Q4 2023 Array Technologies Inc Earnings Call

Operator: Greetings and welcome to Array Technology's fourth quarter and full year 2023 earnings call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the array technologies fourth quarter and full year 2023 earnings call.

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

Operator: The question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Cody Mueller, Investor Relations at Array. Please go ahead.

A question and answer session will follow the formal presentation.

As a reminder, this conference is being recorded.

Now my pleasure to introduce your host Cody Mueller Investor Relations at array. Please go ahead.

Cody Mueller: Thank you, and welcome to Array Technology's fourth quarter 2023 financial conference call. On the call with me today are Kevin Hostetler, our CEO, and Kurt Wood, our CFO. Today's call is being webcast from our investor relations site at ir.arraytechinc.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website. Today's discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures can be found on our website.

Thank you and welcome to array technologies fourth quarter 2023 financial conference call.

With me today are Kevin Hostettler, our CEO and Kurt what our CFO.

Today's call is being webcast from our Investor Relations site at IR.

They are a rain check dot com.

Audio and slides.

In addition, the press release detailing our quarterly results has been posted on the website.

Today's discussion of financial results is presented on a non-GAAP financial basis, unless otherwise specified.

A reconciliation of GAAP to non-GAAP financial measures can be found on our website.

Cody Mueller: We encourage you to visit our website at ArrayTechInc.com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending. As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, our expected results, and other matters. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from the statements made today. We refer you to the documents we file with the SEC, including our most recent Form 10-K, for a recent discussion of risks that may affect our future results. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievement. We are under no duty to update any of the forward-looking statements or compare these statements to actual results. I'll now turn the call over to Kevin. Thank you, Cody. Good afternoon, everyone.

Encourage you to visit our website at a rain check in dot com throughout the quarter for the most current information on the company, including information on the financial conferences that we may be attending.

As a reminder, the matters. We're discussing today include forward looking statements regarding market demand and supply are.

Expected results and other matters.

These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from the statements made today.

We refer you to the documents, we file with the SEC, including our most recent Form 10-K for a recent discussion.

Those risks that may affect our future results.

Although we believe that the expectations reflected in the forward looking statements are reasonable we cannot guarantee future results.

Those of activity performance or achievements.

We are under no duty to update any of the forward looking statements to conform these statements to actual results.

Now I'll turn the call over to Kevin.

Thank you Cody and good afternoon, everyone.

Operator: First, turning to slide three, I'll give some highlights from our fourth quarter and our full year results. We delivered a record year across almost every metric we tracked. We exited the year with an order booking excess of $1.8 billion on strong new bookings momentum in the fourth quarter. On a global basis, our book-to-bill ratio was 1.7, with Q4 bookings coming in at approximately $600 million.

Turning to slide three I'll give some highlights from our fourth quarter and our full year results.

We delivered a record year across almost every metric we track.

We exited the year with an order book in excess of $1 $8 billion on strong new bookings momentum in the fourth quarter.

On a global basis, our book to Bill ratio was 1.7 with Q4 bookings coming in at approximately $600 million.

Operator: The sequential growth in bookings and resulting increase in our order book further highlights the improved pipeline we discussed last quarter and is a testament to our winning product and services portfolio, including energy optimization software and severe weather mitigation solutions, that enable an attractive, levelized cost of energy for our customers. I will speak more broadly about our order book and what we are seeing in the market in a few moments. Revenue for the full year came in at $1.58 billion, which was above the high end of our latest guidance range. Full-year adjusted gross margin was 27.3%, inclusive of approximately $9.3 million of 45X benefit recognized to the P&L in the fourth quarter.

The sequential growth in bookings and resulting increase of our order book further highlights the improved pipeline, we discussed last quarter and is a testament to our winning product and services portfolio.

Including energy optimization software and severe weather mitigation solutions.

Enable an attractive level wise cost of energy for our customers.

I will speak more broadly about our order book and what we are seeing in the market in a few moments.

Revenue for the full year came in at $1.58 billion, which was above the high end of our latest guidance range.

Full year adjusted gross margin was 27, 3% inclusive of approximately $9 $3 million or 45 tax benefit recognized to the P&L in the fourth quarter.

Operator: This represents a year-over-year increase of 1,300 basis points and is a record for Array as a public company. Our performance here is largely demonstrating the structural changes we have successfully executed around how we price, how we procure materials, and how we design for value optimization in our new product introductions and existing products alike. With the 2023 proof point in hand, coupled with the upside from the 45x manufacturing credits, we are confident in our ability to deliver annual adjusted gross margin percentage in the low 30s in 2024. Adjusted EBITDA more than doubled to $288 million, which was the highest year on record by over $100 million, and marks the second consecutive year where this metric has more than doubled.

This represents a year over year increase of 13 100 basis points. It is a record for array as a public company.

Our performance here is largely demonstrating the structural changes we have successfully executed around how we price how we procure materials and how we design for value optimization, and our new product introductions and existing products alike.

With the 2023 proof point in hand, coupled with the upside from the 45 ex manufacturing credits, we are confident in our ability to deliver annual adjusted gross margin percentage in the low thirties in 2024.

Adjusted EBITDA more than doubled to $288 million, which was the highest year on record by over $100 million and marks the second consecutive year, where this metric has more than doubled.

Operator: On a full-year basis, we generated $215 million of free cash flow, which was $100 million higher than the outlook we provided at the beginning of 2023. We strengthened the balance sheet throughout the year and ended with $250 million of cash on hand, and we now maintain a historically high level of liquidity at $424 million when factoring in our undrawn revolving credit capacity. This leaves us well-positioned to fund growth while continuing to deleverage our balance. Now, please turn to slide 4, where we will discuss our capacity, domestic content, and 45X. From an operational standpoint, we expanded our domestic and international supplier base and now have more than 30 gigawatts of deliverable capacity in the U.S., and total capacity nearing 50 gigawatts across the globe.

On a full year basis, we generated $215 million of free cash flow, which was $100 million higher than the outlook. We provided at the beginning of 2023.

We strengthened the balance sheet throughout the year and ended with $250 million of cash on hand, and we now maintain a historically high level of liquidity at $424 million when factoring in our undrawn revolving credit capacity.

This leaves us well positioned to fund growth, while continuing to deleverage our balance sheet.

Now please turn to slide four where we will discuss our capacity domestic content and 45 acts.

From an operational standpoint, we expanded our domestic and international supplier base and now have more than 30 gigawatts of deliverable capacity in the U S and total capacity nearing 50 gigawatts across the globe.

Operator: At the same time, with our focus on supply chain resiliency, we added additional sources of supply for several critical components throughout the year. We did this while simultaneously achieving both lower inventory levels and record on-time delivery performance. Our strong execution and proactive build-out of our domestic supply chain and manufacturing capabilities allows us to achieve domestic content levels of the mid-80 percent level and higher, depending upon project configuration, in high volume, not only on a one-off basis. This level of scale will be critical as the domestic content requirements become better understood and more relevant to our customers over time.

At the same time, which tends to focus on supply chain resiliency, we added additional sources of supply for several critical components throughout the year.

We did this while simultaneously achieving both lower inventory levels and record on time delivery performance.

Our strong execution and proactive spilled out of our domestic supply chain and manufacturing capabilities allows us to achieve domestic content levels in the mid 80% level and higher depending upon project configuration.

In high volume not only I don't want off basis.

This level of scale will be critical at the domestic content requirements become better understood and more relevant to our customers over time.

Operator: As many of you are aware, in December, the IRS published additional guidance on the 45X manufacturing benefits that largely confirmed our previous understanding of the eligibility of our torque. In late 2023 and early 2024, we successfully negotiated agreements with key suppliers around domestic content incentives associated with our torch. This resulted in us earning $50 million of 45x benefit in our financial statements in the fourth quarter, which included a catch-up for certain volumes delivered earlier in 2023. Approximately $9 million was recorded as a benefit to our P&L, and the remainder was recorded on our balance sheet and will be recognized on the P&L throughout 2024. Unfortunately, the 45X guidance published in December did not further clarify what would be considered a structural facet.

As many of you are aware in December the IRS published additional guidance on the 45 next manufacturing benefits largely confirmed our previous understanding the eligibility of Ark talked to.

In late 2023, and early 'twenty 'twenty four we successfully negotiated agreements with key suppliers around domestic content incentives associated with our torture.

This resulted in us, earning $50 million of 45 X benefit in our financial statements in the fourth quarter, which included a catch up for certain volumes delivered earlier in 2023.

Approximately $9 million was recorded as a benefit to our P&L and the remainder was recorded on our balance sheet and will be recognized through the P&L throughout 2024.

Unfortunately, the 45 next guidance published in December did not further clarified what would be considered a structural fastener.

Operator: We continue to expect there will be additional benefits we can monetize for a number of our components under the definition of structural fasteners, and we are actively working on multiple initiatives to obtain clarity regarding specific eligibility. In parallel, we are continuing to negotiate the economic split with our supply base for parts we do not manufacture internally. It is our belief that the inclusion of these structural fastener components was the spirit behind the initial framework and the intent of the legislation. We will provide additional updates on future calls as more information becomes available. I'd now like to transition to our product, software, and service offices.

We continue to expect there will be additional benefits, we can monetize for a number of our components under the definition of structural fasteners and we are actively working multiple initiatives to obtain clarity regarding specific eligibility.

In parallel we're continuing to negotiate the economic split with our supply base for parts, we do not manufacture internally.

It's our belief that the inclusion of these structural fastener components or the spirit behind the initial framework and the intent of the legislation.

We will provide additional updates on future calls as more information becomes available.

I'd like to now transition to our product software and service offerings.

Operator: During 2023, we strengthened our product, services, and software portfolio with the launch of two new tracker platforms, the expansion of our SmartTrack software to provide automated hail and snow response, and the rollout of our new service option. This is all on top of numerous other improvements that have driven down our installed costs and improved our customer experience. Turning to slide 5, as I mentioned earlier, I would like to provide additional color around current market dynamics and our order. After gaining meaningful market share in 2021 and 2022, we chose not to pursue business in the first half of 2023 that would not generate a threshold level of financial return or would require us to assume elevated risk.

During 2023, we strengthened our product services and software portfolio with the launch of two new tracker platforms.

The expansion of our smart track software to provide automated hail and snow response.

And the rollout of our new service offerings.

This is all on top of numerous other improvements that have driven down our installed cost and improved our customer experience.

Turning to slide five as I mentioned earlier I would like to provide additional color around current market dynamics and our order book.

After gaining meaningful market share in 'twenty, 'twenty, one and 2022 we chose not to pursue business in the first half of 2023.

Not generate a threshold level of financial return.

Or would require us to assume elevated risk.

Operator: As we entered the second half of 2023, we were seeing the fruits of our structural cost enhancements and the implementation of more real-time processes around logistics and commodity costing come online, which allowed us to achieve lower price points while still sustainably achieving our margin expansion goals. With our structural cost enhancements firmly in place and the market moving away from the short-term, high-risk pricing environment, we saw our pipeline triple and our win rate increase, which are both important leading indicators of bookings and order book momentum. This was evidenced by the $900 million of new orders cumulatively received in the second half of 2023 and a 1.7 times book-to-bill ratio in the fourth quarter. As we look into our order book, we continue to see a consistent quality of customers as we have historically.

As we entered the second half of 2023, we were seeing the fruits of our structural cost enhancements and the implementation of more real time processes around logistics and commodity costs come online, which allowed us to achieve lower price points, while still sustainably achieving our margin expansion goals.

With our structural cost enhancements firmly in place and the market moving away from the short term high risk pricing environment, we saw our pipeline triple and our win rate increase which are both important leading indicators of bookings and order book momentum.

This was evidenced by the $900 million of new floors accumulate to be received in the second half of 2023 and at 1.7 times book to Bill ratio in the fourth quarter.

As we look into our order book, we continue to see a consistent quality of customers as we have historically.

