Q4 2024 Array Technologies Inc Earnings Call
Came out of it.
Question and answer session will follow the formal presentation.
As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host Jean are Gunning arrays, Chief legal officer and corporate Secretary. Please go ahead.
Speaker Change: Thank you.
Speaker Change: I would like to welcome everyone to array technologies fourth quarter and year end 'twenty 'twenty four earnings conference call.
Speaker Change: I'm Gina getting a raise new chief legal officer, and corporate Secretary and I am temporarily covering for Sarah Shepherd Senior director of Investor Relations, who is currently out of the office on a highly anticipated family leave of absence.
Speaker Change: Greetings and welcome to the Array Technologies fourth quarter and full year 2024 earnings call. At this time all participants are in listen-only mode. A question and answer session will follow the formal presentation.
Speaker Change: I am thrilled to be here at array technologies and I am joined on this call by Kevin Hostettler, Our CEO, Keith Jennings, our CFO, Neil Manning, our President and C O O and James <unk>, Our Chief Accounting Officer.
As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host, Gina Gunning, Array's Chief Legal Officer and Corporate Secretary. Please go ahead.
Speaker Change: Today's call is being webcast from our Investor Relations site at IR Dot array Tech, Inc, dot com, including audio and slides.
Speaker Change: Thank you. I would like to welcome everyone to Array Technology's fourth quarter and year-end 2024 Earnings Conference Call.
Speaker Change: In addition, the press release and the presentation detailing our quarterly and full year results have been posted on the website.
Speaker Change: I'm Gina Gunning, Array's new Chief Legal Officer and Corporate Secretary, and I am temporarily covering for Sarah Sheppard, Senior Director of Investor Relations, who is currently out of the office on a highly anticipated family leave of absence.
Speaker Change: Today's discussion of financial results includes non-GAAP measures.
Speaker Change: A reconciliation of GAAP to non-GAAP financial measures can be found on our website we.
Speaker Change: We encourage you to visit our website at array Tech and Dot com for the most current information on our company.
Speaker Change: I am thrilled to be here at Array Technologies, and I am joined on this call by Kevin Hostetler, our CEO, Keith Jennings, our CFO, Neil Manning, our President and COO, and James Chu, our Chief Accounting Officer.
Speaker Change: 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 statements made on this call.
Speaker Change: Today's call is being webcast from our Investor Relations site at ir.arraytechinc.com, including audio and slides.
Speaker Change: We refer you to the documents, we file with the SEC, including our most recent Form 10-K for a discussion of risks that may affect our future results.
Speaker Change: In addition, the press release and the presentation detailing our quarterly and full-year results have been posted on the website.
Today's discussion of financial results includes non-GAAP measures.
Speaker Change: Although we believe that the expectations reflected in the forward looking statements are reasonable we cannot guarantee future results levels of activity performance or achievements, we're under no duty to update any of the forward looking statements to conform these statements to actual results except as required by law.
Speaker Change: A reconciliation of GAAP to non-GAAP financial measures can be found on our website. We encourage you to visit our website at ArrayTechInc.com for the most current information on our company.
Speaker Change: As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, our expected results, and other matters.
Kevin: I will now turn the call over to Kevin.
Speaker Change: Okay.
Speaker Change: Gina and I will take a moment to publicly welcome both you and Keith to team array.
Speaker Change: These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made on this call.
Speaker Change: For the entire executive team and saying we're excited to have both of you as our partners.
Speaker Change: Good afternoon, everyone and thank you for joining us today.
Speaker Change: We refer you to the documents we file with the SEC, including our most recent Form 10-K, for a discussion of risks that may affect our future results.
Speaker Change: I'll begin with a brief business and market update then Neil Manning, our president and Chief operating officer will provide some product and commercial updates for the quarter.
Speaker Change: Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.
