <unk>. During the same period in the prior year.

Net loss attributable to common shareholders was $33.7 million compared to a net income of $4.6 million during the same period in the prior year, and basic and diluted loss per share were negative $0.23 compared to basic and diluted earnings per share of $0.04 during the same period in the prior year.

Nipul Patel: Adjusted EBITDA decreased to $700,000 compared to $36.6 million for the prior year period. Looking at free cash flow, as anticipated, we used cash of $52.5 million in the quarter, primarily due to an increase in unbilled receivables as we had a high concentration of deliveries toward the end of the quarter, which limited our ability to get them billed prior to quarter end. This is not a trend we expect going forward. Overall, we were pleased with the quarter. The changes we instituted in our legacy Array business are continuing to drive improvements in our profitability, and our operations team has delivered on progressively higher volumes despite a lot of project timing movement.

adjusted EBITDA decrease to $700,000 compared to $36.6 million for the prior year period.

Adjusted EBIT decreased to 700000 compared to $36 6 million for the prior year period.

Looking at free cash flow as anticipated, we used cash of $52 5 million in the quarter, primarily due to an increase in unbilled receivables as we had a high concentration of deliveries towards the end of the quarter, which limited our ability to get them built prior to quarter end. This is not a trend we expect going forward.

Looking at free cash flow, as anticipated, we used cash of 52.5 million in the quarter, primarily due to an increase in unbilled receivables, as we had a high concentration of deliveries toward the end of the quarter, which eliminated our ability to get them built prior to quarter end. This is not a trend we expect going through.

Overall we were pleased with the quarter the changes we instituted in our legacy array business are continuing to drive improvements in our profitability and our operations team has delivered on progressively higher volumes despite a lot of project timing

Overall, we were pleased with the quarter. The changes we instituted in our legacy array business are continuing to drive improvements in our profitability and our operations team has delivered on progressively higher volumes. Despite a lot of project timing movement.

Nipul Patel: Our recently acquired STI business did have a few cost challenges this quarter as it went through some growing pains constructing a project in the US, which were compounded by disruption caused by the war in Ukraine. These elevated costs will be a short-term overhang, but they are certainly addressable as we more fully integrate. Now, if we move to slide 7. When we had our last earnings call, you will remember that it was the week after the announcement of the AD/CVD investigation. At that time, we stated on the call we did not have sufficient information to evaluate any resulting impact. However, since that time, there has been a lot more work done by the industry to quantify the impact of the investigation. At this point, it is inevitable that it will have an impact to the industry.

A recently acquired STI business did have a few cost challenges this quarter as it went through some growing pains constructing a project in the US, which were compounded by disruption caused by the war in Syria.

Our recently acquired Sci business did have a few cost challenges this quarter as it went through some growing pains constructing a project in the U S, which were compounded by disruption caused by the war in Ukraine.

These elevated costs will be a short-term overhang, but they are certainly addressable as we more fully integrate.

These elevated costs will be a short term overhang, but they are certainly addressable as we more fully integrate.

Now if we move to slide seven.

When we had our last earnings call, you will remember that it was the week after the announcement of the ADCBD investigation.

When we had our last earnings call, you'll remember that it was the week after the announcement of the <unk> investigation.

At that time, we stated on the call we did not have sufficient information to evaluate any resulting impact. However, since that time, there's been a lot more work done by the industry to quantify the impact of the investigation.

At that time, we stated on the call we did not have sufficient information to evaluate any resulting impact.

However, since that time, there's been a lot more work done by the industry to quantify the impact of the investigation.

At this point, it is inevitable that it will have an impact to the individual.

At this point it is inevitable that it will have an impact to the industry.

Nipul Patel: As SEIA recently noted in their 26 April survey, of the respondents, 83% of projects have had their current module supply either get canceled or delayed, and 80% of domestic manufacturers are expecting severe or devastating impacts to their business. Unfortunately, as one of the largest domestic providers of utility scale trackers, we are not immune to this market disruption, so we do anticipate a portion of our business will be impacted. However, that is the bad news. On a more positive side, we conducted a thorough analysis of our current order book, and at this time we are forecasting between $225 and 250 million of revenue will be at risk due to module uncertainty. While that number is not trivial, it only represents about 15% of our previous outlook at the midpoint of $1.6 billion.

As SIA recently noted in their April 26 survey of the respondents, 83% of projects have had their current model supply either get canceled or delayed, and 80% of domestic manufacturers are expecting severe or devastating impacts to their business.

At Sia recently noted in their April 26 survey of the respondents 83% of projects have had their current module supply either cancel or delay and 80% of domestic manufacturers are expecting severe are devastating impacts to their business.

Unfortunately, as one of the largest domestic providers of utility scale trackers, we are not immune to this market disruption. So we do anticipate a portion of our business will be impacted.

Unfortunately, it's one of the largest domestic providers of utility scale trackers, we are not immune to this market disruption. So we do anticipate a portion of our business will be impacted.

However, that is the bad news on a more positive side. We conducted a thorough analysis of our current order book and at this time we are forecasting between 225 to 250 million dollars of revenue will be at risk due to module uncertainty.

However that is the bad news on a more positive side, we conducted a thorough analysis of our current order book and at this time, we are forecasting between $225 million to $250 million of revenue will be at risk due to module uncertainty.

While that number is not trivial, it only represents about 15% of our previous outlook at the midpoint of $1.6 billion.

That number is not trivial it only represents about 15% of our previous outlook at the midpoint of $1 6 billion.

Nipul Patel: Further, in recent weeks, we have seen the industry rally behind its opposition to this investigation, and we have been front and center of it. Our position is clear. We are fully supportive of a more robust domestic source of modules. However, the supply chain does not exist today. So in the meantime, we seek a practical and stable solution for our industry. Erica Brinker, our Chief Commercial Officer, has spent much of the last few weeks meeting with legislators and administration officials outlining that position along with many others in the industry. While there still is uncertainty as to the ultimate outcome, we are hopeful that these efforts are making a positive impact. Moving to the next slide. In light of the current expected impact, you will see our updated guidance range for 2022.

Further in recent weeks, we have seen the industry rally behind its opposition to this investigation and we have been front and center of it.

Further, in recent weeks, we have seen the industry rally behind its opposition to this investigation, and we have been front and center.

Our position is clear. We are fully supportive of a more robust domestic source of modules. However, the supply chain does not exist.

Our position is clear.

We are fully supportive of a more robust domestic source of module. However, the supply chain does not exist today. So in the meantime, we seek a practical and stable solution for our industry.

So in the meantime, we seek a practical and stable solution for our industry.

Erica Brinker, our Chief Commercial Officer, has spent much of the last few weeks meeting with legislators and administration officials outlining that position along with many others in the industry.

Eric the Brinker, our Chief commercial officer has spent much of the last few weeks meeting with legislators and administration officials outlining that position along with many others in the industry.

While there still is uncertainty as to the ultimate outcome, we are hopeful that these efforts are making a positive impact.

While there is still is uncertainty as to the ultimate outcome. We are hopeful that these efforts are making a positive impact.

Moving to the next slide.

In light of the current expected impact, you will see our updated guidance range for 2022.

In light of the current expected impact you will see our updated guidance range for 2022.

Nipul Patel: You can see that we are reflecting a reduction of revenue of $200 million at our midpoint, reflecting the AD/CVD risk, which was partially offset by conversion of new orders. We now expect revenue to be between $1.3 and $1.5 billion. Looking at adjusted EBITDA, as you might expect, the projects with less module certainty are those that we have signed more recently and therefore carry higher gross margin, which creates a larger drop through impact. Further, as discussed earlier, we are also seeing some cost challenges in the STI business that will create a short-term headwind. First, there are elevated labor costs related to the construction of some of their projects, particularly a large US-based project. This project was signed prior to our acquisition and is the first large project in the US where STI is doing the site construction.

You can see that we're reflecting a reduction of revenue of $200 million at our midpoint, reflecting the ADCVD risk, which was partially offset by conversion of new order.

You can see that we are reflecting a reduction of revenue of $200 million at our midpoint, reflecting the CVD risk, which was partially offset by conversion of new orders.

We now expect revenue to be between $1.3 and $1.5 billion.

We now expect revenue to be between one three and $1 $5 billion.

Looking at adjusted EBITDA, as you might expect, the projects with less module certainty are those that we have signed more recently and therefore carry higher gross margins, which creates a larger drop through impact.

Looking at adjusted EBITDA as you might expect the projects with less natural certainty are those that we have signed more recently and therefore carry a higher gross margin, which creates a larger drop through impact.

Further, as discussed earlier, we are also seeing some cost challenges in the FTI business that will create a short-term head.

Further as discussed earlier, we are also seeing some cost challenges in the STI business that will create a short term headwind.