Operator: The percentage of our executed contracts with Tier 1 customers has remained over 80% for the last two years. That being said, we are also seeing new customers enter our pipeline. Our order book stands at over $1.8 billion as of year end, excluding any BCAs that don't have a named project and or defined start date.

What percentage of our executed contracts with tier one customers has remained over 80% for the last two years.

That being said we are also seeing new customers into our pipeline.

Our order book stands at over $1 $8 billion as of year end, excluding any D. C. As they don't have a named project <unk> defined start date.

Operator: The projects that we willingly walked away from in the first half of last year, coupled with the increase in project delays and pushouts, are disproportionately impacting the first half of 2024 revenues, as it resulted in our order book being more weighted towards the second half of 24 and into 2025 than historically would be the case at this point in the year. As it relates to Project Pushout, which we highlighted on our last call, we are still seeing several industry-wide factors that are impacting project start dates, particularly in the first half of 2024. The most common issues we are hearing are around permitting and interconnection, supply chain delays on long-lead-time equipment, and timing of financing.

The projects that we willingly walked away from in the first half of last year, coupled with the increase in project delays and push outs are disproportionately impacting the first half of 'twenty 'twenty four revenues.

As it resulted in our order book being more weighted towards the second half of 'twenty four and into 2025, and historically would be the case at this point of the year.

As it relates to project push outs that we highlighted on our last call. We are still seeing several industry wide factors that are impacting project start dates, particularly in the first half of 'twenty 'twenty four.

The most common issues, we're hearing are around permitting and interconnection supply chain delays and long lead time equipment and timing of financing.

Operator: It is also important to point out that while we are seeing these delays fairly well represented across all types of customers, utilities included, there are a handful of our customers who are not seeing an impact, and projects are moving forward in a more normalized manner. Looking ahead, we are guiding full year 2024 revenue between $1.25 and $1.4 billion, representing a 16% decline at the midpoint versus 2023 on relatively flat volume. We expect ASPs to be down year over year, primarily due to declining commodity inputs.

It's also important to point out that while we are seeing these delays fairly well represented across all types of customers utilities included there are a handful of our customers who are not seeing an impact and projects are moving forward in a more normalized manner.

Looking ahead, we are guiding full year 2024 revenue between 1.25, and $1 $4 billion, representing a 16% decline at the midpoint.

First is 2023 on relatively flat volume.

We expect asps will be down year over year, primarily due to declining commodity input costs. However.

Operator: However, we will again see adjusted gross margin expand to the low 30% range and expect to see year-over-year growth in both absolute adjusted EBITDA dollars and as a percentage of revenue. Our revenues will be more back-end loaded, with just under 30% of our revenues expected to materialize in the first half of the year, reflecting the order book dynamics I spoke about earlier. Q1 will be a trough with revenue in the range of $135 to $145 million, followed by continued sequential growth for the remainder of the year and overall year-over-year growth returning in the second half. Burt will now provide additional color on 2023 results and our 2024 outlook. I'll then give some concluding remarks before opening the line for questions. Huh?

We will again see adjusted gross margin expand to the low 30% range and expect to see year over year growth in both absolute adjusted EBIT dollars and as a percentage of revenue.

Our revenues will be more back end loaded with just under 30% of our revenue is expected to materialize in the first half of the year, reflecting the order book dynamics I spoke about earlier.

Q1 will be a trough with revenue in the range of $135 million to $145 million, followed by continued sequential growth for the remainder of the year and overall year over year growth returning in the second half.

Kirk will now provide additional color on 2023 results and our 2020 for outlook.

I'll, then give some concluding remarks before opening the line for questions.

Kurt Wood: Thanks, Kevin. I would like to start off by providing some additional details around the fourth quarter and full year 2023 results and ask that you turn your attention to slide 7. As Kevin mentioned, 2023 was a record year on many fronts, and we were able to deliver a highly profitable year despite the headwinds that came our way via Project Pushout. In the fourth quarter, we delivered $342 million in revenue, above the top end of the guidance range provided on our Q3 earnings call and down approximately 15% from the prior year period. We shipped 3.3 gigawatts in the fourth quarter, which was roughly flat versus the prior year. At the heart of the year-over-year decline in revenue was lower ASP driven by a reduction in global commodity costs.

Kurt.

Thanks, Kevin.

To start off by providing some additional details around the fourth quarter and full year 2023 results.

I ask that you turn your attention to slide seven.

As Kevin mentioned 2023 was a record year on many fronts and we were able to deliver a highly profitable year. Despite the headwinds that came our way as you know project push outs.

In the fourth quarter, we delivered $342 million in revenue.

Above the top end of the guidance range provided on our Q3 earnings call and down approximately 15% from the prior year period.

We shipped three three gigawatts in the fourth quarter, which was roughly flat versus the prior year.

At the heart of the year over year decline in revenue was lower asps driven by a reduction in global commodity cost.

Kurt Wood: As a reminder, when commodity costs move up or down, we generally pass the movement on to our customers. Splitting the revenue by geography, the $342 million was comprised of $278 million and $64 million from the Legacy Array and STI units, respectively. We saw fourth quarter adjusted gross margins expand by 520 basis points on a year-over-year basis to 25.7%, inclusive of the $9.3 million of 45x benefit to cost of sales realized in the quarter. Our ability to expand margins on relatively flat volume and lower revenue is directly attributable to the structural changes Kevin highlighted earlier. Our Q4 Adjusted Gross Margin was negatively impacted by approximately 250 basis points due to one-time entries in our STI segment related to inventory adjustment. Absent those anomalies, SDI's adjusted Q4-23 gross margin would have been in the mid-twenties, as expected.

As a reminder, when commodity costs move up or down we generally pass the movement onto our customers.

Putting the revenue by geography, the 342 million was comprised of $278 million and $64 million from the legacy array and S. T I units respectively.

We saw fourth quarter adjusted gross margin expanded by 520 basis points on a year over year basis to 25, 7%.

Inclusive of the $9 $3 million or 45 X benefit to cost of sales realized in the quarter.

Our ability to expand margins on relatively flat volume and lower revenue is directly attributable to the structural changes as Kevin highlighted earlier.

Our Q4 adjusted gross margin was negatively impacted by approximately 250 basis points due to one time entries in our S. T I segment related to inventory adjustments.

Absent those anomalies stis adjusted Q4 twenty-three gross margin would have been in the mid Twenty's as expected.

Kurt Wood: I'd now like to expand further on the 45x benefit. In the fourth quarter, we recorded a $50 million benefit to our financials relating to Tortube, with $9.3 million included as a reduction to our cost of goods sold and $40.6 million treated as a gross increase to the balance sheet in the form of an increase to both other assets and other current liabilities. The entire benefit relates to certain volumes delivered during 2023, but based on the structure of the contract with each vendor and the timing when the contract was executed, $41 million of the amount we are entitled to will not materialize on the P&L until 2024. As Kevin noted earlier, we expect to see additional benefits in future periods relating to our 2023 volumes based on how eligibility for structural fasteners is determined. Operating expenses of $54 million were down approximately 11% from $60.5 million during the same period of the previous year.

I'd now like to expand further on the 45 next benefits in the fourth quarter, we recorded a $50 million benefits, where financials relating to tort too with $9 3 million included as a reduction to our cost of goods sold and 46 billion treated as a gross up to the balance sheet in the form of an.

Kris to both other assets and other current liabilities.

The entire benefit relates to certain volumes delivered during 2023.

Based on the structure of the contract with each vendor and the timing when the contract was executed $41 million is the amount we are entitled to well not materialize on the P&L until 2024.

As Kevin noted earlier, we expect to see additional benefits in future periods relating to our 2000 twenty's be volumes based on how eligibility for structural fasteners is determined.

Operating expenses of $54 million were down approximately 11% on the $65 million during the same period of the previous year.

Kurt Wood: This decline was driven by an improvement in amortization expense relating to certain intangible assets from the STI acquisition. The decrease was partially offset by a couple of one-time items that combined for nearly $5 million of expense in the period, including a reserve for value-added tax, or VAT, due to a ruling received from the European Tax Authority in the fourth quarter on the refundability of certain VAT items and a reserve on certain outstanding overdue receivables. Both of these adjustments were related to items that occurred prior to 2023. Net income attributable to common shareholders was $6 million compared to a loss of $17.3 million during the same period in the prior year, and basic and diluted income per share was $0.04 compared to a basic and diluted loss per share of $0.11 during the same period in 2022.

This decline was driven by an improvement in amortization expense relating to certain intangible assets from the S. T I acquisition.

Decrease was partially offset by a couple one time items that combined for nearly $5 million of expense in the period.

Including a reserve for value added tax or that due to a ruling received from the European tax authority in the fourth quarter on the refundable, if certain D T items and reserve on certain outstanding overdue receivables.

Both of these adjustments were related to items that occurred prior to 2023.

Net income attributable to common shareholders was $6 million compared to a loss of $17 $3 million during the same period in the prior year.

And basic and diluted income per share was <unk> <unk>.

Compared to basic and diluted loss per share of 11.

During the same period in 2022.

Kurt Wood: Adjusted net income increased to $31.4 million, compared to adjusted net income of $15 million during the fourth quarter of 2024, and adjusted basic and diluted net income per share was $0.21, compared to adjusted basic and diluted net income per share of $0.10 during the prior year period. Finally, our free cash flow for the period was $88.6 million versus $93.5 million for the same period in the prior year. I haven't spoken to many of the full year metrics, so I'll just briefly cover these again on the slide. Full-year revenue was $1.577 billion, representing a 4% revenue decline versus 2022.

Adjusted net income increased to $31.4 million compared to adjusted net income.

$10 million during the fourth quarter of 2024, and adjusted basic and diluted net income per share was 21 cents compared to adjusted basic and diluted net income per share of <unk> 10 cents during the prior year period.

Finally, our free cash flow for the period was $88 $6 million versus $93 $5 million for the same period in the prior year.

And then spoke to many of the full year metrics. So I'll just briefly cover these again on slide eight.

Full year revenue was 1.5 dollars 77 billion, representing a 4% revenue decline versus 2022.

Kurt Wood: This decline was primarily attributable to a reduction in ASP resulting from lower commodity pricing on relatively flat volumes and the change in the Brazilian ICMS benefit. As a reminder, we discussed on the last call how in prior years the impact of the Brazilian Value-Added Tax, or ICMS, was treated as an adder to revenue, and starting in 2023, it was transacted as a reduction to cost of sale. For 2023, this amounted to $23.2 million less revenue relative to the 2022 comparison. Adjusted gross profit increased to $430.1 million from $234.1 million in the prior year. Again, this was driven by the expansion of our baseline gross margin from the structural enhancements we made to our business and, to a lesser effect, the $9.3 million of 45x benefits that was recorded in the fourth quarter. Operating expenses decreased to $201.4 million from $230.9 million in the prior year.

The decline was primarily attributable to a reduction in E. S. P, resulting from the lower commodity pricing on relatively flat volume and a change in the Brazilian Ics mess benefit treatment.

As a reminder, we discussed on the last call how in prior years, the impact of the Brazil value added tax or ICM S, which traded as an adder to revenue starting in 2023. It was transacted as a reduction to cost of sales for.

Our 2023, this amounted to $23 $2 million less revenue relative to the 2022 comparison.

Adjusted gross profit increased to $431 million from $234 1 million in the prior year.

Again, driven by the expansion of our baseline gross margin on the structural enhancements, we made to our business and to a lesser effect. The $9 3 million up 45 X benefit that was recorded in the fourth quarter.

Operating expenses decreased to 201 $4 million from $230 9 million in the prior year.

Kurt Wood: The lower expenses were primarily related to a $46.9 million decrease in intangible amortization expense related to the STI acquisition, partially offset by higher headcount-related costs to drive process improvement, operational execution, and product innovation. Net income attributable to common shareholders was $85.5 million compared to a loss of $43.6 million in the prior year, and basic and diluted income per share was $0.57 and $0.56 compared to basic and diluted loss per share of $0.29 in the prior year. Adjusted EBITDA more than doubled to $288.1 million compared to $128.7 million in the prior period. Adjusted net income increased by approximately three times to $171.3 million compared to $57.3 million during the prior year, and adjusted basic and diluted net income per share was $1.13 compared to $0.38 in the prior year.