Speaker Change: Keith Jennings, our Chief Financial Officer will provide the fourth quarter and full year 2024 financial highlights and full year 2025 financial guidance then we'll open the line for your questions.
Speaker Change: We are under no duty to update any of the forward-looking statements to conform these statements to actual results except as required by law. I will now turn the call over to Kevin.
Speaker Change: Starting on slide three I'll begin with the summary, and key highlights of the quarter as well as full year 2024 results followed by a discussion on the latest near term market dynamics and industry environment.
Kevin: Thank you, Gina. And I'll take a moment to publicly welcome both you and Keith to Team Array. I speak for the entire executive team in saying we're excited to have both of you as our partners.
Speaker Change: We had a strong fourth quarter driven by robust project execution.
Speaker Change: This in turn translated into better than expected financial results for the quarter and strong results for 2024.
Good afternoon, everyone, and thank you for joining us today.
Speaker Change: I'll begin with a brief business and market update, then Neil Manning, our President and Chief Operating Officer, will provide some product and commercial updates for the quarter.
Speaker Change: We achieved $275 million of revenue in the fourth quarter and $916 million of revenue for full year, 2024, which was above the midpoint of our previously communicated guidance range.
Speaker Change: Keith Jennings, our Chief Financial Officer, will provide the fourth quarter and full year 2024 financial highlights and full year 2025 financial guidance. Then we'll open the line for your questions.
Speaker Change: Fourth quarter adjusted gross margin came in at 29, 8% an improvement of 410 basis points year on year and full year. Adjusted gross margin of 34, 1% represents an improvement of 680 basis points compared to full year 2000.
Speaker Change: Starting on slide 3, I'll begin with the summary and key highlights of the quarter as well as full year 2024 results, followed by a discussion on the latest near-term market dynamics and industry environment.
Speaker Change: 23.
Speaker Change: We had a strong fourth quarter, driven by robust project execution.
We also delivered adjusted EBITDA of $45 2 million in the fourth quarter.
Speaker Change: This, in turn, translated into better-than-expected financial results for the quarter and strong results for 2024.
And $173 6 million for full year 2024.
Speaker Change: We achieved $275 million of revenue in the fourth quarter and $916 million of revenue for full year 2024, which was above the midpoint of our previously communicated guidance range.
Speaker Change: For the full year, we generated $135 million of free cash flow ending the year with a strong cash balance of $364 million.
Speaker Change: As depicted on slide four several achievements highlighted our 2024.
Speaker Change: Fourth Quarter Adjusted Gross Margin came in at 29.8%, an improvement of 410 basis points year on year.
Speaker Change: We broke ground on our new state of the art manufacturing facility in Albuquerque, New Mexico, which is an important part of our supply chain resiliency strategy as we look to further domesticate additional components reduce our costs and lower enterprise risk around continuity of supply for certain critical components.
Speaker Change: and Full Year Adjusted Gross Margin of 34.1% represents an improvement of 680 basis points compared to Full Year 2023.
Speaker Change: We also delivered adjusted EBITDA of $45.2 million in the fourth quarter and $173.6 million for full year 2024.
Speaker Change: Yeah.
We have and continue to improve and innovate our portfolio of products software and service solutions based on feedback we received from our customers.
Speaker Change: For the full year, we generated $135 million of free cash flow, ending the year with a strong cash balance of $364 million.
Speaker Change: Recent examples include our patented Halo alert response, and our automated snow response as integral parts of our smart track suite of controller and software services.
As depicted on slide four, several achievements highlighted are 2024.
Speaker Change: The strong traction we are experiencing globally with our omni track to rain following tracker, which I'm pleased to report already represents over 20% of our order book.
Speaker Change: We broke ground on our new state-of-the-art manufacturing facility in Albuquerque, New Mexico, which is an important part of our supply chain resiliency strategy.
Speaker Change: We've received positive feedback on scaling since its launch and launched our reusable packaging initiative to enhance sustainability and reduce costs.