First, there are elevated labor costs related to the construction of some of their projects, particularly a large U.S. based project.

First there are elevated labor costs related to the construction of some of their projects, particularly a large U S based project.

This project was signed prior to our acquisition and is the first large project in the US where STI is doing the site construction.

This project was signed prior to our acquisition and is the first large project in the U S where STI is doing the site construction.

Nipul Patel: We have already made changes to the way the company sources its labor on future projects, and we'll evaluate in more detail whether construction is a core competency of the business. Second, the war in Ukraine has created some supply chain disruption in Europe. This has forced STI to bring materials from Asia, leading to higher logistics costs. Going forward, these elevated costs will be reflected in price increases. However, for projects currently under contract, it will create some margin compression. Taking these factors together, we are now expecting adjusted EBITDA to be between $120 million and 140 million for 2022, and adjusted EPS to be between $0.25 and 0.35, with the same share count expectations as before.

We have already made changes to the way the company sources its labor on future projects, and we'll evaluate in more detail whether construction is a core competency of the business.

We have already made changes to the way the company sources that flavor on future projects, and we will evaluate and more detailed weather construction as a core competency of the business.

Second, the war in Ukraine has created some supply chain disruption in Europe .

Second the warranty Ukraine has created some supply chain disruption in Europe .

This has forced STI to bring materials from Asia leading to higher logistics costs.

This has forced STI to bring materials from Asia, leading to higher logistics costs.

Going forward, these elevated costs will be reflected in price increases. However, for projects currently under contract, it will create some margin.

Going forward. These elevated costs will be reflected in price increases however for projects currently under contract it will create some margin compression.

Taking these factors together, we are now expecting adjusted EBITDA to be between $120 million and $140 million for 2022, and adjusted EPS to be between 25 and 35 with the same share count expectations as before.

Taking these factors together, we are now expecting Adjustment EBITDA to be between 120 million and 140 million for 2022 and Adjustment EPS to be between 25 cents and 35 cents with the same share count expectations as before.

Nipul Patel: We also expect the AD/CVD pushouts will have a negative impact to our legacy array margins in Q2, as several large higher-margin projects are no longer slated to be delivered. This, coupled with STI challenges, will create some downward margin pressure for Q2. That said, we still anticipate sequential revenue growth and sequential margin improvement in both the legacy array and STI businesses. For the quarter, we are expecting sequential revenue growth between 20% and 25% and adjusted EBITDA margin to be between 6.5% and 7.5%. Lastly, the reduction of our outlook, we've obviously considered the impact to liquidity and free cash flow. We still anticipate to produce free cash flow for the year, with the expectation still that it will be more H2 weighted.

We also expect the ADCVD pushouts will have a negative impact to our legacy array margins in the second quarter as several large higher margin projects are no longer slated to be delivered.

We also expect the CVD push outs will have a negative impact to our legacy array margins in the second quarter as several large higher margin projects are no longer slated to be delivered.

This coupled with STI challenges will create some downward margin pressure for the second quarter.

That said, we still anticipate sequential revenue growth and sequential margin improvement in both the Legacy, Array, and FTI.

That said, we still anticipate sequential revenue growth and sequential margin improvement in both the legacy array and STI businesses.

For the quarter, we are expecting sequential revenue growth between 20 and 25% and adjusted EBIT emergent to be between 6.5 and 7.5%.

For the quarter, we are expecting sequential revenue growth between 20% and 25% and adjusted EBIT margin to be between six 5% and seven 5%.

Lastly, the reduction of our outlook. We've obviously considered the impact to liquidity and free cash flow

Lastly, the reduction of our outlook, we obviously considered the impact of liquidity and free cash flow.

We still anticipate to produce free cash flow for the year, with the expectation still that it will be more back halfway.

We still anticipate to produce free cash flow for the year with the expectation still that it will be more back half weighted.

Nipul Patel: Further, the reduced volume eases some of the peaks and troughs in our working capital, so there is little bit of smoothing effect. However, the constant shifting of project timing will mean we have to manage our inventory levels very intently. I'll conclude by stating, while there are near-term headwinds, 2022 will still be a good operational year for us. With that, I'll turn the call over to the operator for questions.

Further the reduced volume eases some of the peaks and troughs in our working capital. So there is little bit of a smoothing effect.

Further, the reduced volume eases some of the peaks and troughs in our working capital, so there is a little bit of smoothing effect.

However, the constant shifting of project timing will mean we have to manage our inventory levels very intact.

However, the constant shifting of project timing will need we have to manage our inventory levels very intently.

I'll conclude by stating while there are near term headwind 2022 will still be a good operational year for us with that. I'll turn the call.

I'll conclude by stating while there are near term headwinds 2022 will still be a good operational year for us.

With that I'll turn the call over to the operator for questions.

Operator 1: Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Brian Lee of Goldman Sachs. Please go ahead.

Operator: Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Brian Lee of Goldman Sachs. Please go ahead.

Thank you. At this time we will be conducting a question and answer session. If you would like to ask a question please press star and then one on your telephone keypad. A confirmation turn will indicate your line is in the question queue.

Thank you at this time, we will be conducting a question and answer session.

Can I ask a question. Please press star and then one on your telephone keypad.

A confirmation tend to indicate your line is in the question queue.

You may press star and then two, if you would like to remove your question from the queue. For participants using speak equipment, it may be necessary to pick up your handed before pressing the star keys. One moment please while we poll for questions.

Let me start and then two if you would like to move your question from the queue.

For participants using speaker equipment it might be.

Seems to pick up your handset before pressing the star keys.

One moment, please while we poll for questions.

Okay.

of his questions from Brian Lee of Goldman Sachs. Please go ahead.

Our first question is from Brian Lee of Goldman Sachs. Please go ahead.

Brian Lee: Hey, guys. Good afternoon. Thanks for taking the questions, you know, appreciate some of the color around the guidance update here. I guess with respect to that, you know, first question I would have would just be around, you know, when you're talking to some of your customers and you've identified these projects that are, you know, moving out of 2022, how much, if any, visibility do you have around, you know, if these are moving into 2023 H1, H2, or if these are kind of open-ended, where they may actually slip into even further out years based on, you know, project development timelines? Then I think, Nipul, you mentioned some projects in the legacy Array business actually moved out altogether. Could you elaborate on that?

Hey, guys. Good afternoon, thanks for taking the questions.

Hey guys, good afternoon. Thanks for taking the questions.

and you know appreciate some of the color around the guidance update here I guess with respect to that um you know first question I would have would just be around

And I appreciate some of the color around the guidance update here I guess with respect to that.

First question I would have would just be around.

You know, when you're talking to some of your customers and you've identified these projects that are, you know, moving out of 22,

When youre talking to some of your customers and you've identified these projects that are moving out of 'twenty two.

How much, if any, visibility do you have around, you know, if these are moving into 23, first half, second half, or if these are kind of open-ended, where they may actually slip into even further out years based on, you know, project development timelines? And then I think, Nipol, you mentioned some projects in the legacy array business actually moved out altogether. Could you elaborate on that? I thought that was a too-too comment, but could you elaborate on that a bit as well?

How much if any visibility do you have around if these are moving into 'twenty three first half second half or if these are kind of open ended where they may actually slip into even further out years based on project development timelines and then I think.

Paul you mentioned some projects in the legacy array business.

Actually moved out all together could you elaborate on that I thought that was a <unk> comment, but could you elaborate on that a bit as well.

Brian Lee: I thought that was a Q2 comment, but could you elaborate on that a bit as well?

Nipul Patel: Yeah, sure. Hey, Brian. Regarding the discussion, as we mentioned on the prepared remarks, you know, we performed a project-by-project analysis of the order book, and we spoke with customers and independently also evaluated the module certainty. With that, as of now, the pushouts that we see are moving into 2023. We don't have any further information at this point. The comment I made about the Q2 margins and the pushouts is we had some of those projects scheduled in Q2 that got pushed, some got pushed, you know, further into the year, and some got pushed into 2023.

Yeah, sure Hey, Brian So regarding the discussion so as we mentioned on the prepared remarks.

Yeah, sure. Hey, Brian . So regarding the discussion, so as we mentioned on the prepared remarks, you know, we've performed a project by project analysis on the order book when we spoke with customers and independently also evaluated the model certainty and with that, as of now, the pushouts that we see are moving into 2023, we don't have any further information at this point. And the comments I made about the Q2 margins and the pushouts is we had some of those projects scheduled in Q2 that got pushed, some got pushed into Q2.

Therefore on a project by project analysis on your book when we spoke with customers and independently also evaluate the amount of uncertainty and with that ill now pushed out that lease year are moving into 2023, we don't have any further information at this point and the comments I made about the Q2 margin and the push outs.