The lower expenses were primarily related to $46 9 million dollar decrease in intangible amortization expense related to the S. T. I acquisition, partially offset by higher head count related costs to drive process improvement operational execution and product innovation.

Net income attributable to common shareholders was $85 $5 million compared to a loss of $43 $6 million in the prior year.

And basic and diluted income per share was 57 and.

And 56.

Compared to basic and diluted loss per share of <unk> 29.

In the prior year.

Adjusted EBITDA more than doubled to $288 1 million compared to $128 7 million in the prior year period.

Adjusted net income increased by approximately three times to $171 3 million compared.

Compared to $57 3 million during the prior year and adjusted basic and diluted net income per share was $1 13 compared to 38 in the prior year.

Kurt Wood: Finally, our free cash flow for the year was $215 million compared to $130.9 million in the prior year. Excluding the $42.8 million legal settlement proceeds received in the third quarter of 2022, we more than doubled our free cash flow year over year and ended the year with approximately $250 million of cash on hand and total liquidity of $424 million, factoring in capacity in our undrawn revolver. Throughout the year, we paid down $87 million of our debt, including nearly $75 million of principal on our term loan.

Finally, our free cash flow for the year was $215 million compared to $139 million in the prior year.

Putting the $42 $8 million legal settlement proceeds received in the third quarter of 2020 to be more than doubled our free cash flow year over year and ended the year with approximately $250 million of cash on hand, and total liquidity of $424 million factoring in capacity on our Undrawn revolver.

Throughout the year, we paid down $87 million of our debt, including nearly $70 billion of principal on our term loan and we ended the year with a net leverage ratio of 1.6, excluding our preferred shares.

Kurt Wood: And we ended the year with a net leverage ratio of 1.6, excluding our preferred share. Now I'd like to go to slide 9, where I will discuss our outlook for 2024. I want to begin by noting that we will be providing guidance as one consolidated array segment going forward, rather than breaking out array and SPI. This change is reflective of how we are managing our business following the successful integration of STI and streamlining of our collective process. We're helpful.

Now I'd like to go to slide nine where I will discuss our outlook for 2024 I want to begin by noting that we won't be providing guidance as one consolidated array segment going forward, rather than breaking out array and STI.

Any change is reflective of how we are managing our business. Following the successful integration of STI and streamlining of our collective processes work.

Kurt Wood: We will continue to give regional and product commentary for additional color on our business performance throughout the year. Additionally, starting in 2024, we will be reporting all metrics on an all-in basis, inclusive of 45x benefits. 2023 was a transitional year and warranted a specific call out of the benefit given the number of uncertainties around its treatment. In future periods, we will call out any material differences in our assumptions, including those resulting from the inclusion of structural fasteners within the 45X benefits, to the extent there are any. We expect full-year 2024 revenue to be within the range of $1.25 billion to $1.4 billion.

Helpful. We will continue to give regional and product commentary for additional color on our business performance throughout the year.

Additionally, starting in 2024, we will be reporting all metrics on an all in basis inclusive of 45 X benefits.

2023 was a transitional year and warrants at a specific call out or the benefit given the number of uncertainties around its treatment.

In future periods, we will call out any material differences in our assumptions, including those resulting around the inclusion of structural fasteners within the 45 that benefit to the extent there already.

We expect full year 2020 for revenue to be within the range of 1.25 billion to $1 4 billion as Kevin discussed earlier, there are a number of dynamics driving our outlook.

Kurt Wood: As Kevin discussed earlier, there are a number of dynamics driving our outlook. Primarily, we are forecasting a reduction in ASP of low double-digit percent year over year driven by lower input costs, our ability to lower prices due to our lower cost structure, and the pass-through of a portion of the 45x benefit to our customers as we strive to lower the overall cost of solar generation for the industry. From a linearity perspective, the year will be more weighted towards the second half.

Primarily we are forecasting a reduction in asps of low double digit percent year over year, driven by lower input cost our ability to lower price due to a lower cost structure.

And the pass through of a portion of the 45 X benefit to our customers as we strive to lower the overall cost of solar generation for the industry.

From a linearity perspective, the year will be more weighted towards the second half.

Kurt Wood: Q1 will be the trough, with revenues at approximately $135 million to $145 million before we begin to see sequential growth in the second quarter, which then continues in earnest in the second half. To that end, we are expecting year-over-year revenue growth in the second half of the year when compared to the second half of 2023, inclusive of 45x benefits from our torque tube. We expect our adjusted gross margins to be in the low 30s for the year. However, as you would expect, on a quarterly basis, this may fluctuate slightly based on product mix, project mix, and fixed cost absorption. For adjusted SG&A, we expect approximately $33 to $35 million per quarter, which is slightly down from a dollar standpoint compared to 2023. We expect adjusted EBITDA to be within the range of $285 to $315 million.

Q1 will be the trough with revenues at approximately $135 million to $145 million before we begin to see sequential growth in the second quarter, which then continues in earnest in the second half.

To that end, we are expecting year over year revenue growth in the second half of the year when compared to the second half of 2023.

Inclusive of 45 X benefits from our torque tube, we expect our adjusted gross margins to be in the low <unk> for the year.

As you would expect on a quarterly basis. This may fluctuate slightly based on product mix project mix and fixed cost absorption.

Our adjusted SG&A, we expect approximately $33 million to $35 million per quarter, which is slightly down from a dollar standpoint compared to 2023.

We expect adjusted EBITDA to be within the range of $285 million to $315 million.

Kurt Wood: This guidance is driven by the improvement and profitability from our structural cost enhancements that drive efficiency and Scale, as well as the 45x benefits for our TORPS. At the midpoint, this represents a 4% point increase in adjusted EBITDA and a 430 basis point improvement in adjusted EBITDA margin year-over-year, marking the third consecutive year in both dollar and percent of revenue expansion. For adjusted diluted earnings per share, we anticipate a range of $1.00 to $1.15, which represents a 5% year-over-year decline at the midpoint. This decrease is largely due to an effective tax rate increase related to a change in tax treatment of the ICMS benefit in Brazil. Previously, this benefit was tax-exempt, but it will now become subject to federal Brazilian taxation beginning in 2024.

This guidance is driven by the improvement in profitability from our structural cost enhancement enhancements that drive efficiency.

And scale as well as the 45 X benefits for our torches.

The midpoint. This represents a four percentage point increase in adjusted EBITDA and a 430 basis point improvement in adjusted EBIT margin year over year, marking the third consecutive year in both dollar and percent of revenue expansion.

For adjusted diluted earnings per share, we anticipate a range of $1 to $1 15.

Which represents a 5% year over year decline at the midpoint.

This decrease is largely due to an incentive tax rate increase related to a change in tax treatment of the Ics benefit in Brazil <unk>.

This benefit was tax exempt, but will now become subject to the federal Brazil taxation beginning in 2024.

Kurt Wood: As such, we expect our effective tax rate for the year to be between 26 and 28 percent. We expect preferred dividends to be approximately $14 million on a quarterly basis, of which approximately $6 million will be the cash or PIK portion, and the remaining will be the amortization of the discount. We expect free cash flow to be between $100 million and $150 million in 2024, which is inclusive of our estimate of the cash received during the year from the 45X TORX II benefits. I would point out here that a large portion of the expected cash benefit will occur later than the P&L benefit due to the timing of the payments from the IRS. Embedded in our free cash flow forecast is a CapEx assumption of $25 to $30 million. Now, I'll turn the call back over to Kevin for closing remarks. Thank you, Kurt.

As such we expect our effective tax rate for the year to be between 26 and 28%.

We expect preferred dividends will be approximately $14 million on a quarterly basis.

Which approximately $6 billion will be the cash or P. I K portion and the remaining will be the amortization of the discount.

We expect free cash flow to be between $100 million and $150 million in 2024, which is inclusive of our estimate of the cash received during the year from the 45 X towards two benefit.

I would point out here that a large portion of the expected cash benefit will occur later than the P&L benefit due to the timing of the payments from the I R. S.

Embedded in our free cash flow forecast and the capex assumption of $25 million to $30 million.

Now I'll turn the call back over to Kevin for closing remarks.

Thank you Kurt.

Operator: I want to again highlight our record 2023 financial performance, the structural enhancements we made to our cost structure, and the strong top line momentum we are seeing for the second half of 2024 and into 2025. We have made a lot of progress as a business over the last few quarters and are confident that this will lead to sustainable and profitable growth as we continue our journey. I am very proud of what our team accomplished in 2023, and I want to take a moment to thank our hardworking employees for all of their dedicated efforts. We will now open the call up for questions. Operator.

I wanted to again highlight our record 2023 financial performance the structural enhancements, we made to our cost structure and a strong topline momentum we are seeing for the second half of 'twenty 'twenty four and into 2025.

We made a lot of progress as a business over the last few quarters and are confident that this will lead to sustainable and profitable growth as we continue our journey.

I'm very proud of what our team accomplished in 2023 and I wanted to take a moment to thank our hardworking employees for all of their dedicated efforts.

We will now open the call up for questions operator.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press start, too, if you would like to remove your question from the queue.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate that your line is in the question queue and.

And you May press star two if he would like to remove your question from the queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. In the interest of time, we ask that you please limit your question to one. One moment, please, while we pull for questions. Our first question comes from the line of Mark Strauss with J.P. Morgan. Please proceed with your question. Yes, good evening.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

In the interest of time, we ask that you please limit to one question.

One moment, please while we poll for questions.

Thank you. Our first question comes from the line of Mark Strouse with Jpmorgan. Please proceed with your question.

Yes. Good evening. Thank you very much for taking our questions I wanted to start with the 2024 outlook and on the revenue decline.

Mark Strauss: Thank you very much for taking our question. I wanted to start with the 2024 outlook and the revenue decline. Yeah, I fully appreciate kind of the first half of 23, being more selective on higher-margin projects that created a bit of a hole that you needed to fill. Just trying to compare what we're hearing today to what we heard on the 3Q call, though, as far as project delays go, are there continued delays in those projects that you were seeing back then? Are there any incremental delays?

Yeah, I I I fully appreciate kind of the first half of 'twenty three that being more selective on higher margin projects that created a bit of a hole that you needed to Phil just trying to compare what we're hearing today to what we heard on this re queue called though as far as the project delays or are there.

Continued delays in those projects that you were seeing back then are there incremental delays just anything you can do to kind of help me compartmentalize whats happening here. Thank you.

Operator: Just anything you can do to kind of help me compartmentalize what's happening here. Thank you. Thanks for your question, Mark. This is Kevin.

Thanks for your question Mark This is Kevin Yeah relative to the project delays, what we've seen is the continuing delays and push outs of projects for for many of the same.

Operator: Yeah, relative to the project delays, what we've seen is continuing delays and push-outs of projects for many of the same issues that we talked about earlier on the call. So I'll highlight them again, but certainly some related to interest rates and financing and some confusion around the tax equity transfer rules. There's still a lack of clarity around the IRA, and we still, as I'm engaging our customers, still hearing of orders sitting on the sidelines waiting for better clarity around the overall domestic content adder to the ITC. What we're hearing more of now than we have previously are really about supply chain issues, and that's really related to shortages of long-lead-time items of switches, transformers, and the one that keeps coming And these are placing interconnection queues at risk, and we're hearing about that throughout. But that is not ubiquitous.

Issues that we talked about earlier on the call.

So we.

Highlight them again, but certainly some related to interest rates and financing and some confusion around the tax equity transfer rules. There is still lack of clarity around the IRA and we still as I'm engaging our customers still hearing of orders sitting on the sidelines waiting for better clarity around the overall domestic content.

Added to the ITC.

What were hearing more of now than we have previously are really about supply chain issues and that's really related to shortages of long lead time items of switches transformers and the one that keeps coming up as being very acute is on high voltage breakers and these are placing interconnection queues at risk and we're hearing about that throughout now.