Speaker Change: as we look to further domesticate additional components, reduce our costs, and lower enterprise risk around continuity of supply for certain critical components.
Speaker Change: Most recently, we made a significant investment in swap robotics, which Neil will describe in more detail later.
Speaker Change: We have and continue to improve and innovate our portfolio of products, software, and service solutions based on feedback we receive from our customers.
Speaker Change: We made organizational improvements such as the remediation of our final material weaknesses, and we strengthened our management team with key hires with depth of industry experience and strong relationships in both our domestic and international teams.
Speaker Change: Recent examples include our patented hail alert response and our automated snow response as integral parts of our SmartTrack suite of controller and software services.
Yes.
Speaker Change: And lastly, we are in active voice working with industry trade groups, such as the solar Energy Industries Association and American clean power and have a seat at the table as we advocate for our value proposition and the benefits of renewable energy as a key component of our broader Energy addition strategy.
Speaker Change: The strong traction we're experiencing globally with our Omnitrack Terrain Following Tracker, which I'm pleased to report already represents over 20% of our order book.
Speaker Change: We have received positive feedback on SkyLink since its launch and launched our Reusable Packaging Initiative to enhance sustainability and reduce costs.
Speaker Change: And the element supporting this strategy found within the inflation reduction Act.
Speaker Change: Most recently, we made a significant investment in Swap Robotics, which Neil will describe in more detail later.
Speaker Change: 2024 was a productive and successful year for array and I'm proud of everything our team accomplished.
Speaker Change: We made organizational improvements, such as the remediation of our final material weaknesses, and we strengthened our management team with key hires, with depth of industry experience, and strong relationships in both our domestic and international teams.
Speaker Change: Turning to slide five I'd like to provide an update on our order book.
Speaker Change: Our order book ended the year at $2 billion up 10% compared to 2023 year end.
Speaker Change: We continued to see strong overall momentum in the business as new and existing customers are seeing the benefits of arrays innovative products software and services portfolio.
Speaker Change: and American Clean Power, and have a seat at the table as we advocate for our value proposition and the benefits of renewable energy as a key component of a broader energy addition strategy and the elements supporting this strategy found within the Inflation Reduction Act.
Speaker Change: In particular, the domestic portion of our order book continues to build momentum with over 20% growth experienced over the course of 2024.
Speaker Change: Our win rate continues to improve and we're seeing great traction with our recently expanded product software and services portfolios.
Speaker Change: 2024 was a productive and successful year for Array, and I'm proud of everything our team accomplished.
Speaker Change: We are encouraged by this momentum, which we believe is largely driven by our focus on renewed customer engagement and innovative and differentiated solutions for our customers.
Speaker Change: Turning to slide five, I'd like to provide an update on our order book.
Speaker Change: Our order book ended the year at $2 billion, up 10% compared to 2023 year-end.
Speaker Change: Our omni track to rain following tracker continues to gain traction in the market and contributed almost 10% of our 2020 for revenue.
Speaker Change: We continue to see strong overall momentum in the business as new and existing customers are seeing the benefits of Array's innovative product software and services portfolio.
Speaker Change: We believe the ongoing success of this product reflects the diverse range of to range being utilized for solar projects, both in the U S and globally.
Speaker Change: In particular, the domestic portion of our order book continues to build momentum with over 20% growth experienced over the course of 2024.
Speaker Change: This is an exciting trend as it allows the industry to broaden its total addressable market, while staying one of the most cost effective options for new energy generation.
Speaker Change: Our win rate continues to improve, and we're seeing great traction with our recently expanded product, software, and services portfolios.
Okay.
Speaker Change: Transitioning to slide six I want to take the time to walk through what we're seeing in the market both in the long term and short term.
Speaker Change: We are encouraged by this momentum, which we believe is largely driven by our focus on renewed customer engagement and innovative and differentiated solutions for our customers.