We had some some of those projects scheduled in Q2 that got pushed some got pushed into Q further into the year and some got pushed into 2023.

further into the year and some gap weekend in 2020.

Brian Lee: Okay, fair enough. That's helpful. Maybe two just kind of modeling-related questions. You know, if I look at the sort of $200 million or so in revenue that's being pulled out of the guidance for the year at the midpoint, and then I know in the press release you said that the EBITDA impact is higher because these are, you know, richer margin projects. It implies you're getting like a 30% EBITDA margin on the $200 million revenue or so that's being pulled out of the guide. I guess one, is that correct? Two, I guess what are you seeing on the incremental $200 million of bookings and awarded contracts you cited in the quarter?

Okay, fair enough. That's helpful. And then maybe two just kind of modeling related questions. You know, if I look at the sort of 200 million or so in revenue that's being pulled out of the guidance for the year at the midpoint, and then I know in the press release you said that the

Okay Fair enough. That's helpful. And then maybe to just kind of modeling related questions.

Yes.

Look at the sort of 200 million or so in revenue.

Being pulled out of the guidance for the year at the mid point and then I know in the press release, you said that the.

the EBITDA impact is higher because these are richer margin projects. It implies you're getting like a 30% EBITDA margin on the $200 million revenue or so that's being pulled out of the guide. So I guess one, is that correct? And then two, is that correct?

The EBITDA impact is higher because these are rich.

A richer margin projects it implies youre getting like a 30% EBITDA.

Margin on the.

The 200 million revenue, so thats being pulled out of the guide. So I guess, one is that correct and then two.

I guess, what are you seeing on the incremental $200 million of bookings and awarded contracts you cited in the quarter? Is this kind of the level of EBITDA margin you're expecting going forward on new projects? Just sort of seems like a very high number, just trying to get a sense of how sustainable that 30% level is, just given what's implied by the push out in revenues here.

I guess, what are you seeing on the incremental $200 million of bookings.

In order to contracts you've you cited in the quarter or is this kind of the the.

Brian Lee: Is this kind of the level of EBITDA margin you're expecting going forward on new projects? Just sort of seems like a very high number. Just trying to get a sense of how sustainable that 30% level is, just given what's implied by the push out in revenues here.

The level of EBITDA margin, you're expecting going forward on new projects to sort of it seems like a very high number just trying to.

Get a sense of how sustainable that 30% level is just given what's implied by the pushout in revenues here.

Nipul Patel: Yeah. Hey, Brian. Just a little clarification. When we said the push out of the $200 million, that's at legacy margins, so think about low 20s. The piece that is also in there is our FTI business has, you know, as we mentioned in the prepared remarks, has a bit more higher construction costs and logistics costs. That's we're gonna see that remaining for a couple of quarters, so impacting 2022. The combination of the two is what brings the midpoint of that EBITDA range down.

Yeah, hey Brian , so just a little clarification. So when we said the push out of the $200 million, that's at legacy margins. So think about low 20s. That's a piece that is also in there is our FPI business has, you know, as we mentioned in the prepared remarks, has a bit more higher construction costs and logistics costs. That's, we're going to see that overhang for a couple of quarters, so impacting 2022. So the combination of the two is what brings the midpoint of that even a range.

Yeah, Hey, Brian So still a fair clarification. So when we set the push out of the 200 million at legacy legacy margins thinking about low twenty's. There's a piece that is also in there is our MTI business has as we mentioned in the prepared remarks.

Our higher construction costs and logistics costs.

We're going to see that already for a couple of quarters. So connecting 2022. So the combination of the two is what.

One point of that EBITDA range down.

Brian Lee: Sorry, let me repeat myself. I was looking at, you know, what you've taken out of the guide, I guess. Some of that is just the elevated cost, but it does imply the incremental, you know, $200 million of revenue. Had you captured that was gonna come in at a 30% EBITDA margin. Am I missing something there? Is there something unique about that volume of projects that is now, you know, being assumed in 2023, I suppose, reaching those levels of profitability? Because it's just the EBITDA delta versus the revenue delta I'm trying to get at, and it implies a pretty healthy margin profile for the amount of projects that are pushing out in the guide here.

Sorry, let me repeat myself. I was looking at what you've taken out of the guide, I guess, so some of that is just the elevated cost, but it does imply the incremental $200 million of revenue.

Sorry, let me repeat myself I was looking at.

What you've taken out of.

The guide I guess, so some of that is just the elevated cost, but it does imply the incremental two.

$200 million of revenue.

you know, had you captured that that was going to come in at a 30% EBITDA margin, am I missing something there? Is there something unique about that, that volume of projects that is now, you know, being assumed in 23, I suppose, reaching those levels of profitability because it's the EBITDA delta versus the revenue delta I'm trying to get at and it implies a pretty healthy margin profile for the amount of projects that are pushing out in the guide here.

How'd you had you capture that that was going to come in at a 30% EBITDA margin am I missing something there or is there something unique about that.

That volume projects that is now being assumed at 23 I suppose.

Reaching those levels of profitability because it's just it's the EBITDA.

Delta versus the revenue Delta I am trying to get at and it implies a pretty healthy margin profile for us.

The amount of projects that are pushing out in the guide here.

Nipul Patel: No, you know, it does. It's not implying anything more. I would keep it to thinking that we're at the legacy margins of below 20%, what's pushing out of 2022 and into 2023.

So it doesn't it's not implying anything more so I would keep it too thinking network at the legacy margins in the low 20%, what's pushing out to 2022 and into 2023.

So, you know, it's not, it's not implying anything more. So I would, I would keep it to thinking that we're at the legacy margins and below 20%, what's pushing out 2022 and into 2023.

Brian Lee: Okay. Fair enough. I'll take it offline. Then just on the cash comments in the balance sheet. You know, you have $50 million of cash or so exiting Q1 here. I think the revolver's untapped. But how should we think about, you know, cash flow? It sounds like based on your comments and also looking at seasonality, Q2 is gonna be another cash burn quarter. Plans to tap the revolver, any covenants we need to be aware of, and just general thoughts around liquidity in the near term until you see better cash flow in the back half of the year.

Okay, fair enough. I'll take it offline and then just on the cash

Okay fair enough I'll take it offline and then just on the cash.

comments in the balance sheet. You have $50 million of cash or so exiting Q1 here. I think the revolver is untapped, but how should we think about cash flow, it sounds like, based on your comments and also looking at seasonality. Q2 is going to be another cash burn quarter. Plans to tap the revolver, any covenants we need to be aware of and just general thoughts around liquidity in the near term until you see better cash flow in the back half of the year.

Comments on the balance sheet, you have $50 million of cash or so.

Exiting Q1 here I think the revolvers untapped, but how should we think about cash.

Cash flow it sounds like based on your comments and also looking at seasonality Q2 is going to be another cash burn quarter.

<unk> plans to tap the revolver any covenants, we need to be aware of.

And just your general thoughts around liquidity in the near term until you see better cash flow in the back half of the year.

Nipul Patel: Yeah, no. Yeah, you'll see we are tapped on the revolver of $52 million at Q1, you'll see. We do have $50 million of cash on the balance sheet, just timing of that. We feel good about overall cash flow. As we mentioned in the prepared remarks, we will be cash flow positive. We're forecast to be cash flow positive for the year, that'll be back half weighted. Q2 is a quarter year where some of these projects that we mentioned previously have shifted out of Q2. You know, that kind of peak has helped a little bit from a cash flow perspective.

Yeah, no. So, yes, you'll see we are we're tapped on the revolver of 52 million next to one. You'll see, but we do have 50 million of cash on the balance sheet. Just timing of that.

Yeah.

Yes, you'll see we're tapped on the revolver of $52 million at Q1, you'll see but we do have $50 million.

Cash on the balance sheet, just timing of that we feel good about overall cash flow as you mentioned in the prepared remarks.

We feel good about overall cash flow. As we mentioned, we prepared the merch.

We will be casual positive we're looking to be casual positive for the year that we back up weighted q2 is Is a quarter year where some of these projects that we mentioned previously have shifted out of q2? So, you know, that's kind of that peak has helped a little bit from a cash flow perspective. So we feel, you know, it'll be

We'll be cash flow positive cash.

Cash flow positive for the year and backend weighted Q2 is.

In a quarter here, where some of these projects that we mentioned previously have shifted out of Q2, so that kind of that peak has helped a little bit from a cash flow perspective. So.

Nipul Patel: We feel, you know, it's H2 weighted about a little bit of, you know, free cash flow positive in Q2, and then H2 weighted to get to a total free cash flow positive for the year.

We feel it will be.

get back half-weighted, about a little bit of, you know, pre-cash flow positive in Q2, and then back half-weighted to get to a total pre-cash flow positive for the year.