Operator: There are certain customers and utilities that we're able to safely harbor lots of electrical equipment, and we're finding that those are the ones that are seemingly moving forward with projects now unabated, those that have a huge supply of those electrical components, in particular that fit their design criteria. And last, permitting delays, long queues accentuated by the dramatic increase in solar and solar plus batteries. So in many municipalities, we're getting used to doing solar projects.

That is not ubiquitous there are certain customers and utilities that we're able to safe harbor lots of electrical equipment and we're finding that those are the ones that seemingly are moving forward with projects now unabated.

I have a huge supply of those electrical components in particular that fit their design criteria.

And last permitting delays long queues accentuated by the dramatic increase in solar and solar plus battery. So when many municipalities, we're getting used to doing solar projects the.

Operator: The addition of battery storage to sites, and we're seeing that increasing as a percentage, is creating, again, confusion in the permitting delays. So really, the same set, they're continuing on. And what we're seeing in the order book and how it translates to the order book is that customers are beginning to bake those delays into their order book. And that's what we talked about in our prepared remarks about a higher proportion of orders that are coming now where they're giving themselves a couple of extra quarters for that work to begin if they solve some of these issues. Okay.

Additionally, the battery storage to sites and we're seeing that increasing as a percentage is creating again confusion and permitting delays.

But really the same said theres continuing on and what we're seeing in the order book and how it translates to the order book is that customers are beginning to bake those those delays into their order book and that's where we talked about in our prepared remarks I have a higher proportion of orders that are coming out where they are giving themselves a couple of extra quarters.

For that work to begin as they solve some of these issues.

Kurt Wood: And then, Kurt, a couple of quick questions on 45X. Are you planning, are you able to today, are you planning in 2024 to provide kind of what the gross margin is, excluding 45X, just so we can get a sense of kind of what your structural margin improvements that you've been talking about are? And then second, the low-30s outlook for 24, does that include the 41 million of catch-up from 2023? Yeah, great questions.

Okay, and then curt's a couple of quick questions on the forty-five backs here.

Are you planning or are you able to today or are you planning in 2024 to provide kind of what the gross margin is excluding forty-five. Alex just so we can get a sense of kind of what your your structural Marvin margin improvements that you've been talking about are and then second does.

The low thirties outlook for 'twenty four does that include the $41 million of catch up from 2023.

Yeah, great questions there.

Kurt Wood: We're still sticking to our structural margin in the mid-20s percent range. We think that holds solid. We saw that in the fourth quarter as well, if you take out the one-time items there that we were saddled with.

Still sticking to our structural margin in the mid 20% range, we think that whole solid you saw that in the in the fourth quarter as well if you take out the one time items there that were saddled with and then yes the.

Kurt Wood: And then, yes, the low 30s does take into account the 40 percent, and you've got to remember where it takes into a couple of things, our margin. It takes into our cost enhancements that we've done that allow us to lower the price and still maintain our margin profile that we want. It takes into account the 45X credits that we're talking about here, and it takes into account a certain pass-through of the 45X that we'll pass along to customers on new deals that we sign going forward. So it's got all that in.

The low thirties does take into account the 40%.

You got to remember, where you know it takes into a couple of things our margin takes into our cost enhancements that we've done that allow us to lower the price and still maintain our margin profile that would be one it takes into account. The 45 X credits that we're talking about here and it takes into account a certain pass through of the 45 X that will pass along to the customer.

On new deals that we sign going forward. So it's got all of that and when it doesn't have in there is any additional.

Mark Strauss: What it doesn't have in there is any additional contracts that we may sign. In our prepared remarks, we talked about structural fasteners and what might be included in them. So that would be the upside of those deals, as well as any other deals that we negotiate with our vendors going forward. And we don't want to give specifics because, obviously, that puts us at a disadvantage when we're negotiating some of these things. I'll take the rest offline, thank you.

Contracts that we may sign it in our prepared remarks, he talked about structural fasteners and what might be included in there so that would be upside if those materialize as well as any other deals that we negotiate with our vendors going forward and we don't want to give specifics because obviously that puts us at a disadvantage when we're negotiating some of these things.

Okay I'll take the rest offline. Thank you.

Okay.

Christine Cho: Our next question comes from the line of Christine Cho with Barclays. Please proceed with your question. Yeah, hey guys, this is Yoavon for Christine.

Our next question comes from the line of Christine Cho with Barclays. Please proceed with your question.

Yeah, Hey, guys. This is <unk> on for Christine just one quick one from me what sort of bookings are waiting on the sidelines.

Operator: Just one quick one for me. What sort of bookings are waiting on the sidelines? You show this chart where your high probability pipeline tripled since 4Q22. So I'm wondering what actually needs to happen for this to be converged.

So this chart, where you're high probability pipeline tripled since for Tony to so I'm wondering what actually needs to happen for this to be converted.

Operator: Yeah, it's a great question. So, what we typically see momentum in our business is you go from overall pipeline, meaning pipeline that's down in that 25% range, to when it becomes over 50%, it becomes the high probability pipeline that, so we're waiting on, in some cases, an EPC to be named. In other cases, it's still competitive, even at 50%. There may be a portion of that that we're still competing with one of our peers to get that business. But what we measure is that trend of the high probability pipeline. Then once it goes from 50 to 75, that's when it begins to convert to verbal orders.

Yeah, It's a great question, so what we typically see momentum in our business.

As you go from a overall pipeline meeting pipeline, that's down in that 25% range two when it becomes over 50% it becomes to high probability pipeline that are so we're waiting on in some cases, an E. P. C to be named in other cases, it's still competitive even at 50% there may be a portion of that that we're still.

Competing with one of our.

With one of our peer companies to get that business, but what we measure is that trend of high probability pipeline. Then once it goes from 50 to 75, that's when it begins to convert to verbal orders. So that's really the trend. So what we look at that trend as the overall, what's coming into the funnel.

Operator: So that's really the trend. So what we look at that trend is the overall what's coming into the funnel, what's getting through the stage gates in the funnel in terms of the quality of that order and our position to win that order. That's where it gets into the high probability.

What's getting through the stage gates in the funnel in terms of quality of that order and our position to win that work, that's where it gets into the high probability. So that's really an indication of the momentum we're seeing in the business of a tripling of that high probability pipeline is very significant to us.

Julian DeMolin-Smith: So that's really an indication of the momentum we're seeing in the business. A tripling of that high probability pipeline is very significant. Thank you. Our next question comes from the line of Julian DeMolin-Smith with Bank of America. Please proceed with your question. Cameron Lockridge, I'm from V of A on behalf of Julian.

Thank you. Our next question comes from the line of Julien Dumoulin Smith with Bank of America. Please proceed with your question.

Cameron Lochridge encore from Bofa for Julien.

Cameron Lockridge: Quick one for me. And because they kind of tie together, I'll just ask them both in tandem. First, on the backlog, can you speak a little bit about, I appreciate the commentary around some of the customer delays and things of that nature, interconnection permitting, things like that. Are you seeing any project churn in the backlog? Any projects coming out of backlog as a result of some of these delays? Whether those projects are, you know, perhaps being sold to others or what have you at the customer level. And then, at the same time, US international dynamics in 4Q and how those kind of play out in 2024. I'll certainly take the first one.

Quick one for me and so they kind of tie together I'd just ask them both tandem.

First on the backlog can you speak a little bit to I appreciate the commentary around <unk>.

The customer delays and things of that nature interconnection permitting things like that.

Seeing any any project churn in the backlog any any projects coming out of backlog as a result, some of these delays where those projects are perhaps being b.

<unk> two to others or what have you at the customer level and then at the same time. This U S and international dynamics in four Q and how those kind of play out in 2024.

Well I'll certainly take the first one I'll, let Kurt talk about the specific Q4 <unk>.

Operator: I'll let Curt talk about the specific Q4 booking. So look, when we put a project into our backlog, we're pretty sure that that project is going to go forward. It may be delayed, but we've modeled this out, actually, in the last few months. We've only ever had two projects pull out of the backlog and get canceled. Certainly, that's domestically. Internationally, as you do some of the smaller projects, and the Brazilian Forgiveness Day is a little bit different from that, but I'll broadly speak to our North American backlog. And that's only two projects ever.

So look we we have only when we put a project into our backlog.

We're pretty sure that that product project, rather it's going to go forward it may be delayed.

But we've only we've modeled this out actually in the last few months, we've only ever had two projects pull out of backlog and get canceled certainly that's domestically internationally as you do some of the smaller projects and the Brazilian forgiveness stays a little bit different to that but I'll I'll broadly speak to our north American backlog.

And that's only two projects that we are in fact seeing some projects get sold.

Operator: We are, in fact, seeing some projects get sold. Some developers are coming in and taking advantage of the fact that others are having supply issues, and they're coming in and refinancing and moving those. And in some cases, we're benefiting from that in terms of some of the developers doing that work are, for lack of a better word, friends of Array, and we're picking up some additional orders, and they're converting them from other suppliers to Array as they do that business. So far, we've not seen any meaningful cancellations at all.

Some developers are coming in and taking advantage of the fact that others are having supply issues and theyre coming in and refinancing and moving those and in some cases, we're benefiting from that in terms of of some of the developers doing that work are for lack of a better word friends of array and we're picking up some additional orders and they're converting it from.

Other suppliers to array as they do that business. So so far we've not seen any meaningful cancellations at all.

Kurt Wood: And in fact, we're benefiting from some of this secondary market emerging from these projects getting bought and sold prior to completion. And for the second part of your question on the U.S. and international dynamics, you'll see when we post our K out in the next day or so that we've got about, in Q4, 75% of our U.S. revenue, 25%-ish of our revenue was domestic or was international. Excuse me. As we look into the, you know, first half of the year, we talked about the first, softness in the first half, obviously that's hard to overcome, so we do expect overall a decline in U.S. volumes year over year. You know, first half will be down, second half will be up, as we talked about, and then we'll see a little bit more meaningful growth at our international locations, including Spain and Brazil. Perfect. Thank you, guys. I'll pass it back to you.

And in fact, we're benefiting from some of the secondary market emerging from these projects getting bought and sold prior to completion.

And for the second part of your question on the U S and international dynamics, you'll see when we post our K out in the next day or so that we've got about in Q4, 75% U S. 25% ish of our revenue was domestic or was international excuse me.

As we look into the.

First of all you heard me talk about the first softness in the first half obviously, that's hard to overcome so we do expect overall a.

A decline in U S volumes year over year.

First half will be down second half will be up as we talked about and then we'll see a little bit more meaningful growth in our international locations, including Spain and Brazil.

Perfect. Thank you guys I'll pass it back.

Brian K. Lee: Welcome, Cameron. Thank you. Our next question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question. Hey guys, good afternoon. Thanks for taking the questions. I had a couple.

Welcome Cameron.

Okay.

Thank you. Our next question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question.

Hey, guys. Good afternoon. Thanks for taking the questions I had a couple I apologize I jumped on late so if you did cover these I apologize in advance.

Brian K. Lee: I apologize; I jumped on late, so if you did cover these, I apologize in advance. On the gross margin guidance, you know, last year you were talking about mid to high 20s XIRA. Are you expecting the same level in 2024 XIRA? Are you actually targeting gross margin expansion into the 30s XIRA? Maybe just give us some of the breakdown of the overall margin guidance and what's embedded in there for kind of core margin versus what IRA is adding this year. You know, on that one specifically, I'd say you've got to break it up.

On the gross margin guidance are you know last year, you were talking about mid to high twenties X I R. A.

Are you expecting the same level in 2024 X I R. A are you actually targeting gross margin expansion into the Thirty's X Ray maybe just give us some of the breakdown of the overall margin guidance and whats embedded in there for.

Kind of core margin versus what what iras, adding this year.

Yeah on that one specifically I'd say, you've got to break it up the U S. We definitely expect to be in.