Speaker Change: Utility scale solar remains the cheapest and fastest growing energy source to meet the increasing demand for electricity.
Speaker Change: Our Omnitrack Terrain Following Tracker continues to gain traction in the market and contributed almost 10% of our 2024 revenue.
Speaker Change: According to a study released last week by <unk> and conserve America by 2035, the U S will need 50% more annual electricity production than today to meet the demand created mostly by data centers for AI and manufacturing re shoring.
Speaker Change: We believe the ongoing success of this product reflects the diverse range of terrains being utilized for solar projects both in the U.S. and globally.
Speaker Change: This is an exciting trend as it allows the industry to broaden its total addressable market while staying one of the most cost-effective options for new energy generation.
Speaker Change: Peak demand growth rates exceed five times that over the past decade.
Speaker Change: Furthermore.
Speaker Change: And wood Mackenzie released data in Q4, noting that solar and solar plus battery storage represented 64% of all new electricity deployment in the U S. Continuing a four year trend.
Speaker Change: Transitioning to slide 6, I want to take the time to walk through what we are seeing in the market, both in the long term and short term.
Speaker Change: Utility-scale solar remains the cheapest and fastest-growing energy source to meet the increasing demand for electricity.
Utility scale solar is faster to deploy lower in cost has no ongoing variable input costs and utilizes a proven domestic supply chain.
Speaker Change: According to a study released last week by Brattle and Conserve America, by 2035 the U.S. will need 50% more annual electricity production than today to meet the demand created mostly by data centers for AI and manufacturing reshoring.
Speaker Change: Thus, we see continued growth to meet the increased electricity demand in the coming decade.
Speaker Change: We've spoken in the past about the headwinds we have seen impacting the solar industry and pushing project timelines to the right.
Speaker Change: Peak demand growth rates exceed five times that of the past decade.
Speaker Change: While these continue to impact project timelines in the U S. We did see the market stabilized towards the end of the year compared to the level of push outs, we experienced in the middle of the year.
Speaker Change: Furthermore, Sia and Wood McKenzie released data in Q4 noting that solar and solar plus battery storage represented 64 percent of all new electricity deployment in the U.S., continuing a four-year trend.
Speaker Change: We are encouraged by the level of stabilization, we experienced in the market towards the end of the year and look forward to continued momentum in 2025.
Speaker Change: On the policy front. It has certainly been a dynamic start to the year.
Speaker Change: Utility scale solar is faster to deploy, lower in cost, has no ongoing variable input costs, and utilizes a proven domestic supply chain.
Speaker Change: First there has been much speculation regarding the IRA which is now being referred to as the American energy credits.
Speaker Change: Thus, we see continued growth to meet the increased electricity demand in the coming decade.
Speaker Change: As we've communicated in the past our view remains that a full repeal of the American energy credits is unlikely given narrow GOP margins in Congress and support from some Republican legislators.
Speaker Change: We've spoken in the past about the headwinds we have seen impacting the solar industry and pushing project timelines to the right.
Speaker Change: While these continue to impact project timelines in the U.S., we did see the market stabilize towards the end of the year compared to the level of pushouts we experienced in the middle of the year.
Speaker Change: We continue to work with our industry Association partners like American clean power and the solar energy industry Association to highlight the impact that array and other U S manufacturers are having on the American economy.
Speaker Change: Delivering both jobs and secure reliable energy.
Speaker Change: On the policy front, it has certainly been a dynamic start to the year.
Speaker Change: Second wed like to add some context on the recent executive orders and their impact on our business customers and industry.
Speaker Change: First, there has been much speculation regarding the IRA, which is now being referred to as the American Energy Credits.
Speaker Change: We do not believe the key tax credits for our industry, including the ITC PTC domestic content and 45 X are affected by the recent Trump executive orders.
Speaker Change: As we've communicated in the past, our view remains that a full repeal of the American Energy Credits is unlikely given narrow GOP margins in Congress and support from some Republican legislators.