Back half weighted.

A little bit of free.

Free cash flow positive.

Q2, and then back half weighted to get to a total free cash flow positive for the year.

Brian Lee: Okay. Appreciate it. Thanks a lot, guys.

Okay.

Okay I appreciate it thanks, a lot guys.

Operator 2: Our next question is from Mark Strouse of J.P. Morgan. Please go ahead.

Operator: Our next question is from Mark Strouse of J.P. Morgan. Please go ahead.

Yeah.

Our next question is from Mark Strauss of JPMorgan, please go ahead.

Our next question is from Mark Strouse of Jpmorgan. Please go ahead.

Mark Strouse: Yeah. Good afternoon. Thank you very much for taking our questions. I was just hoping you could give a bit more color on kind of demand trends that you're seeing in Europe, either with the STI business or the legacy Array business. We're seeing very strong import data into the European market year to date. Obviously utility scale projects take time. So just kinda curious if it's backlog or if it's pipeline, any way to quantify what you've seen in Europe year to date.

Yeah, good afternoon. Thank you very much for taking our questions. I was just hoping you could give a bit more color on kind of demand trends that you're seeing in Europe , either with the STI business or the legacy array business.

Yeah. Good afternoon. Thank you very much for taking my questions.

I was just hoping you could give a bit more color on kind of demand trends that you're seeing in Europe .

Either with the SDI business or the legacy array business we're.

We're seeing very strong.

import data into the European market year to date, obviously with utility scale projects take time, so I'm just kind of curious if it's backlog or if it's pipeline, any way to quantify what you've seen in Europe year to day.

The import data.

Into the European market year to date.

Obviously with utility scale projects take time, so I was just kind of curious if there if it's backlog or if its pipeline.

Any way to quantify what you've seen in Europe year to date.

Nipul Patel: Yeah. With both our US and European business, we've seen strength in our bookings. As we say, you know, our overall order book's gone up to $2 billion from what we had at year-end. We feel strong about that. STI has gone up as well. We've seen that strength in both STI businesses in both Europe and in Brazil. Europe is strong as, you know, kind of what you said as well there, Mark.

Yes, okay.

Yeah, so with both our U.S. and European business, we've seen strength in our bookings as we say, you know, our overall corner book's gone up to $2 billion from what we had in year end, so we feel strong about that. And FDI has gone up as well, and we've seen that strength both in both FDI businesses in both Europe and in Brazil, but Europe is as strong as, you know, kind of what you said as well. Thank you all very much.

With both our U S and European business, we've seen strength in our bookings.

As we say in our overall.

Order book has gone up to $2 billion from the what we added year end. So we feel strong about that SDI has gone up as well and we've seen that that strength in both SCS business in both Europe and in Brazil, but Europe .

As strong as it.

Kind of what you said as well every month.

Mark Strouse: Okay. I mean, if we think about a surge in demand in Europe in addition to kind of pushouts from ADCVD in the US kind of gearing up for arguably a very strong 2023, does that require any kind of temporary elevated investment in order to prepare your ability to meet that demand, those shipments in 2023?

Okay and then.

Okay. And then, I mean, if we think about a surge in demand in Europe , in addition to kind of push out from ADCVD in the U.S., kind of gearing up for arguably a very strong 2023, does that require any kind of temporary elevated investment in order to prepare your ability to meet that demand, those shipments in 2024?

If we think about a surge in demand in Europe . In addition to kind of push outs from 80 CVD in the U S.

Gearing up for arguably a very strong 2023 does that require any kind of.

Temporary elevated investment in order to prepare your ability to meet that demand those shipments in 2023.

Nipul Patel: No, the fortunate thing is, you know, we have the asset-light model, and our supply chain is, you know, goal is to increase our capacity to handle increases in overall demand. We feel right now, you know, we're setting that capacity up for the demand that is pushing out into 2023.

The unfortunate thing is we have the asset light model and our supply chain.

You know, the fortunate thing is, you know, we have the asset like model and our supply chain is, you know, goal is to increase our capacity to handle increases in overall demand. We feel right now, you know, we're setting that capacity up for the demand that is pushing out into 2023.

Goal is to increase our capacity to handle.

Increases in overall demand, we feel right now and were setting that capacity up for the demand that is pushing out into 2023.

Mark Strouse: Okay. Then just real quick, lastly, this could be a yes or no answer, but kinda getting the sense that the construction costs and everything that you're talking about incremental expenses here do not impact your long-term view of gross margin. If we should still think about the legacy business being high teens, low twenties gross margins, is that still accurate?

Okay. And then just real quick, lastly, this could be a yes or no answer, but kind of getting the sense that the construction costs and everything that you're talking about incremental expenses here do not impact your long-term view of gross margin. So if we should still think about the legacy business being high teens, low 20s, gross margins, is that still accurate?

Okay, and then just real quick lastly, this could be a yes or no answer but.

Kind of getting the sense that.

The construction costs and everything that you're talking about incremental expenses here.

Do not impact your long term view of gross margin. So if we should still think about the legacy business being high teens low twenty's gross margins is that still accurate.

Nipul Patel: That is accurate.

Mark Strouse: Perfect. Okay. Thank you.

That is accurate.

Perfect. Okay. Thank you.

Operator 2: Our next question is from Maheep Mandloi of Credit Suisse. Please go ahead.

Operator: Our next question is from Maheep Mandloi of Credit Suisse. Please go ahead.

The next question is from Mahidman Loi of Credit Press. Please go ahead.

The next question is from <unk> <unk>.

Credit Suisse. Please go ahead.

Maheep Mandloi: Hey, good afternoon. Thanks for taking the questions. Just from the guidance, could you just talk about like how much confidence you have for the balance of, I think the US revenue is at the midpoint is roughly around $750 million. How much confidence do you have on that in terms of module availability from your customers?

Hey, good afternoon. Thanks for taking the questions. So just from the guidance, could you just talk a bit about how much confidence you have for the balance of, I think the US revenues at the midpoint is roughly around $750 million. So how much confidence do you have on that in terms of module availability from your customers?

Hey, good afternoon, thanks for taking the questions.

So just wanted to guidance.

Could you just talk about like how much confidence you have for the balance of.

I think the U S revenues at the midpoint is up here on the $750 million.

So how much confidence you have on that in terms of module availability from your customers.

Nipul Patel: Yeah, no, we do. Based on our discussions as well as independent valuations, we feel confident about module availability with the revised guidance that we provided.

Yeah, no, we do based on our discussions as well as independent valuations. We feel confident about model building with the revised guidance that we provided.

Yes, no we do based on our discussions as well as independent valuations, we feel confident about module availability with the revised guidance.

Got it.

Maheep Mandloi: Got it.

Kevin Hostetler: I will say, this is Kevin. I just wanna make sure that we're noting that that's at this point in time, right? We've had direct conversations with all our large customers, and this is their direct feedback to us and commitments that have been made to them for module availability. You know, dealing with some imperfect information from time to time, and at this point in time, we feel pretty confident.

But I will say, this is Kevin. I just want to make sure that we're noting that that's at this point in time. We've had direct conversations with all our large customers, and this is their direct feedback to us, and this has been made to them for a lot of people.

Got it got it but I will say that this is Kevin I just wanted to make sure that we're noting that thats at this point in time.

We've had direct conversations with all of our large customers and this is this is there a direct feedback to us commitments that have been made to them for Basel IV.

You know, dealing with some imperfect information from time to time, but at this point in time, we feel pretty confident.

Dealing with some imperfect information from time to time at this point in time, we feel pretty good.

Maheep Mandloi: Right. I presume you have access to like the type of modules probably used in those projects, right? Could you say like if those modules are exempted from this investigation or are they still at risk of potentially being reviewed later this year?

Right, and but I presume you have access to like the type of modules probably use in those projects, right? So could you say like if those modules are exempted from these investigation or are they still at risk of potentially being reviewed later this year?

Alright.

But I presume you have access to like the type of modules, probably using those projects right.

Could you say like if those modules are exempted from these investigation or are they still.

Electric cost potentially being reviewed later this year.

Nipul Patel: Well, I mean, I guess what we'll say, Maheep, is what Kevin said is, you know, we had discussions with customers, did our independent evaluation, and at this time, this is where we feel that, you know, we've identified the risk that we know at this time, based on that information, and that's why we feel comfortable with the guidance range we've provided.

Okay.

I mean, I guess global state behavior is what Kevin said is, you know, we did our, we had discussions with customers, did our independent evaluation and at this time, this is, this is where we feel the, you know, we've identified the risk that we know at this time based on that information and that's why we feel comfortable with, with the guidance range we've provided.