Kurt Wood: The U.S., we definitely expect to be higher than what we said on the call, which was, you know, consolidated at 25%, so kind of mid to high 20s for the U.S. And then, obviously, mid 20s for the international units, so combined. That's where you get free any 45X or IRA benefit. And then, on a consolidated basis, the low 30% range for gross margin is an all-in number inclusive of the benefits from any new incentive program that's out there. Okay, fair enough, that's helpful. And then, I know there's already been a decent number of questions and, you know, you're providing some process around why the revenue guidance, on paper, looks like it's softer than what the backlog you ended the year with would kind of entail.

The higher than what we said on the call, which was consolidated at 25% so kind of mid to high <unk> for the U S. And then obviously mid twenties for.

The international units are combined that's where you get free any 45 X or I or a benefit and then on a consolidated basis, the low 30% range for gross margin and an all in number inclusive of the benefit from any new incentive program that's out there.

Okay Fair enough that's helpful and then.

It sounded like there's already been a decent number of questions and.

Are you, providing some sort of thought process around why the revenue guidance.

On paper it looks like it's.

Softer than what the backlog you ended the year with.

Kurt Wood: So, maybe just taking even a further step back, you talked about a flat volume view for the year. It seems like peers are growing faster, and, you know, some of the utility scale forecasts for the U.S. are all up double digits, 10%, you know, 15% this year. So, maybe just kind of walk through for you specifically what's different? Is it customer mix? Is it share?

What kind of an entails so.

Maybe just taking even a further step back you talked about a flat volume view for the year. It seems like peers are growing faster than some of the utility scale forecast for the U S are all up double digits 10, 15% this year so.

Maybe just kind of walk through for you specifically whats different is it customer mix of it sure.

Operator: Just kind of trying to understand and reconcile the build to the flat volume view for you this year and, you know, after last year where you already had some pushouts and disexpectations for, you know, for 2020, 2030. So, just trying to balance it a bit here. I think that's a great question.

Just kind of trying to understand and reconcile that the bill to the flat volume for year.

For you this year and after last year, where you already had some push outs in this expectation is for 2023, so I'm just trying to reconcile a bit here.

Yes, I think that's a great question I'd love to answer that question, we have seen a lot of notes recently about market share changes in shifts.

Operator: I'd love to answer that question. I've seen a lot of notes recently about market share changes and shifts. Let me start by reminding everyone that this is fundamentally a large project business where a few projects can have an outsized impact on either the shorter term windows of share, which is why, really, as a general practice, we don't overly focus on quarter over quarter market share statistics. I'll remind you in my prepared remarks that I tried to remind you that not too long ago, we were discussing the dramatic market share gains Array secured in both 2021 So, that being said, let me talk about a few things I think about relative to the market share change. First, we've discussed previously and in our prepared remarks that there was a period of time in early 23 where our primary objective and my role here was to help demonstrate a margin recovery for the business and build a backlog of high quality for the business. We've talked about this before, that in doing so, we brought in fewer projects into our pipeline to actively pursue in the first half of 2023. We temporarily ceded a portion of projects to our competitors based on what we saw was dramatically lower pricing and terms that we felt were just simply too risky for our business.

Let me start by reminding everyone that this is fundamentally a large project business.

A few projects can have an outsized impact on either the shorter term windows of share.

Which is why really at a general practice, we don't overly focus on quarter over quarter market share statistics.

I'll remind you in my prepared remarks, I tried to remind you that not too long ago, we were discussing the dramatic market share gains array secured in both 2021 and 2022.

So that being said, let me talk a few.

Talk about a few items I would think about relative to the market share change first we discussed previously and in our prepared remarks that there was a period of time in early 'twenty, three where our primary objective and my role here was to help demonstrate our margin recovery for the business and build a backlog of high quality for the business.

We've talked about this before that.

Doing so we brought in less projects into our pipeline to actively pursue in the first half of 2023.

We temporarily ceded a proportion of projects to our competitors based on what we saw was dramatically lower pricing and terms.

That we felt were just simply too risky for our business.

Operator: These projects are now being delivered in the first half of 2024. We see that. And, in retrospect, we could have yielded a bit more on some of these orders and still hit our committed mid-20s margin. Perhaps we could have. But the reality is our focus was on improving our pricing to our customers without sacrificing margins to do this. And we were so focused on methodically attacking our, We focused really on increasing our global strategic sourcing. We really did a deep dive review of our internal engineering and design standards.

These projects are now being delivered in the first half of 'twenty four we see that in retrospect, we have yielded a bit more on some of these orders and still hit our committed mid twenty's margin.

Perhaps we could.

But the reality is our focus was on improving our pricing to our customers without sacrificing margins to do this and we were so focused on methodically attacking our cost structure.

We focus really on increasing our global strategic sourcing.

We really did a deep dive review of our internal engineering and design standards.

Operator: And we invested nearly $11 million in improved IT systems and cyber security systems that would inherently improve our visibility to our bill of materials, our cost structure, our logistics operations for every project that we do. In engaging with our customers, it was really important to our customers that the cost reductions that we were able to provide them were structural in nature, and therefore, they could count on these into the future as they realign and do business with Array. And to be clear, we're not out there trying to buy business. And that's evidenced by our committed 2024 expanding gross market. I'm confident that if you go out and poll the marketplace today, you'll find these structural cost reductions are becoming very apparent to our customers, and they're making a difference in our wind rates on projects.

And we invested in the last two years, nearly $11 million and improved it systems and cyber security systems.

In Paraguay improve our visibility to our bill of materials or cost structure, our logistics operations for every project that we do.

And engaging with our customers.

Really important to our customers that the cost rich.

The reductions that we were able to provide them are structural in nature and therefore, they can count on these into the future as they realign and do business with array.

And to be clear, we're not out there trying to buy business and that's evidenced by our committed 2024 expanding gross margins.

I'm confident that if you go out and pull the marketplace today, you'll find these structural cost reductions are becoming very apparent to our customers.

And they're making a difference in our win rates on projects, we're actually seeing win rates substantially increase from that pipeline and funnel, we talked about earlier.

Operator: We're actually seeing wind rates substantially increase from that pipeline and funnel we talked about earlier. Since completing the first two planned initiatives for cost reduction, we've seen a marked improvement in the high probability pipeline that we noted in the presentation, that it's nearly three times larger than at the end of Q2, and that's what drove the really strong Q4 bookings on the back of it. Earlier this month, we completed our third structural cost reduction initiative.

Since completing the first two planned initiatives for cost reduction we've seen a marked improvement in the high probability pipeline that we noted in the presentation. That's nearly three times larger than at the end of Q2, and that's what drove the really strong Q4 bookings on the back of this.

Earlier this month, we completed our third structural cost reduction initiatives.

Operator: This one was all about emphasizing automation and optimization of some of our engineering calculations that were all about reducing our customers' costs through optimizing the foundations they would be required to purchase and put into the ground. So again, that's not one that reduces our costs, but we're focusing beyond our costs and onto our customers' costs and identifying ways that we can reduce their costs. The second thing is that we continue to see project timing be negatively impacted by the factors we talked about in one of the first questions that we got asked. The supply chain issues, permitting, interconnect delays, IRA clarity, timing of financing, all of the above.

This one was all about emphasizing automation and optimization of some of our engineering calculations.

So we're all about reducing our customers' costs through optimizing the foundations they would be required to purchase and put into the ground. So again, that's not one that reduces our cost, but we're focusing beyond our cost into our customers' costs and identify ways that we can reduce their costs.

The second thing is we continue to see project timing be negatively impacted by the factors we talked about in one of the first questions that we got asked the supply chain issues permitting interconnect delays IRA clarity timing of financing all of the above.

Operator: And then last, I would just note that we saw strong bookings in the fourth quarter, but one of the things we are seeing, as I indicated just a minute ago, is that we're seeing projects get awarded for longer time periods than we have historically. Our customers are now building in a couple of quarters of buffer, and what they're doing is locking in capacity. I think this is really our customers' desire to buy more time to clear some of the project timing challenges, but obviously, this limits our ability to fill in more near-term revenue than we would have historically. Like others in our industry, we keep a portfolio of lots of products, and historically, we've been able to work with our customers to push and pull projects in when one would push out for simply stated right now, that option is less given the kind of cycle that But I think that, you know, to just put a topping on it.

And then last I would just note that.

We saw strong bookings in the fourth quarter, but one of the things we are seeing as I indicated just a minute ago, we're seeing projects get awarded for longer time periods than we have historically.

Our customers are now building in a couple of quarters of buffer and what they're doing is locking in capacity with us.

I think this is this is really our customers' desire to buy more time to clear some of the project timing challenges.

But obviously this limits our ability to fill in more near term revenue than we would have historically.

Like others in our industry, we keep a portfolio of lots of projects and historically, we've been able we would be able to work with our customers to push and pull projects in when one would push out further.

Simply stated right now that option is less given that they the.

Cycles that we're seeing in our interstate backlog.

But I think that the.

So just.

But its harping on this.

Operator: I don't see any real dislocation or any indication of a longer trend. There's not been a killer app or any major new product that diminishes the strength of our product and services, and software portfolio. There is, however, a short-term dislocation based on what we previously discussed.

I don't see any real dislocation or any indication of a longer trend theres not been a killer app or any major new product that diminishes the strength of our product and services and software portfolio there.

There is a short term dislocation based on what we've previously discussed.

Brian K. Lee: I can tell you that in the last three months, I've been in front of over 20 of our largest customers, and we continue to receive great feedback from our customers on our current product, software, and service offerings, as well as high marks for many of the operational and business improvements we've been making over the last two years. And most recently, I can tell you I'm receiving very positive feedback on our increasingly competitive pricing position. So that's really what's driving the early Q1 results, and that's why we're very confident calling it the trough. We're seeing that backlog and pipeline momentum, and we're certainly going to lean into that as we build the back half of our year here. I appreciate all the calls. Maybe just the last one, if I could squeeze in, and taking all that into account.

I can tell you in the last three months I've been in front of over 20 of our largest customers and we continue to receive great feedback from our customers on our current product software service offerings as well as high marks for many of the operational and business improvements we've been making over the last two years.

And most recently I can tell you I'm, receiving very positive feedback on our increasingly competitive pricing position.

So that's really what's driving the early.

Q1 results and Thats why were very confident calling at the trough, we're seeing that that backlog and pipeline momentum.

We're certainly going to lean into that as we build the back half of our year here.

I appreciate all that color and then maybe just the last one if I could squeeze in and take taking all of that into account I mean, I don't want to put words in your mouth, Kevin but it sounds like first half of the year, maybe year because of all the.

Operator: I mean, I don't want to put words in your mouth, Kevin, but it sounds like... First half of the year, maybe you're, because of all the circumstances you just outlined, undergrowing the market, but then back half of the year, back to, like, being in line with market growth trends, if that's the way to read it. Yeah, I think it would be... maybe even better in the back half than how you've left it. If we just simply look at the win rate percentages, I think we feel really good about the direction of our... Okay, fair enough. That's great! Thank you. Pass it on!

Circumstances, you just outlined here in growing the market, but then back half of the year back to like being in line with our with market growth trends, if that's the way to read it.

Yeah, I think it would be.

Maybe even even better in the back half and then how you've left it if we just simply look at the.

Win rate percentages I think we feel really good about the direction of our business at this point.

Okay Fair enough that's great. Thank you pass it on.

Yeah.

Our next question comes from the line of Mohit <unk> with Mizuho. Please proceed with your question.

Mahit Manloy: Our next question comes from the line of Mahit Manloy with Mizuho. Please proceed with your question. Hi, this is David Benjamin on Fermi.

Hi, This is David Benjamin on for me.

David Benjamin: I was just wondering if you guys expect to see the same sort of gross margin breakdown in the first half versus the second half despite the delta in revenues? It'll be roughly, obviously, slightly lower in the first half given the lower scale, but not on a material basis. We expect it to be fairly constant. However, I have no doubt that, as project mix and everything else changes, it could move quarter to quarter. You saw that in 2023 and the past years, but we should be relatively consistent, slightly better in the second half than in the first half. Thanks very much.