Speaker Change: Regarding the freeze on disbursing IRA funds. This would apply only to appropriated funds that agencies have not yet dispersed such as grants or loans from the department of energy.
Speaker Change: We continue to work with our industry association partners like American Clean Power and the Solar Energy Industry Association to highlight the impact that Array and other U.S. manufacturers are having on the American economy, delivering both jobs and secure, reliable energy.
Speaker Change: Tax credits are considered mandatory spending and are not subject to appropriation.
Speaker Change: As such they are outside the scope of this executive order.
Speaker Change: We continue to monitor developments on this front and we will continue to share information as it becomes clearer.
Speaker Change: Second, we'd like to add some context on the recent executive orders and their impact on our business, customers, and industry.
Speaker Change: As the original provider of high domestic content solar tracker solutions, we continue to focus on our domestic supply chain and we've made excellent progress throughout the year.
Speaker Change: We do not believe the key tax credits for our industry, including the ITC, PTC, domestic content, and 45X, are affected by the recent Trump executive orders.
Speaker Change: We are on track to provide 100% domestic content trackers in the first half of 2025 and to be able to do so at scale and with the required certifications are customers are expecting.
Speaker Change: Regarding the freeze on dispersing IRA funds, this would apply only to appropriated funds that agencies have not yet dispersed, such as grants or loans from the Department of Energy.
Speaker Change: On the international front in Brazil, the devaluation of the Brazilian real the volatile interest rate environment.
Speaker Change: Tax credits are considered mandatory spending and are not subject to appropriation.
Speaker Change: And newly introduced tariffs on solar components have significantly slowed market growth.
Speaker Change: As such, they are outside the scope of this executive order.
Speaker Change: This is expected to continue for three to four more quarters as purchase price agreements are renegotiated across regions and as Brazil enters a presidential election cycle in 2026.
Speaker Change: We continue to monitor developments on this front, and we will continue to share information as it becomes clearer.
Speaker Change: As the original provider of high domestic content solar tracker solutions, we continue to focus on our domestic supply chain and we've made excellent progress throughout the year.
Speaker Change: In Europe, our business is performing as expected and we anticipate modest market growth in 2025.
Speaker Change: We are on track to provide 100% domestic content trackers in the first half of 2025, and to be able to do so at scale and with the required certifications our customers are expecting.
Speaker Change: We believe we are well positioned to capture market share in the region.
Speaker Change: We are actively evaluating additional markets for international expansion, including the Middle East, where we announced opportunities in the first half of 2024.
Speaker Change: On the international front, in Brazil, the devaluation of the Brazilian Real, the Volatile Interest Rate Environment.
Speaker Change: We are excited by the positive reception and the potential growth in the region.
Speaker Change: As we turn our attention to 2025, despite ongoing industry headwinds, we see demand stabilizing as the value proposition for utility scale solar remains robust driving underlying industry growth to mid to high single digits.
Speaker Change: and newly introduced tariffs on solar components have significantly slowed market growth.
Speaker Change: With the guidance, we introduced today array expects to exceed the market with 20% top line growth.
Speaker Change: In Europe, our business is performing as expected, and we anticipate modest market growth in 2025. We believe we are well positioned to capture market share in the region.
Speaker Change: Keith will discuss our guidance for 2025 in more detail later, but it should be noted given our experience in 2024, we have modified our forecasting methodology to take a more conservative approach as we entered 2025.
Speaker Change: We are actively evaluating additional markets for international expansion, including the Middle East, where we announced opportunities in the first half of 2024.
Speaker Change: As we explained during our last earnings call a significant portion of our order book is scheduled for delivery between now and through the end of 2025 in fact over 50% of our current order book is set to be delivered in 2025.
Speaker Change: We are excited by the positive reception and the potential growth in the region.