I mean, I guess global stage <unk>, what Kevin said is we did our are discussed we had discussions with customers that are independent evaluation and at this time. This is this is where we feel the.

We've identified the risks that we know at this time based on that information and that's why we feel comfortable with the guidance range we provided.

Maheep Mandloi: All right. Just one last one from me. I think in the past, you kind of talked about shipping trackers as well sometimes ahead of module deliveries, which generally is a rare occurrence. Trying to understand if that's something which could help kind of bring some upside to the guidance later this year? Thanks.

Alright, and then just one last one from me I think in the past you kind of talked about.

And then this one last one from me, I think in the past, we kind of talked about shipping trackers as well, sometimes ahead of model deliveries, which generally is a rare occurrence, but trying to understand if that's something which could help kind of bring some upside to the guidance later this year.

Shipping trackers as well, sometimes a handoff module deliveries, but suddenly theoretical ends but I'm.

Trying to understand if that's something which could help kind of.

Bring some upside to the guidance later this year.

Kevin Hostetler: We do currently have a couple of customers requesting that of us now, and we're evaluating that. You know, fortunately for us with our design, we have a high degree of flexibility. You know, for our end customers to potentially switch out similar modules without doing major design changes. We have customers who are operating in every bit of that continuum now from doing full design changes to switch out panels, to asking us to construct and then at a later point in time, supply the clamping systems for their module of choice, which may be in flux. We're working really hard with our customers, direct communication on a regular basis, and all along that continuum.

We do currently have a couple of customers requesting that of us now, and we're evaluating that. Fortunately for us with our design, we have a high degree of flexibility.

We do currently have a couple of customers requesting that of us now.

Evaluating that.

Fortunately for us with our design, we have a high degree of flexibility.

Okay.

You know, for our end customers to potentially switch out similar modules without doing major design changes. But with customers operating in every bit of that continuum now, from doing full design changes to switch out panels to asking us to construct and then at a later point in time supply the clamping systems for their module of choice which may be in flux. So we're working really hard with our customers to direct communication on a regular basis and all along that continuum.

For end customers to potentially switch outs similar modules without doing major design changes, but we have customers.

And every bit of that continuing now from doing full design changes to switch out.

To asking us to construct.

And then at a later point in time to supply the clamping systems for their module of choice, which may be important. So we're working really hard with our customers direct communication on a regular basis and all along that continuum.

Maheep Mandloi: Gotcha. I appreciate the response. Thanks.

Got you and I appreciate the response.

Kevin Hostetler: I guess it should be noted that many of our customers, although the modules may be at risk in pushing out of this year, that doesn't mean they're giving up. They're still trying to find alternative supply and trying to pull and keep things into their original program dates as well. We're certainly here and willing to support them in all of those endeavors.

I guess you should be noted that many of our customers, although the modules may be at risk in pushing out of this year, that doesn't mean they're giving up. They're still trying to find alternative supply and trying to pull and keep things into their original program dates as well. So we're certainly here and willing to support them in all of this.

I guess it should be noted that many of our customers. Although the modules may be at risk and pushing out of this year that doesn't mean, they're giving up theyre still trying to find alternative supply and trying to pull a few things into their original program dates as well so.

We're certainly here are willing to support them in all of those.

Operator 2: Our next question is from Philip Shen of Roth Capital. Please go ahead.

Operator: Our next question is from Philip Shen of Roth Capital. Please go ahead.

Next question is from Philippe Chin of Roth Capital. Please go ahead.

Our next question is from Philip Shen of Roth Capital. Please go ahead.

Philip Shen: Hey, guys. Thanks for taking my questions. I had a follow-up on Maheep's question there on the 2022 revenue guide. Was wondering if you might be able to share what percentage of that $1 billion is one, domestic and two, international. Then also importantly, of the domestic revenue, what percentage of that do you think is supported by First Solar Maxeon projects as well as Safe Harbor? Just trying to get a feel for, you know, the level of confidence you have in that $1 billion, and if there, again, with, you know, First Solar Maxeon and Safe Harbor modules, then it seems like you guys are probably in a very good position there with the $1 billion. Thanks.

Hey, guys. Thanks for taking my questions I had a follow up on the heaps question there on the.

You guys, thanks for taking my questions. I had a follow-up on Maheep's question there on the 22 Revenue Guide. I was wondering if you might be able to share what percentage of that billion dollars

The 22 revenue guide was wondering if you might be able to share what percentage of that $1 billion.

is one domestic and two international. And then also importantly of the domestic revenue, what percentage of that do you think is supported by first solar, maxion?

Is one.

Domestic and two international and then also importantly of the domestic.

Revenue what percentage of that do you think is supported by first solar maxion.

projects as well as safe harbour. Just trying to get a feel for the level of confidence you have in that billion.

Our projects as well as safe Harbor just.

Just trying to get a feel for.

The level of confidence you have in that $1 billion.

And it's.

there again with, you know, FIRST Solar Maxon and TAFE Harbored Modules, then it seems like you guys are probably going to...

Sure again, with personal and Maxion and Safe Harbor.

Harvard modules then.

Like you guys are probably not.

Very good position there.

Nipul Patel: Yeah. Hey, Philip. First, to answer the first part of your question, of that $1 billion, that represents the legacy Array portion of, it's about a 90-10 split as far as domestic, international. As far as the split, we haven't provided the split of, you know, kind of of that $1 billion or of that $900 million, I guess that of the particular modules. Again, you know, we'll go back to the discussions we had, but also the independent evaluation we did of what module certainty there was. We feel, you know, we feel good about that at this point, where we feel confident enough to put the $1 billion out there as far as midpoint.

Yeah.

Yeah, Hey, Phil.

Yeah, hey, so the answer to the first part of your question, that billion that represents the legacy array portion of.

To answer the first part of your question on that billion.

<unk> represents the.

CRA portion.

It's about a 90-10 split, as far as domestic and international, as far as the split. We haven't provided a split of, you know, kind of of that billion, or that $900 million, I guess, of the particular modules, but again, now we'll go back to the discussions we had, but also the independent evaluation we did of what module certainty there was. We feel, you know, we feel good about the

That's about a 90 10 split as far as domestic international.

As far as the split we haven't provided the split.

Of that billion.

$900 million against that.

The particular modules, but again I'll go back to the discussions we had but also the independence.

Evaluation, we did.

What nodule certainty there was we feel we feel good about that at this point.

that at this point where we feel confident enough to put the billion dollars out there as far as midpoint.

Where we feel confident enough to put the $1 billion out there as far as the midpoint.

Philip Shen: Great. Thank you, Nipul. Coming back to the revolver, you mentioned, Nipul, that you guys pulled down $52 million in the quarter. Can you talk through how much more you can pull down without tripping any of the covenants?

Great. Thank you, Nipol. And then coming back to the revolver, you mentioned, Nipol, that you guys pulled down 52 million in the quarter. Can you talk through how much more you can pull down without tripping any of the covenants?

Great. Thank you in April and then coming back to the revolver.

You mentioned people that you guys pulled down $52 million in the quarter can you talk through how much more you can pull down without tripping any of the covenants.

Nipul Patel: Yeah, sure. You know, we have a covenant that we have to be 7.1x leverage or less. With the short term kind of trailing twelve-month adjusted EBITDA that we've had, we have to stay under $70 million for the very short term, probably Q2. We feel good about, you know, our cash flow here in Q2 and the options we have, you know, scenario planning we've done to get past the short term. After Q2, we see it opening up and the full revolver capacity being available for us.

Yes, sure. So we have we have a covenant that we.

So, you know, we have a covenant that we have to be 7.1 times each leverage or less. And so, with the short-term kind of trailing 12 months, just the EBITDA that we've had, we have to clear. We have to stay under 70 million for the very short-term, probably Q2, but we feel good about, you know, our cash flow here in Q2 and the options we have, you know, scenario planning we've done to get this past the short-term and then after Q2 we see it opening up in the full revolver capacity being available for us.

We have to be seven one times.

Oh leverage or less.

And so with a short term kind of a trailing 12 month adjusted EBITDA that we've had we have to clear web stay under $70 million for the very short term problem in Q2, we feel good about.

Our cash flow here in Q2, and the options that we have scenario planning we've done too.

As the short term and then after Q2, we see opening up in.

For the full revolver capacity being available for us.

Philip Shen: Okay, great. Thanks. One more here. As it relates to STI, can you just help us understand, you were talking about these increased construction costs, but I think of you guys as, you know, selling widgets and tracker and product. So does STI have a business where they actually get involved with EPC as well? Just if you can give us a little bit more color on that. Sorry if I missed it, but thank you.

Okay, great. Thanks, and one more here. As it relates to STI, can you just help us understand, you were talking about these increased construction costs, but I think of you guys as selling widgets and tracker and product. So does STI have a business where they actually get involved with PPC as well? And just if you can give us a little bit more color on that, and sorry if I missed it, but um

Okay, great, Thanks, and one more here.