I was just wondering if you guys expect to see the same sort of gross margin breakdown in the first half versus a second half despite the.

Delta and revenues.

It'll be roughly the same obviously slightly lower probably in the first half given the lower scale, but not on a material basis, we expect it to be fairly constant. However, I would no doubt that as project mix and everything else you get move quarter to quarter you saw that in 2023 in past years, but we should be.

Relatively consistent slightly better in the second half than the first half.

Thanks, very much and is there also any of that due to.

Kurt Wood: And is there also any of that due to, or could you talk a little bit about ASPs between international business and the U.S.? You mentioned cost downs. Are you applying those to customers both domestically and internationally? One of the great things about the product base that we have is that it's applied universally. Obviously, there are some geographic differences you have to do for compliance, but generally, the cost savings we do will be passed on to customers or will be in our product to help the margin and or ASP there. And each margin has a slightly different dynamic.

Could you talk a little bit about like Asp's between international business.

And and U S. You mentioned cost downs are you applying those to customers both domestically internationally.

Well one of the great things about the product base that we have is this apply universally obviously there are some geographic differences you have to do for compliance, but generally the cost savings, we do we will pass on to customers.

Or will be in our product to help the margin <unk> ASP, there and each margin has a slightly different dynamic we approach. It on a portfolio basis, you can imagine as you're seeding new markets you might go in with a little bit more aggressive pricing and you will add more established products, but as long as youre looking at a portfolio basis, you're generally cover it and that's how we do it.

Kurt Wood: We approach it on a portfolio basis. As you can imagine, as you're seeing new markets, you might go in with a little bit more aggressive pricing, and you will add more established products. But as long as you're looking at it on a portfolio basis, you're generally covered.

Try not to give too much color on a region by region specific just for competitive and customer related info, we don't want to give that secret sauce out so to speak.

Kurt Wood: And that's how we do it. Try not to give too much color on a region by region basis, just for competitive and customer-related info. We don't want to give that secret sauce out.

The one thing I will note that on the international there's obviously not a pass through of the 45 X benefits clearly.

Donovan Schaefer: But the one thing I will note is that on the international, there's obviously not a pass through the 45x. Our next question comes from the line of Donovan Schaefer with Northland Capital Markets. Please proceed with your question. Hey guys, so I want to ask about the H250 tracker.

Our next question comes from the line of Jonathan Schaffer with Northland Capital markets. Please proceed with your question.

Hey, guys. So I wanted to ask about the H 250 tracker I know I think when you initially.

Operator: I know I think when you initially, I was really focusing on the US actually at the moment, so when you initially launched you kind of had a push-pull design I think like a lot of the other two-row tracker companies do. I know you you've switched, I think we saw at Replus you have the kind of more elevated two-row linked rotary because that was kind of required for the US. So you know has that like, just if we can get an update on like kind of the rollout there and what was like the backlog, the large increase in backlog they had in this quarter, you know if you could give us kind of the mix of H250 versus the DuraTracker Omnitrack or if you could just give us some, whether it's more quantitative or quality, I mean has it risen to a level of like materiality and moving a needle and is that part what drove that increase?

We're really focusing on the U S actually at the moment. So when you initially launched you kind of had a push pull designed I think like.

A lot of the other two ROE tracker companies do.

You switched it and can we start re plus you have the kind of more elevated to rubbing linked rotary because that was kind of required for the U S. So is that like just if we can get an update on like kind of a roll out there and what was like the backlog the large increase in backlog that you had in this quarter.

If you could give us kind of a mix of it's 250 versus zero tracker omni track or if you could just give us some whether it's more quantitative or cause I mean has risen to a level of materiality and moving unusual and is that part of what drove that increase.

You know what to understand like the nexus of that with price.

Operator: Anything to help us understand the nexus of that with price, you know, with the conversations about prices. So what's really been happening, Donovan, is that the whole point of us launching the H250 was to have a tracker at a lower price point to be able to compete with those super CAPEX-sensitive customers. And there's a handful of them that are out there.

Conversations about.

Prices Asps and such.

So what's what's really been happening Donaldson.

The whole point of us launching the H $2 50 was to have a tracker at a lower price point to be able to compete with those super capex sensitive customers and theres a handful of them that are out there and what we found that's really building is that as we've reduced our price on the core Dura track that is.

Operator: And what we found that's really building is that as we've reduced our price on the core DuraTrack, that is putting a lot of pressure on those competitors to have those price sensitive. And our win rate against those products using DuraTrack has really gone way up. So what we're seeing is customers are preferring the DuraTrack at the lower price point far better than saying, hey, let's go and chase the H250 up against this other competitive platform, right? So that's what we're seeing. We still have a large backlog of quotes for the H250.

Putting a lot of pressure on those competitors that have those price sensitive and our win rate against those products using dura track has really gone way up so what we're seeing is customers are.

Preferring the dura attract at that lower price point far better than saying, Hey, let's go and chase the H $2 50 up against this other competitive platform right. So that's what we're seeing we still have a large backlog of quotes on the H $2 50, we're still pursuing that and we think that's really important because as.

Operator: We're still pursuing that, and we think that's really important because as those competitors, and some have publicly even noted that they're getting pricing pressure to reduce their prices, that's where the H250 will come into play. But what we've seen thus far is a big uptick in the sale of DuraTrack versus those competitors that we targeted the H250 at. And while you're on it, let me address Omnitrack as

Those competitors and some have publicly even noted that theyre getting pricing pressure to reduce their price, that's where the H 250 won't come into play, but what we've seen thus far is a big uptick in the sale of <unk> versus those competitors that we've targeted the H 250, yet.

And while you're on it let me, let me address omni track as well we have.

We have.

Again getting orders real orders for omni track and as we've said all along we expect that too to kind of be at that 10% to 15% of the overall share domestically.

Operator: We have begun getting orders, real orders, for Omnitrack. And as we've said all along, we expect that to be at that 10% to 15% of the overall share domestically versus Duratrack. And I think that's really beginning to play out in that volume range, if you will. So the orders in hand, I think we're already nearly just over half of our anticipated volume for this year already. So that's beginning to translate, which is pretty good for us at this point.

Versus <unk> and I think.

That's really beginning to play out in kind of that volume range. If you will.

So the orders in hand, I think we're already nearly.

Just over half of our anticipated volume for this year already so thats beginning to translate.

Good for us at this point and what's more important is that's translating to our customers in that it's a very small price premium to the customers and that's really related to the fact that you may need a couple more foundation or posts to utilize debt, but it's far more offset by the amount of grading savings to our customers. So net.

Operator: And what's more important is that it's a very small price premium for our customers, and that's really related to the fact that you may need a couple more foundations or posts to utilize that, but it's far more offset by the amount of grading savings to our customers. So, net-net, Omnitrack is providing the customer several percentage points of improvement in a project, even relative to duration. So we're seeing that traction.

Net debt.

That omni track is providing the customers several percentage points of improvement in our project even relative to <unk>. So we're seeing that traction and I think that traction is going to accelerate as more of the <unk> worked with civil engineering companies and learn how to design in that product as we go forward.

Joseph Altschul: And I think that traction is going to accelerate as more of the EPCs work with civil engineering companies and learn how to design that product as we go forward. Our next question comes from the line of Joseph Altschul with Guggenheim Partners. Please proceed with your question. Yeah, thank you. When you discussed some of the pushouts and timing issues that you've seen, one of the issues that didn't come up was the cost of capital in terms of the things your developers are struggling with. I'm wondering if, in the course of your conversations, that is something that has come up as a factor.

Our next question comes from the line of Joseph Osha with Guggenheim Partners. Please proceed with your question.

Yeah. Thank you.

When you discussed some of the push out some timing issues that you've seen one of the issues that didn't come up.

As cost of capital in terms of the <unk>.

Things your developers or are struggling with them I'm wondering if in the course of your conversations that is something that has has come up as a factor and if you don't mind also I do want to quickly follow up on the previous question.

Operator: And if you don't mind, also, I do want to quickly follow up on the previous question. Is it your intention still to take H-250 and drive it into the lower ASP segment of the market? Or am I hearing a more fundamental shift in your strategy vis-a-vis that and a withdrawal? Thank you. So, let me take the latter first, if you don't mind.

Is it your intention still to to take a $2 50 and drive it into the lower ASP segment of the market or is am I hearing a more fundamental shift in your strategy.

Vis vis that and to attract thank you.

So let me I'll take the latter first if you don't mind no. We still intend to have the H $2 50, as a lower value product to be able to compete with others that may drop their price in order to maintain maintain their market share in that segment, but again, what we are truly seeing now is much more as we move our value line.

Operator: No, we still intend to have the H 250 as a lower-value product to be able to compete with others that may drop their price in order to maintain their market share in that segment. But again, what we're truly seeing now is much more as we move our value line closer. That trade-off between us and one of those lower-priced competitors becomes somewhat negligible with our advantages and installation costs when you add those in. And that's what we're seeing. So we're seeing people start that project and say, look. This is a much better, much more competitive price. I'm going to go ahead and start the project with Endura.

Closer.

Tradeoff between us and one of those lower priced competitors.

Becomes somewhat negligible with our advantages and installation costs when you add those in and that's what we're seeing so we're seeing people start that project and say look.

This is a much better much more competitive price I'm going to go ahead and start the project with the <unk>.

Operator: We are, the H-250 is ready to go. Obviously, we have lots of quotes in for that. And internationally, it's really, really quoting off the charts at this point.

We are the H $2 50 is ready to go.

Obviously, we have lots of quotes in there for that and internationally its really really quoting off the charts at this point, we feel great about that so what we're really focused on is having that ready to be a response. So that we don't have to further decline that eurotrack price that we can do that with the H $2 50. So the original thesis is still solid.

Operator: We feel great about that. So what we're really focused on is having that ready to be a response so that we don't have to further decline the Duratrac price; we can do that with the H-250. So the original thesis is still solid, but it's not playing out nearly as much as we thought.

It's not playing out nearly.

To the degree we thought what we're seeing is the <unk> takeover much more on that.

Operator: What we're seeing is the Duratrac take over much more on that. I'm sorry, can you repeat the first part of the question? In talking to a lot of our customers and developers, there were several that said, I can only put it in a phrase that was used to me, "Why go forward and finance a project today when I know it's 50 basis points cheaper if I wait for the back-end?" And I, look, I don't claim to be an expert in project financing, and I would think there are ways around that in the finance community, but that was a I don't know, honestly, to what degree that's important. Our next question comes from the line between Colin Roche and Oppenheimer.

<unk>.

I'm sorry can you repeat your first part of the question.

Oh, the push outs, so realistic in and talking to a lot of our customers and developers there were several that talked I could only put it in in a phrase that was used to me is why go forward and finance a project today when I know, it's 50 basis points.

Oh, the push outs, so realistic in and talking to a lot of our customers and developers there were several that talked I could only put it in in a phrase that was used to me is why go forward and finance a project today when I know, it's 50 basis points.

Or if I wait for the back half.

And I look I don't claim to be an expert in project financing and I would think theres ways around that.

In the finance community, but that wasn't phrase.

Conveyed to me by a couple of developers over the last three months I don't know honestly to what degree that's impacting things.

Our next question comes from the line of Colin Rusch with Oppenheimer. Please proceed with your question.

Colin Roche: Please proceed with my question. You know, you've offered a lot of details. I appreciate that. But I'm just curious, embedded in the guidance for this year, can you talk about the product mix and how that's trending? You're just alluding to it, but I'm just curious what the assumptions are underlying that, you know, some of the newer products versus older products, larger.

Thanks, so much guys.

Offered a lot of details so I appreciate that but I'm just curious embedded in the guidance for this year can you talk about the product mix and how that's trending you just alluded to it but I'm just curious what the assumptions are underlying that in terms of you know that some of the newer products or solar products.