Speaker Change: As we turn our attention to 2025, despite ongoing industry headwinds, we see demand stabilizing as the value proposition for utility-scale solar remains robust, driving underlying industry growth to mid to high single digits.
Speaker Change: We should also note we still expect to book some additional DG projects over the next couple of quarters for delivery in 2025.
Speaker Change: Overall customers are facing a range of both challenges and opportunities in the market.
Speaker Change: With the guidance we introduced today, Array expects to exceed the market with 20% top-line growth.
Speaker Change: However, it's important to highlight that for 2025 deliveries, we observed the U S market stabilizing rather than deteriorating compared to the level of customer push outs experienced in mid 2024.
Speaker Change: Keith will discuss our guidance for 2025 in more detail later, but it should be noted, given our experience in 2024, we have modified our forecasting methodology to take a more conservative approach as we enter 2025.
Neil Manning: Now I'll turn the call over to Neil to speak about some exciting product and commercial updates.
Speaker Change: As we explained during our last earnings call, a significant portion of our order book is scheduled for delivery between now and through the end of 2025. In fact, over 50% of our current order book is set to be delivered in 2025.
Neil Manning: Thanks, Kevin.
Neil Manning: Turning to slide seven I'd like to share with you a recap on our innovation progress in 2024, we're driving results both from within array and with our ecosystem partners.
Speaker Change: We should also note we still expect to book some additional DG projects over the next couple of quarters for delivery in 2025.
Neil Manning: I'm happy to report that array attained 22, new patents in 2024, bringing our total to 329 granted worldwide.
Neil Manning: We are quite pleased that our aviation programs are yielding meaningful differentiating capabilities for our customers in hardware software and installation efficiency.
Speaker Change: Overall, customers are facing a range of both challenges and opportunities in the market.
Speaker Change: However, it's important to highlight that for 2025 deliveries, we observed the U.S. market stabilizing rather than deteriorating compared to the level of customer push-outs experienced in mid-2024.
Neil Manning: On the right side of this slide is an overview of several innovations array brought to market in 2024 with a keen focus on ease and speed of installation along with mitigating damage from extreme weather events for our customers.
Neil Manning: Now, I'll turn the call over to Neil to speak about some exciting product and commercial updates.
Neil Manning: We're very pleased with the initial market response for Skylake platform and the enhancements to our <unk> software solutions for extreme hail and snow events.
Thanks, Kevin.
Neil Manning: Turning to slide seven, I'd like to share with you a recap on our innovation progress in 2024. We're driving results both from within Array and with our ecosystem partners.
Neil Manning: It is important to note that a raise automated hailstone capability is truly automated and does not require human intervention to activate.
Neil Manning: I'm happy to report that Array attained 22 new patents in 2024, bringing our total to 329 granted worldwide.
Neil Manning: This is quite well with the significant storm damaged competing tracking solutions experienced in 2024, where these competing solutions dependent on human intervention to still effectively.
Neil Manning: We are quite pleased that our ideation programs are yielding meaningful differentiating capabilities for our customers in hardware, software, and installation efficiency.
Neil Manning: I'm happy to report that we now have over five gigawatts of <unk> software solutions in operation and an additional five gigawatts being deployed in the near term for backtracking in diffuse capabilities.
Neil Manning: On the right side of this slide is an overview of several innovations already brought to market in 2024, with a keen focus on ease and speed of installation, along with mitigating damage from extreme weather events for our customers.
Neil Manning: We are now offering site specific productivity gain evaluations through our customers to further their understanding of the financial benefit of arrays smartwatch functionality.
Neil Manning: We're very pleased with the initial market response for our Skylink platform and the enhancements to our SmartTrack software solutions for extreme hail and snow events.
Neil Manning: Customers are indicating significant interest in our high angle hailstone tracker, which will lead the industry with a still angle of at least 77 degrees.
Neil Manning: It's important to note that Array's automated hailstone capability is truly automated and does not require human intervention to activate.