It relates to STI can you just help us understand.

You were talking about these increased construction costs, but I think if you guys are selling widgets and tracker and product.

So.

It does STI of a business, where they actually get involved with <unk> as well and just if you can give us a little bit more color on that and sorry, if I missed this but thank you.

Nipul Patel: Yeah. Hey, Philip. That isn't their core business, but for certain large customers, they have contracted to do the construction for projects. What drove a large portion of the margin lower than our expected amount for Q1 was a project in the US. We've been involved. They have another project in the US where they've committed construction, and we've been involved, the management team is involved in helping them with their labor, choosing labor for that one. It's not something they do as a core competency, but they have it on a couple of projects.

Yeah, so, hey, so there are that isn't their core business, but for certain large customers, they have contracted to do the construction for projects and what drove.

Yeah, so haynesville that isn't their core business, but for certain large customers. They have contracted to do the construction projects and what drove that.

A large portion of what drove the margin lower than our expected amount for Q1 was a project in the U.S. We've been involved. They have another project in the U.S. where they've committed construction, and we've been involved. The management team is involved in helping them with their labor, choosing labor for that one. So, that's not something they do as a core competency, but they have it on a couple of projects.

A large portion of what drove the margin.

The margin lower than our expected amount for Q1 was a project in the U S. We've been involved they have another project in the U S where they've committed construction and we've been involved the management team is involved in helping them with their labor keeping labor for that one so that's.

That's something that you as a core competency, but they have it on a couple of projects.

Philip Shen: Okay. Appreciate all the color. Thanks.

Okay. Appreciate all the color. Thanks.

Operator 2: Our next question is from Colin Rusch of Oppenheimer. Please go ahead.

Operator: Our next question is from Colin Rusch of Oppenheimer. Please go ahead.

Our next question is from Colin Rüsch of Oppenheimer. Please go ahead.

Our next question is from Colin Rusch of Oppenheimer. Please go ahead.

Colin Rusch: Thanks so much. Guys, I wanna dig into the liquidity question a little bit deeper. Can you give us a sense of how much liquidity you have right now and, you know, how much you've been able to collect out of that working capital, quarter to date?

Thanks so much. Guys, I want to dig into the liquidity question a little bit deeper. Can you give us a sense of how much liquidity you have right now and, you know, how much you've been able to collect out of that working capital quarter of the day?

So much because I wanted to dig into the liquidity question, a little bit deeper can you give us a sense of how much liquidity you have right now.

How much you've been able to collect out of that working capital on a quarter to date.

Nipul Patel: Yeah, sure. Liquidity, you know, we have the revolver up to another $20 million on the revolver plus the cash we have on the balance sheet, as mentioned previously. We also have, if needed, $100 million of preferred shares that we can pull. Of course, as you saw, you'll see as our receivables, we have $400 million of receivables at 3/31, and about $200 million of payables. That just cash sources and uses, we expect those receivables to be collected here in Q2. We feel that provides us enough liquidity along with the remaining revolver as well as, you know, if needed, potentially the preferred shares.

Yeah, sure. So liquidity, you know, we have, we have the revolver up to another $20 million on the revolver plus the cash we have on the balance sheet, as mentioned previously.

Yes, sure so liquidity.

We have we have the revolver up to now.

Yes, $20 million on our revolver plus cash we have on the balance sheet.

As mentioned previously.

We also have, if needed, we have $100 million with preferred shares that we could pull. And then, of course, as you saw, you'll see as our receivables, we have $400 million receivables at $331, and about $200 million of payables, so that just cash sources and uses, we expect those receivables to be collected here in Q2. Please fill out that provides us enough liquidity along with.

You also have if needed we have a 100 million preferred preferred shares that we can pull and then of course as you saw you will see as our receivables we have $400 million receivable at $3 31.

And about $200 million payable so that just cash sources and uses we expect those receivables to be collected here in Q2.

It provides us enough liquidity, along with the remaining revolver as well as <unk>.

the remaining revolver as well as potentially the preferred share.

It essentially the preferred shares.

Colin Rusch: Okay. That's helpful. Can you give us an update on any sort of efforts that you have around engineering and, you know, cost out of the solutions and cost reduction efforts and qualification of those redesigns?

Okay.

Okay, that's helpful. And then can you give us an update on any sort of efforts that you have around engineering and, you know, cost out of the solution and cost reduction efforts and qualification of those redesigns?

Helpful. And then can you give us an update on any sort of efforts that you have around engineering and.

Cost out of the solutions and cost reduction efforts and qualification of those redesigns.

Nipul Patel: Yeah, sure. You know, we continue to look at value engineering our products and taking cost out of it. Nothing very specific at this point, but we continue to work with our customers on, you know, reducing the cost of install of their product. Whatever we can do on that, because that's one of the largest costs, of course, in building the solar farm. We'll continue to help the customer with that and reduce and on, you know, installing the trackers as well as the foundations and such. Those are the key things we're working on from an engineering innovation standpoint.

Yes, sure. So we continue to see them.

Yeah, sure. So, you know, we continue to look at value engineering and our products and taking costs out of it.

Looking at value engineering, our product and taking cost out of it.

Nothing very specific at this point, but we continue to work with our customers on, you know, reducing the cost of install of their product. So, whatever we can do on that, because that's one of the largest costs, of course, in building the solar farm. So we'll continue to help the customer with that and in reduce and on.

Nothing very specific at this point the whole we continue to work with our customers.

Reducing that cost of install of their product. So whatever we can do on that.

Of course in building the solid firms, who will continue to do.

Our customer with that end and reduced and on.

You know, installing the trackers as well, the foundations and stuff. So we, those are the key things we're working on from an engineering innovation standpoint.

Installing the trackers as well as the foundations and stuff so.

So those are the key things, we're working on from an engineering innovation standpoint.

Colin Rusch: Okay. Thanks a lot, guys.

Okay. Thanks, a lot guys.

Operator 2: Our next question is from Kashy Harrison of Piper Sandler. Please go ahead.

Operator: Our next question is from Kashy Harrison of Piper Sandler. Please go ahead.

unexpressioned from Kashi Harrison of 5% lip. Please go ahead. Good afternoon.

Our next question is from Kashi Harrison Harte Sandler. Please go ahead.

Kashy Harrison: Good afternoon, and thank you for taking the questions. Kevin, congrats on the new role. You made a comment in your prepared remarks about sharing risks with your customers. Could you please elaborate further on what you were referring to specifically?

Good afternoon, and thank you for taking the questions.

Kevin.

Kevin, congrats on the new role. You made a comment in your prepared remarks about sharing risks with your customers. Could you please elaborate further on what you were referring to specifically?

Congrats on the new role.

Made a comment in your prepared remarks about sharing risks with your customers could you. Please elaborate further on what you were referring to specifically.

Kevin Hostetler: Yeah. This is really about maintaining a level of flexibility for customers. What I was referencing there, in particular, was things such as warranty on clamps and clamp design that may be changing from the original design spec to where they find themselves needing a different clamp spec with different module choice, right? We have customers coming to us saying, Look, can you be a little bit more flexible, extend warranty on that change of design, and we'll either pay an additional money for an extended warranty or things like that. Just asking us for a little bit more flexible solutions to get through this time period. We're certainly willing to do that only after we've done the engineering work internally to make sure that makes sense for us to do.

Yeah.

Yes. So this is really about maintaining a level of flexibility for customers.

Yes, so this is really about maintaining a level of flexibility for customers. And what I was referencing there in particular was things such as warranty on the clients and client design that may be changing from the original design spec to where they find themselves needing a different client spec with a different module voice, right?

He was referencing there in particular was.

Things such as warranty on claims that.

And maybe changing from the original design spec.

Two where they find themselves needing a different class spec with.

With a different module.

Alright.

So we have customers coming to us saying, look, can you be a little bit more flexible, extend warranty on that change of design, and we'll either pay an additional money for an extended warranty or things like that. So just asking us for a little bit more flexible solutions to get through this time period, and we're certainly willing to do that.

So we have customers coming to us, saying look could you be a little bit more flexible extended warranty on that changes design and wont be there pay an additional one eight for an extended warranty or things like that so just asking us for a little bit more flexible solutions.

To get through this time period, and we're certainly willing to do that.

Only after we've done the engineering work internally to make sure that that makes sense for us to do so it's really about again staying in close contact with these large customers of ours and having a degree of flexibility and working.

Only after we've done the engineering work.

Certainly to make sure that that made sense for us to do so.

Kevin Hostetler: It's really about, again, staying in close contact with these large customers of ours and having a degree of flexibility in working with them.