Operator: Yeah, I don't think we give that level of detail, to be honest. I would only say that the product mix, as anticipated, vis-a-vis OmniTrack, is on track. And the comment I'll make about the DuraTrack winning more against certain competitors versus the H250 in the near term. Okay, and then just in R&D spending, you know, is there an expected change in terms of how much you're going to spend on the operational side, looking at new products now that it feels like you've got a pretty full portfolio here? Should we see that as moderate?

Larger versus smaller systems.

Yeah, I don't think we give that that level of detail to be honest.

I would only say that the product mix as anticipated vis vis the omni track is on track.

And the comment I'll make about the dairy track winning more against certain competitors versus the <unk> 50 in the near term.

Okay, and then just in R&D spending.

Is there an expected change in terms of how much you're going to spend on opex side.

Looking at new products now that it sounds like you've got a pretty full portfolio here should we see that moderate a little bit.

Operator: You're actually going to see that accelerate. We feel really good about the changes we've made to our engineering organization over the last two years, and it's my commitment to the engineering organization that if they continue to bring forward really viable products with great margin enhancements, and this includes new software, this includes new additional services, the amount of work we're doing on, say, accessories and clamping solutions and things like that and value-added engineering efforts is very substantial. So we're going to continue to accelerate and spin there, and I think we're getting a phenomenal return on it. And again, we talked earlier last year on a call, relative to the amount of patents, I think we're now up to nearly 120 patents that have been granted in the last two years, which is again more than the previous 18 years combined. So you're just going to continue to see us build that moat around our business with technology and patents and continue to build that out as we go forward. Our next question comes from the line of Kashi Harrison with Piper Sandler. Please proceed with your question. Good afternoon, everybody, and I should say thank you for taking my questions.

Oh, you're actually going to see that accelerate.

We feel really good about the changes we've made to our engineering organization over the last two years and it's my commitment to the engineering organization that if they continue to bring forward really viable products with great margin enhancements and this includes new software. This includes new additional services the amount of work we're doing.

On say accessories in clamping solutions and things like that and value added engineering efforts is very substantial at this point. So we're going to continue to accelerate and spend there and I think we're getting a phenomenal return out of that and again, we talked earlier last year on a call relative.

Relative to the amount of patents I think we're now up to nearly 120 patents.

Been granted in the last two years, which again is more than the previous 18 years combined so you're just going to continue to see us build that moat around our business with technology and patents and continue to build that out because we go forward.

Thank you. Our next question comes from the line of Kashi Harrison with Piper Sandler. Please proceed with your question.

Hi, good afternoon, everybody and thank you for taking my my question My question, but I should say so so my first set are on the U S pipeline growth and conversion are you talked about a three X growth in the U S pipeline between <unk> 20, and <unk> 2023.

Kashi Harrison: So, my first question is on the U.S. pipeline growth and conversion. You talked about a 3X growth in the U.S. pipeline between 2Q2023 and 4Q2023. And I just want to clarify, so are you saying that the growth is mainly due to cost reductions in Duratrack, or is it H250, or is it Omnitrack? And then you said your win rate has gone up recently.

And I just wanted to clarify are you, saying that the growth is mainly due to cost reductions and eurotrack or that HD 50 or is it omni track and then you said your win rate has gone up recently is that compared to early 2023, 2000, 22021, and then finally how.

Operator: Is that compared to early 2023, 2022, 2021? And then finally, how should we think about pipeline conversion in order? The timeline. Yeah, great questions, Kashi. So when I think about win rate, what I'm comparing it to is our baseline win rate. Think about it as our historical domestic market share, right? So think of it that way.

Should we think about.

Pipeline conversion into orders.

The timeline.

Yeah, great questions Kashi, so when I think about win rate what I'm comparing it to as our baseline win rate is.

Think about it as our historical domestic market share right. So think of it that way. So if our win rate was just simply equal to our historic market share. Obviously, the underlying assumption is that we're seeing most projects that are out there in the market, which is not entirely true, but largely accurate I would say.

Operator: So if our win rate was just simply equal to our historic market share, obviously, the underlying assumption is that we're seeing most projects that are out there in the market, which is not entirely true, but largely accurate, I would say. So what we try to do is look at that win rate accelerating above that. And that tells us that there's market share takeaway happening, right, above that historical market share rate. And that's what we're beginning to see now. We've seen that consistently for several months.

So what we tried to do is we look at that win rate accelerating above that and that tells us that theres market share takeaway happening right above that historical market share right and that's what we're beginning to see now we've seen that consistently for several months. So we feel really good about the fact that our our reduced pricing in the market from those.

<unk> activities is really holding.

Operator: So we feel really good about the fact that our reduced pricing in the market from those structural activities is really holding. And again, and I said, as I've gone out and met with many of our customers, they're really focused on, I had one large EPC come to see me here in Chandler, and the entire point of the meeting was, please tell me that this is structural in nature and you're not trying to buy business because, at these prices, I can lock in a lot of work going forward, right? And That was a great conversation.

And again and I said as I've gone out and met with many of our customers. They are really focused on.

One large.

EPC come to see me here in Chandler and the entire part of the meeting was please tell me that this is structural in nature and youre not trying to buy business because if these prices I should lock in a lot of work going forward right and that was a great conversation, we walk that debt that customers through in detail.

Out of work, we're doing to reduce the costs for them and it was very satisfying meet meeting on both our side. So I can I can tell you that.

So again relative to the pipeline and that pipeline is made up of a strong mix of omni tractor attract NH $2 50, that's all I can say on that it's it's all of the above is sitting in that pipeline at this point.

Operator: We walked that customer through in detail the amount of work we're doing to reduce the costs for them, and it was a very satisfying meeting on both our sides. So I can tell you that. So again, relative to the pipeline, that pipeline is made up of a strong mix of Omnitrack, Duratrack, and H250. That's all I can say on that.

Our next question comes from the line of Andrew <unk> with Morgan Stanley. Please proceed with your question.

Hey, Thanks for taking the question, maybe just as a follow up to some of the margin questions earlier.

Youre kind of alluding to some some declining asps this year some of that's being offset by.

Andrew Percoco: All of the above is sitting in that pipeline at this point. Our next question comes from the line of Andrew Percoco with Morgan Stanley. Please proceed with your question. Thanks for taking the question.

Lower commodity prices lower manufacturing cost potentially but I was just curious how much additional room do you have left to lower the cost of your product from here. If you were to take a 12 months to 24 months, you and pricing continues to come down whether that's a competition driven or otherwise how much you know.

Andrew Percoco: Maybe just as a follow-up to some of the margin questions earlier, you're kind of alluding to some declining ASPs this year, some of that's being offset by lower commodity prices, lower manufacturing costs, potentially. But I was curious, how much additional room do you have left to lower the cost of your product from here? If we were to take a 12 to 24 month view and pricing continues to come down, whether that's competition driven or otherwise, how much, you know, cost per watt, if you want to use that measure? How much left?

Cost per watt, if you wanted to use that measure how much left or how much further can you drive down that metric versus where you are today.

I would say a couple of things. This is Kurt you know what the R&D spend that Kevin spoke about earlier isn't only for new product introductions, we're constantly designing for how we can reduce cost out of our program as well and also obviously getting smarter in the supply chain side.

Kurt Wood: Or how much further can you drive down that metric versus where you are today? I would say a couple of things. This is Kurt.

Around how we price logistics in and redesigned clamps and other things like that to Optum.

Kurt Wood: One, the R&D spend that Kevin spoke about earlier isn't only for new product introductions. We're constantly designing for how we can reduce costs out of our program as well. And also, obviously, getting smarter on the supply chain side around how we price logistics in and redesign clamps and other things like that to optimize. And then, obviously, each EPC or developer does things a little bit differently, so we work with them if they have volume with us to make sure we're optimizing to make sure not just our product but the residual balance of system costs and overall LCOE is taken into account as well.

Optimize and then obviously, there's each EPC your developer does things a little bit differently. So we work with them if they have volume with us to make sure we're optimizing to make sure not just our product, but the residual balance of system costs and overall <unk> is taken into effect as well because there could be some instances, where our prices a little bit higher because we're driving value on the back.

And when they reduce cost there. So I think we continue to have room.

We will continue to design cost out <unk>.

<unk> is another example, it is a lower cost product of the German track, we have the ability to use that product if the price points get down to that level and still maintain our margin. So we will continue to focus on that I will say our operations team has done a phenomenal job in executing the cost reduction goals that we had in 2023.

Kurt Wood: There could be some instances where our price is a little bit higher because we're driving value on the back end where they reduce costs there. So I think we continue to have room. We will continue to design costs out. H250 is another example.

And it's a big reason of why we're sitting in the mid Twenty's margin without any.

Kurt Wood: It is a lower-cost version of the Duratrac. We have the ability to use that product if the price points get down to that level and still maintain our margin. So we will continue to focus on that. I will say our operations team has done a phenomenal job in executing the cost reduction goals that we had in 2023 and is a big reason why we're sitting in the mid-20s margin without any 45X or other benefits loaded in there at the time. So I think there's still headway, and every company will do that. You have to match that, and I think you're seeing that across the industry. We are committed to lowering the cost of solar energy globally.

45 extra other benefits included in there at the time, so I think theres still.

Every company will do that you have to match that and you know I.

I think youre seeing that across the industry and we're committed to lowering the cost of solar energy globally.

Our next question comes from the line of Derek Soderberg with Cantor Fitzgerald. Please proceed with your question.

Yeah, Hey, Thanks for squeezing me in just one for me I was curious if you could just talk a bit more about non tracker revenue opportunities.

Any plans or introductions this year.

The non tracker play into the gross margin guidance, if so to what degree just any call outs on the product development side. There how we should think about non tracker revenue trends 24. Thanks.

Derek Soderberg: Our next question comes from the line of Derek Soderberg with Cantor Fitzgerald. Please proceed with your question. Yeah, hey, thanks for squeezing me in.

So I will start Kevin and maybe you can add on if you haven't I think look we've made some good progress on there.

Operator: Just one for me, I was curious if you could just talk a bit more about non-tracker revenue opportunities. Any plans or introductions this year? Did non-tracker play into the gross margin guidance? If so, to what degree?

Again, I'll talk about the structural enhancements starting with Q4, if you take the 45 X, which was $9 3 million and we said we had $8 5 million of one time charges. So they net each other out then that gives us 520 basis points year over year.

Kurt Wood: Just any call-outs on the product development side there, what we should think about non-tracker revenue trends in 24? I'll start, Kevin, and maybe you can add on if you haven't already. I think, look, we've made some good progress on that. You know, again, I'll talk about the structural enhancements starting with Q4. You know, if you take the 45X, which was $9.3 million, and we said we had $8.5 million of one-time charges, so they net each other out, and that gives us 520 basis points year over year.

You know three quarters of that was coming from structural cost enhancements that Kevin talked about and the remaining 25% was coming from these non tracker revenue sources that we have.

We expect that to continue to grow in the year, probably not a very material amount above what youre seeing here, but that.

Therein lies a potential tailwind we have going out we are promoting it.

But it is factored into our guidance.

Yeah, and just adding some color to what those entail theres kind of three major buckets, we've been focusing on the <unk>.

One is accredited training programs as in order to qualify for the ITC and domestic content provisions you have to be able to demonstrate you are using a credit trading programs and there's really a lack of them out there in the industry. So as our customers as those <unk> are hiring labor too.

Operator: About, you know, three-quarters of that was coming from, you know, the structural cost enhancements that Kevin talked about, and the remaining 25% was coming from these non-tracker revenue sources that we have. You know, we expect that to continue to grow in the year, probably not by a very material amount above what you're seeing here, but, you know, that there lies a potential tailwind we have going out. We're promoting it, but it is factored into our guidance. And just adding some color to what those entail, there are kind of three major buckets we've been focusing on. The one is accredited training programs. In order to qualify for the ITC and domestic content provisions, you have to be able to demonstrate that you're using accredited training programs. And there's really a lack of them out there in the industry.

To handle future acceleration they need to be able to have that labor set for our credit trading. So we've taken the time to create many training modules and get them fully accredited and that's already up and running at this point and again as I'm in front of customers, even even as recent as two weeks ago, they're thrilled that there is another resource where they can set.