It's really about again staying in close contact with these large customers of ours and having a degree of flexibility in working with them.

Kashy Harrison: That's helpful.

That's helpful. That also extends in the other direction, right, where as we have some of these large programs flipping out, ensuring that our suppliers, our vendors, are being flexible in delaying shipments and what have you and keeping it in their inventory instead of ours to help us manage working capital a little bit better. So we're looking for that flexibility in both directions and we're behaving in a very flexible manner. Our customers are and thus far our vendors are as well.

Kevin Hostetler: We also think that extends-

That's helpful.

Kashy Harrison: Oh, sorry. Go ahead.

Kevin Hostetler: Yeah. That also extends in the other direction, right? Where as we have some of these large programs slipping out, ensuring that our suppliers, our vendors are being flexible in delaying shipments and what have you, and keeping it in their inventory instead of ours to help us manage working capital a little bit better. We're looking for that flexibility in both directions and we're behaving in a very flexible manner. Our customers are, and thus far, our vendors are as well.

Yes.

So that also extends to the other direction right, where as we have some of these large programs slipping out of ensuring that our suppliers, our vendors are being flexible and delaying shipments and what have you and keeping it at their inventory instead of ours to to help us manage working capital a little bit better. So we're looking for that flexibility in both directions and we're behaving.

At a very flexible manner, our customers are and thus far our vendors are as well.

Kashy Harrison: That's helpful context and actually dovetails quite nicely into my next question, which is around working capital. I think both you and Nipul mentioned it's gonna be a focus here moving forward. You know, just looking at the day sales outstanding in like 2019, 2020 relative to where it is today, it seems like that you know day sales outstanding has increased quite a lot over that time period. I'm wondering if something has changed in the way you collect cash from your customers today relative to 2020, and if you have the ability to return to those historical levels across the board, not just receivables, but payables and inventory days, etc.

That's helpful context and actually dovetails quite nicely into my next question, which is, which is surrounding working capital. I think both you and people mentioned it's going to be a focus here moving forward. You're just looking at the day sales upstanding.

That's helpful context, and actually dovetails quite nicely into my next question, which is which is around and working capital I think both you and nipple mentioned.

It's going to be a focus here.

Moving forward.

Just looking at the days sales outstanding.

in like 2019, 2020 relative to where it is today, it seems like, you know, day sales and spending has increased quite a lot over that time period. I'm wondering if something has changed in the way you collect cash from your customers today relative to 2020 and if you have the ability to return to those historical levels across the board, not just not just receivables but payables and inventory days, etc.

In like 2019, 2020 relative to where it is today.

It seems like.

Days sales outstanding has increased quite a lot over that time period I'm wondering if something has changed in the way you collect cash from your customers today relative to the 2020 and if you have the ability to return to those historical levels across the board not just not just receivables payables and.

Tori days et cetera.

Nipul Patel: Yeah. You know, the short term answer is yes, that we feel we have the ability to get back to those. Keshi, the short term right now with you know, the supply chain as it is, I'll speak of DOIs first and inventory. You know, we've increased inventory in certain aspects of you know, in Q4 and into Q1 to ensure that one, the costs are higher, right, of inventory, but so there's inflation in that. Then also, you know, to buffer any supply chain issues, we've increased some safety stock to make sure we deliver on time, so we don't delay project builds.

Yes.

The short term answer is yes, we feel we have the ability to get back to those kashi.

The short-term answer is yes, but we feel we have the ability to get back to those. Actually, the short-term right now with the supply chain as it is, I'll speak of DOI first and inventory, we've increased inventory in certain aspects in Q4 and in the Q1 to ensure that

Short term right now.

The supply chain as it is I'll speak.

<unk> first in inventory we have.

Increased inventory in certain aspects.

In Q4, ending Q1 to ensure that our costs are higher.

costs are higher, right, of inventory, but there's inflation in that. But then also, you know, to buffer any supply chain issues, we've increased some safety stock to make sure we deliver on time. So we don't delay project bills on the TSOs. There's a portion of that where, you know, as we were delivering items at, you know, the linearity of the deliveries kind of impacted the unbilled, which is...

Inventory.

There is inflation in that but then also.

To buffer any supply chain issues and increased safety stock to make sure. We deliver on time. So we don't delay in project Thunder on the Dsos Theres a portion of that where we.

Nipul Patel: On the DSOs, there's a portion of that, where you know as we were delivering items at you know the linearity of the deliveries kind of impacted the unbilled, which is items that we shipped and delivered but not have gone into the billing cycle yet. The unbilled has increased, which temporarily as our shipments are getting caught up here at the end of Q1. We feel that'll burn down here in Q2 and the balance of the year and get back toward our kind of historical DSOs and DOI as we also burn down the inventory.

We were delivering items.

The linearity of the of the deliveries kind of impacted.

Unbilled niches.

items that we've shipped and delivered but not have gone into the billing cycle yet. That young bill has increased which temporarily as our shipments are getting caught up here at the end of Q1. So we feel that will burn down here in Q2 in the balance of the year and get back toward our kind of historical DSOs and DOI as we also burn down the inventory.

Items that we ship.

<unk> delivered but not have fundings in the billing cycle yet.

Yes.

The Unbilled has increased which temporarily.

Our shipments are getting caught up here at the end of Q1. So we feel that will burn down here in Q2, and the balance of the year and get back toward our historical DSO and DIY as we burn down the inventory.

Kashy Harrison: That's very helpful. If I could sneak maybe just one more in. Just going back to that question on the legacy Array guidance. You know, that $1 billion compares to what you guys did last year at $850 million. I think last year, 97% was US. This year, 90% is US. If you adjust for higher ASPs, would volumes in the US be relatively flat year over year? Or would they be down year over year for your legacy Array US business? That's it. Thank you.

That's very helpful and if I could think maybe just one more in just just going back to that question on the legacy array guidance.

That's very helpful and if I can sneak maybe just one more in I'm just going back to that question on the legacy.

Hey, guys.

Guidance.

You know, that one billion, you know, compares to what you guys did last year at 850. I think last year 97% was U.S. This year 90% is U.S. So if you adjust for higher ASPs, would volumes be relatively flat in the U.S. year over year, or would they be down year over year for your legacy array U.S. business? And that's it. Thank you.

About 1 billion comparisons, but what you guys did last year at 850 am I think last year and 97% was U S. This year and 90% is U S.

So if you if you adjust for higher Asp's wood.

Would volumes be relevant in the U S to be relatively flat year over year or would they be down year over year for.

For your legacy <unk> U S business and that's it thank you.

Nipul Patel: Yeah. You know, when you look at it that way, we actually see that the volumes are slightly up in the US business ex any increase due to pricing. So we've actually seen, seeing it up with the $1 billion.

Yeah, you know, when you look at it that way, we actually see that the volumes are slightly up in the U.S. business X, any increase due to pricing. So we've actually seen it up with the $1 billion.

Yes.

When you look at it that way, we actually see that the volumes are slightly up in the U S business ex any increase.

<unk> increased due to pricing.

We've actually seen.

With the $1 billion.

Kashy Harrison: That's it for me. Thank you.

That's it from me thank you.

Operator 1: Our last question is from Donovan Schafer of Northland Capital Markets. Please go ahead.

Operator: Our last question is from Donovan Schafer of Northland Capital Markets. Please go ahead.

Our last question is from Donna Ben-Shaser of Northland Capital Markets, please go ahead.

My last question is from Jonathan Shaffer of Northland Capital market. Please go ahead.

Donovan Schafer: Hi. Hi, guys. Thanks for taking the question. I wanna follow up asking about kind of the, you know, self-performance or doing the EPC work that STI Norland is doing in North America. One would just be, you know, I think you mentioned that there was one other project. If you can give kind of a sense of size, you know, it could be very rough, you know, if we're talking, you know, larger than 100MW, smaller than 100MW, something like that. Just, and if there's more beyond that, and also outside the US. Is it, you know, is this strictly a US phenomenon where they were doing the self-performance because, you know, it's higher wage market, maybe they felt like they had to prove it out, and execute the labor on their own?

Hi.

Hi, hi guys. Thanks for taking the question. I want to follow up asking about kind of the you know self-performance or doing the EPC work to SGI in Northern America.

Hi, guys. Thanks for taking the question.

I wanted to follow up asking about kind of the.

Ah self performance, we're doing the EPC works as Dino Island, and North America.

One would just be, you know, I think you mentioned that there was one other project. If you can give kind of a sense of size, you know, it could be very rough, you know, for talking, you know, larger than 100 megawatts, smaller than 100 megawatts.

One would just be you know I think you mentioned that there was one other project.

If you can give kind of defensive side.

It could be very rough.

And.