People for this accredited trading.

The second area was in in for lack of a better word process.

Tightening our services, if you will and taken some of the things that we do in terms of commissioning Goldman ROE inspection health assessment inspection services site automation services all of those things that we do from time to time and product ties them. So that they are highly repeatable and that we actually generate revenue for them and again that's really good.

Operator: So as our customers, as those EPCs are hiring labor to handle future acceleration, they need to be able to have that labor sent for accredited training. So we've taken the time to create many training modules and get them fully accredited. And that's already up and running at this point.

Value revenue for us.

And then the last is really it comes down to project management and looking at where we can in source engineering services that maybe some of our customers are doing from time to time in <unk>. For example that the civil engineering terrain analysis that would be required to use Andre bringing some of those services in house and being able to provide that value added for our.

Operator: And again, as I'm in front of customers, even as recently as two weeks ago, they're thrilled that there's another resource where they can send people for this accredited training. That second area was, for lack of a better word, process, process-tizing our services, if you will, and taking some of the things that we do in terms of commissioning, golden row inspection, health assessment inspection services, site optimization services, all of those things that we do from time to time and productizing them so that they're highly repeatable and that we actually generate revenue. And again, that's really good, high-value revenue for us. And then the last one really comes down to project management and looking at where we can outsource engineering services that maybe some of our customers are doing from time to time. And for example, the civil engineering terrain analysis that would be required to use Omni, bringing some of those services in-house and being able to provide that value added for our customers.

So we're really excited about that we're really excited about the team we've built around our services offerings and we do expect that to continue to grow.

Our next question comes from the line of Joanne Maisano with Wolfe Research. Please proceed with your question.

Yeah, Hi, Thanks for taking my question I'm sorry, if this was already covered but I just wanted to go back to the $300 million.

You talked about last quarter as being on the sidelines.

I guess, what I'm trying understand is what is the churn.

Was any of that included in this quarter's bookings and just generally what is the churn in those kind of delayed projects.

Well, what we saw is about half of that came in to the order book at this point. These are projects that they could just no longer delay they need to get the orders to us for us to begin working with our supply chain. So we did see about half of that $300 million were on the sidelines specifically related to IRS clarity come in.

I think the Russell just roll in project by project normal course of business, we won't really call it out.

With any specificity as we go forward.

Operator: So we're really excited about that. We're really excited about the team we've built around our services offerings, and we do expect that to continue to grow. Our next question comes from the line of Dylan Nisano with Wolf Research. Please proceed with your question. Yeah, hi, thanks for taking my question. Sorry if this was already covered, but I just wanted to go back to the 300 million that you guys talked about last quarter being on the sidelines.

But perhaps about half is already converted now.

Our next question comes from the line of Philip Shen with Roth Capital Partners. Please proceed with your question.

Kevin Curt Thanks for taking my questions.

Can you quantify how much.

Can you quantify how much of the 45 X you might pass along to customers and when the IRA first came out you guys quantified the tour to credit being roughly 1.6 cents per watt.

Tortured guy might get maybe a third or a quarter or do you think you pass along as much as a quarter or a third to customers and you guys keep maybe a third or half of it or did.

Dylan Nisano: I guess what I'm trying to understand is, what is the churn? Was any of that included in this quarter's booking? Generally, what is the churn?

Did you pass any along into 40.

Operator: What we saw is that about half of that came into the order book at this point. These are projects that they could just no longer delay. They need to get the orders to us for us to begin working with our supply chain. So we did see about half of that 300 million that were on the sidelines specifically related to IRA clarity come in. I think the rest will just roll in project by project, as is the normal course of business. We won't really call it out with any specificity as we go forward, but about half of that has already converted. Our next question comes from the line of Philip Shen with Roth Capital Partners. Please proceed with your question. Kevin and Curt, thanks for taking my questions. Quantify how much... Can you quantify how much of the 45... when the IRA first came out? YouTube guy might get maybe a third or a quarter.

Sorry did you pass some of the 45 ex credit with the recent $600 million in bookings in Q4 or if not when do you expect to start to pass some of the 45 tax credits along with the customers.

So our margin guidance assumes that there will be a portion so what we've been clear on our messaging is that that low <unk> margin is net of the retained portion of our 45 X growth. We have not entered into any specific contracts requiring us to do that as of yet but.

But our view when we have been working with our customers and certainly our large partners. We've committed to them that there would be a level of sharing of that credit as we go forward. So we're not about to negotiate that over an open conference call, but our expectation and what's baked into our guidance is an expectation that there'll be a portion of that that we're going to share with our.

Scott.

And our next question comes from the line of Vikram <unk> with Citi. Please proceed with your question.

Good afternoon, everyone I think in the prepared comments you had mentioned that you're evaluating multiple avenues to.

Philip Shen: Pass along as much as a quarter or a third to customers, and you guys... half of it, you pass it along. Sorry, did you pass any of the 45x credits? Or, if not, when do you expect...

Any clarity on structural fasteners can you talk about what avenues, you're reevaluating and anticipated timing of clarity.

Operator: So, Phil, our margin guidance assumes that there will be a portion, so what we've been clear in our messaging is that that low 30s margin is net of the retained portion of our 45X credits. We have not entered into any specific contracts requiring us to do that as yet, but our view when we've been working with our customers and certainly our large partners, we've committed to them that there would be a level of sharing of that credit as we go forward. So we're not about to negotiate that over an open conference call, but our expectation and what's baked into our guidance is an expectation that there'll be a portion of that that we're going to share with our customers. And our next question comes from the line of Vikram Bagri with Citi. Please proceed with your question. Good afternoon, everyone.

The carbon period for 445 X scarification expired mid fab.

I believe you did not see clarity through that process.

And on the same topic.

$40 million of 2023, IV credit realized in 'twenty.

123 to be realized in 2004 is that a one time boost to this years EBITDA or we may see a similar amount of credit for 24 to 25 I'm just trying to understand what is the right EBITDA, excluding any one time boost of onetime items.

Should use for two.

<unk> 24 is this $40 million shift from 23 to 24 is it one time or we will see 24 also in Arizona.

Vikram Bagri: I think in the prepared comments, you mentioned that you're evaluating multiple avenues to gain clarity on structural fasteners. Can you talk about what avenues you're evaluating and the anticipated timing of clarity? The comment period for 45x clarification expired mid-Feb, but I believe you did not see clarity through that process. And on the same topic, the $40 million of 2023 IRA credit realized in 2020, earned in 23 to be realized in 24. Is that a one-time boost to this year's EBITDA, or may we see a similar amount of IRA credit from 24 to 25? I'm just trying to understand what the right EBITDA is excluding any one-time boost or one-time items that I should use for 24. Is this $40 million shift from 23 to 24, is it one time, or we'll see? 24 also and at the end of 24, a similar amount shifting from 24 to 25.

A similar amount shifting from 24 to 25. Thank you.

Well I'll take the second part first and then maybe you can go on to the first part the second part regarding the onetime nature. We think it's one you didn't have all of the 45 X negotiated at.

Including the structural fasteners that we know will be included going in there's parts that are a little bit more vague that we're waiting for clarity on so I think.

At least from what we know now you're probably safe that you'll have an equal amount pushed to the following year that about will provide a little bit more clarity as we go throughout the year and when we provide 2025 guidance, but from what we know now that's what I would tell you at that point and I think what we're focusing on is the structural margin in the mid 20, 20% range.

On the core.

And I'll address your comments on structural fasteners, so <unk>.

Kurt Wood: Thank you. I'll take the second part first, Kevin, and then you can go on to the first part. On the second part regarding the one-time nature, we think it's, you know, one that you didn't have all of the 45x negotiated at, you know, including the structural fasteners that we know will be included going in. There are parts that are, you know, are a little bit more vague that we're waiting for clarity on. So I think, you know, at least from what we know now, you're probably safe that you'll have an equal amount pushed to the following year. That amount will provide a little bit more clarity as we go throughout the year, and then we'll provide 2025 guidance. But, you know, from what we know now, that's what I would tell you at that point.

Specifically some of the things we're doing so first of all I'm really thrilled but at the end of the year we increased.

Our government affairs team and hired a new SVP of external policy and government affairs.

Jessica is really having a great impact working with us and being able to navigate some of these challenges around.

Around Washington D C.

So setting that aside.

We are active and working with providing additional clarity to the IRS in terms of additional variations of definitions around structural fasteners for one week.

Certainly active in.

In a broader political push to ensure that the that the structural faster elements as is our further supported and I think for US there's kind of two categories were focused on the first or the amount of parts that we are already today very confident that qualify for credits based on the current.

Operator: And I think what we're focusing on is the structural margin in the mid-20% range on the core. And I'll address your comments on structural fasteners. So specifically, some of the things we're doing. So first of all, I'm really thrilled that at the end of the year, we increased our government affairs team and hired a new SVP of external policy and government affairs. And Jessica's really having a great impact working with us and being able to navigate some of these challenges in Washington, D.C.

Vince as written and our focus there isn't about changing the definition, it's really about negotiating with our parts suppliers.

In terms of the split much like we did at the end of the year into early this year with our torque tube suppliers were in those same negotiations with our suppliers.

Operator: So setting that aside, we are active in working with providing additional clarity to the IRS in terms of additional variations of definitions around structural fasteners, for one. We're certainly active in..., in a broader political push to ensure that the structural fastener elements as they are are further supported. And I think for us, there's kind of two categories we're focused on. The first is the amount of parts that we are already very confident that qualify for credits based on the current guidelines as written. And our focus there isn't about changing the definition.

In hopes of retaining a disproportionate amount of that benefit as well. So once we do that once we have clarity we've committed to come back to the market and given and give you guys. An idea of what the size of that bread box really as.

The second.

Is a little bit more nebulous its a bunch of parts that may qualify and the efforts. We're doing there is we've hired some third party engineering companies to go to evaluate those parts and the definitions and give us rendered opinions on whether or not part a or b or C would actually qualify under that definition.

Operator: It's really about negotiating with our parts suppliers in terms of the split, much like we did at the end of the year into early this year with our torque tube suppliers. We're in those same negotiations with our suppliers in hopes of retaining a disproportionate amount of that benefit as well. So once we do that, once we have clarity, we've committed to come back to the market and give you guys an idea of what the size of that bread box really is. The second is a little bit more nebulous.

But again, we will then take that onboard and once we get the rest of that audio analytics done and as a management team, we will decide whether or not we feel confident enough to take some additional elements of structural fasteners. So theres a lot of work going on around that.

Operator: It's a bunch of parts that may qualify. And the effort we're doing there is we've hired some third-party engineering companies to go and evaluate those parts and the definitions and give us their opinions on whether or not part A or B or C would actually qualify under that definition. But again, we'll then take that on board once we get the rest of that body of analytics done, and as a management team, we'll decide whether or not we feel confident enough to take some additional elements of structural factors.

Again, we will maintain our commitment to come back to you when we have full clarity and disclose that but what I will say is that's upside to the guidance. We've currently provided.

Thank you we have reached the end of our question and answer session and with that this concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Okay.

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Operator: So there's a lot of work going on around that. Again, we'll maintain our commitment to come back to you when we have full clarity and disclose that. But what I will say is that's, again, upside to the guidance we've currently got.

Hum.

Uh-huh.

Okay.

Operator: Thank you. We have reached the end of our question and answer session, and with that, this concludes today's teleconference. You may disconnect your lines at this time.

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Operator: Thank you for your participation, www.arraytech.com, and I'm going to go to town. I'm going to go to town. I can't wait to get there. I just can't wait to get there.

Okay.

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Yeah.

Uh-huh.

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Yeah.

Uh-huh.

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Operator: I'm www.arraytech.com. Bye! Thanks for watching. Thank you. Thanks for watching! www.arraytech.com.

Uh-huh.

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Yeah.

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Operator: Thank you, and the rest of the world. I'm David B. Holmes. Thank you for watching. I'll see you next time.

Okay.

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