Larger than 100 megawatts smaller than 100 megawatts.

something like that, and if there's more beyond that, and also outside the U.S. You know, it was just strictly a U.S. phenomenon where they were doing the self-performance because, you know, it's a higher-wage market, maybe they felt like they had to prove it out and execute the labor on their own. Of course, there's something else to do in Brazil and in Europe .

Something like that.

Just and if theres more beyond that.

And also outside the U S.

It's strictly a U S phenomenon, where they were doing this outperformance because correlate with Martha maybe they felt like they had to prove it out.

So labor on their own.

Donovan Schafer: Is this something they also do in Brazil, and in Europe?

Or is there something else to do in Brazil.

In Europe .

Nipul Patel: Yeah. Hey, Donovan, it's Nipul. The project is, you know, over 100MW here in the US, the second project. It's... There's no others scheduled for the US. We've assisted on that one considerably as far as ensuring the labor is, you know, at the correct cost and such. We've helped them on that one. They do have, as mentioned earlier in the call, it's not core for them, but they have projects both in Brazil and in Spain that they self-perform or install themselves. It's not by any stretch of the majority of their projects. It's a small portion of them, and we're evaluating that.

Yeah, hey, Donovan's people. So the project is, is, you know, over 100 megawatts here in the U.S. the second project and it's there's no others scheduled for the U.S. and we've we've assisted on that one considerably as far as ensuring the labor is, you know, at the cost and so we've helped them on that one. If you have, as mentioned earlier in the call.

Yeah, Hey, Jonathan people. So the project is over 100.

Meanwhile, here in the U S in the second project and.

There are no others scheduled for.

For the U S and we've.

Assisted on that one considerably as far as.

Ensuring the labor.

At the current cost so we've helped them.

On that one that you have and as mentioned earlier on the call not or for them, but they have projects, both in Brazil, and in Spain, and they sell outperformer or install themselves did not buy.

Not, not or for them, but they have projects both in Brazil and in Spain, and they sell the form or install themselves, but not, not by any stretch of the majority of their projects, the small portion of them and we're evaluating that.

By any stretch in it.

Any of that project with a small portion of them and we're evaluating that.

Donovan Schafer: Okay. For the depreciation expense that was added with the STI Norland acquisition, can you give us a sense of kind of what underlies that? You know, is that for, you know, capital equipment to be produced, tracker components? You know, is that the legacy amortization you guys have had with, you know, research and development, where you're no longer doing that practice of amortizing it? Is this something where, you know, it reflects CapEx that is likely to be happening and continuing, or is this something that's just gonna kind of run off? What's kind of underlying that depreciation?

Okay, and then for the depreciation expense that was added with the SDI in oil in that position, can you give us a sense of kind of what underlies that? You know, is that for, you know, capital equipment to be produced?

Okay and then.

The depreciation expense that was added with the Norland acquisition can you give us a sense of kind of what underlies.

Not for capital equipment, we produce.

tracker components, is that, you know, the legacy amortization you guys have had was, you know, research and development where you're no longer doing that practice of amortizing it. So is this something where, you know, there will be a reflect apex that is likely to be happening and continuing or is this something that's just going to kind of run off, what's kind of underlying that depreciation?

Cracker components.

Is that the legacy amortization do you guys have had with <unk>.

Search and development.

We're no longer doing that practice of amortizing it.

<unk>, where there will be a.

Reflect capex that is likely to be happening in renewing or is this something that's just going to kind of run off what kind of underlying depreciation.

Nipul Patel: Yeah. Hey, hey, Donovan. That's what you see there when we put in the prepared remarks is not depreciation, it's amortization related to the acquisition. That's amortization related primarily to backlog and customer lists. That's what makes up the $16.7 million.

Yeah, Hey, Jonathan.

What you see there is not depreciation, it's amortization related to the acquisition. And that's amortization related primarily to backlog and customer lists. That's what makes up the $16.7 million predominantly. My apologies. One last question.

What you see there and what was in the prepared remarks isn't that depreciation and amortization related to the acquisition.

And that's S.

Amortization related to primarily to backlog and customer list. That's what makes up the $16 7 million predominantly my apologies.

Donovan Schafer: Okay.

Nipul Patel: -predominantly.

Donovan Schafer: My apology. Well then, last question. Just, you know, in the interest of, or just sort of for my own sake, looking back, you know, I know things have changed. Looking back at the Q2 and the Q3 decks in 2021, you know, you guys gave some helpful information around gross margins and how that would kind of be reversing. Of course, there was this accounting change that led to the delayed Q4, and that had some impact on gross margins. I'm just curious if you could share for Q1, you know, in pretty rough terms, what kind of a gross margin would it have been under the old methodology? Is that something where you'd pick up another 1%, 2%?

And then last question just.

You know in the interest of or just sort of for my own sake looking back, you know I know things have changed Looking back at the Q2 and the Q3 dex from 21, you know You guys give some helpful information around gross margins and how that would kind of be reversed

In the interest of that sort.

For my own sake, looking back I know things have changed.

So looking back at.

The Q2 into Q3 Bucks in 'twenty. One you guys gave some helpful information around gross margins and how that.

Would kind of be reversing and then of course there is this accounting change that led to the delay in Q4.

And then, of course, there was this accounting change that led to the delay of Q4.

and that had some impact on gross margins. I'm just curious if you could share for the first quarter in pretty rough terms.

And that had some impact on gross margin. So I'm just curious if you could share for the first quarter.

And pretty rough term.

what kind of a gross margin would it have been under the old methodology? Is that something where you would pick up another 1% 2% I'm just trying to kind of

What kind of gross margin would have been under the old methodology is that something where you pick up another 1%, 2% I'm just trying to kind of recall that use it.

Donovan Schafer: I'm just trying to kinda recall that and use it based on what you say to kinda look back on how that compares with what you guys were saying back then. Again, I know things have changed. You know, the whole environment has changed. Can you give me any indication of that?

Recall that and use it based on what you say to kind of look back on how that compares with what you guys are saying like that And again, I know things have changed, you know, the whole environment has changed, but can you give me any indication of that?

Based on what you say to kind of look back and how that compares with what you guys are things like that and again I know things have changed.

The environment has changed.

Can you give me any indication of that.

Nipul Patel: Yeah. You know, hey, Donovan, we wouldn't have thought the margins would have changed in 2022 based on that accounting change. What we stated for the legacy Array business, that 8.5% is where the margins are. We feel good about that. It's a sequential growth as we're stating. We feel, you know, we also feel that in Q2 we'll continue that sequential margin growth. We're staying on that trajectory of the Array business recovering based on the processes we've put in place.

Yeah, you know, hey, Jonathan, we wouldn't have thought the margins would have changed in 2022 based on that that accounting change. So the what we stated for the legacy array business that eight and a half percent is is where where the margins are. So we feel good about that. It's a sequential growth as we are stating. We feel, you know, we also feel that Q2 will continue that sequential margin growth. So we're we're staying on a trajectory of the array business recovering based on the processes we put in place.

Hey, Jonathan.

We wouldn't.

Margins would've changed in 2022 based on that of that accounting change 78, what we stated for the legacy of writing business at eight 5% ish is where where the margins are so we feel good about that sequential growth as we stated and we feel.

We also feel that Q2 will continue that sequential margin growth. So we're staying on that trajectory on the array business recovery and based on the processes, we put in place.

Donovan Schafer: If I'm hearing this right, you're saying they would have also been 8.5%. That would have also been the gross margin under the old methodology? Or you're-

And so if I'm hearing this right, you're saying they would have also been eight and a half percent. That would have also been the gross margin under the old methodology.

And so on.

I'm hearing this right you're saying they would have also been eight 5% that would have also been the gross margin under the old methodology.

Nipul Patel: Yeah. Yeah.

Donovan Schafer: Yeah. Well, oh, okay. All right. Thank you. That's it for me. Thank you.

Yes.

Or you, yeah, well, okay, okay, all right. Thank you. That's it for me. Thank you.

Oh, Okay. All right. Thank you that's it for me.

Nipul Patel: No worries.

Thank you.

Yeah.

Operator 1: Ladies and gentlemen, we have reached the end of the question and answer session. This concludes today's conference. Thank you for joining us. You may now disconnect your lines.

Operator: Ladies and gentlemen, we have reached the end of the question and answer session. This concludes today's conference. Thank you for joining us. You may now disconnect your lines.

Ladies and gentlemen, we have reached the end of the question and answer session. This concludes today's conference. Thank you for joining us. You may now disconnect your lines.

Ladies and gentlemen, we have reached the end of the question and answer session. This concludes today's conference. Thank you for joining US you may now disconnect your lines.

[music].

Yeah.

[music].

Q1 2022 Array Technologies Inc (Dover) Earnings Call

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