Neil Manning: The solution combined with the automated stow capability of Halo alert response will further enhance our customers' ability to protect their assets during extreme weather events.
Neil Manning: This is quite relevant with the significant storm damage competing tracking solutions experienced in 2024, where these competing solutions depended on human intervention to stow effectively.
Neil Manning: This is notable as nearly 40% of the U S market is prone to extreme hailstorms.
Neil Manning: And it's not just a re claiming success on our leading performance and capabilities and extreme weather.
Neil Manning: I'm happy to report that we now have over five gigawatts of SmartTrack software solutions in operation, and an additional five gigawatts being deployed in the near term for backtracking and diffuse capabilities.
Neil Manning: We validated our leading performance with third party engineering companies. So the power producers can independently verify the enhanced and industry leading value we bring to their investments.
Neil Manning: We are now offering site-specific productivity gain evaluations to our customers to further their understanding of the financial benefit of Array's SmartTrack functionality.
Neil Manning: You may recall the insurance form we held at our headquarters in July of 2024, where we shared and discussed our differentiating capabilities in detail. So that investment stakeholders can make informed decisions about their technology solutions.
Neil Manning: Customers are indicating significant interest in our high angle hail stow tracker, which will lead the industry with a stow angle of at least 77 degrees.
Neil Manning: This solution, combined with automated snow capability of hail alert response, will further enhance our customers' ability to protect their assets during extreme weather events.
Neil Manning: Moving to slide eight as a further example of our focus on innovation I'd like to provide an update on our investment in swap robotics and other partnership programs.
Neil Manning: This is notable as nearly 40% of the U.S. market is prone to extreme hailstorms.
Neil Manning: <unk> is a pioneer in utility scale solar robotic operations maintenance and automation solutions, we chose to invest in at the end of 2024.
Speaker Change: And it's not just a Ray claiming success on our leading LCOE performance and capabilities in extreme weather.
Neil Manning: We are quite excited about the potential for swap robotics cutting edge technology to be integrated with our raise existing products to open new possibilities for enhanced project cycle time efficiency field installation savings and optimization of capital expenditures.
Speaker Change: We validated our leading performance with third-party engineering companies so that power producers can independently verify the enhanced and industry-leading value we bring to their investments.
Speaker Change: You may recall the insurance forum we held at our headquarters in July of 2024, where we shared and discussed our differentiating capabilities in detail so that investment stakeholders can make informed decisions about their technology solutions.
Neil Manning: Automated module instillation powered by swap robotics offers the potential for significant savings that if our customers looking to streamline project costs.
Neil Manning: Parallel our technical teams are driving a number of industry partnerships, particularly related to autonomous robotic module cleaning.
Speaker Change: Moving to slide 8, as a further example of our focus on innovation, I'd like to provide an update on our investment in Swap Robotics and other partnership programs.
Neil Manning: As shown on the right module cleaning can be a key application to maximize module performance were operators, particularly in areas of high wind and dust such as the middle East.
Speaker Change: Swap is a pioneer in utility-scale solar robotic operations, maintenance, and automation solutions we chose to invest in at the end of 2024.
Neil Manning: To sum it up our rate continues to drive innovative and disruptive solutions to deliver differential value to our customers.
Speaker Change: We are quite excited about the potential for Swap Robotics' cutting-edge technology to be integrated with Array's existing products to open new possibilities for enhanced project cycle time efficiency, field installation savings, and optimization of capital expenditures.
Neil Manning: Now to slide nine I want to highlight continued progress at array supply chain as we drive supply chain resiliency efforts in parallel with our domestic content goals.
Neil Manning: We continuously add new suppliers in the United States and around the world to Derisk and further diversify our supply base at.
Thank you for joining us. Thank you.
Speaker Change: Automated module installation powered by SWAP Robotics offers the potential for significant savings, benefiting our customers looking to streamline project costs.
Neil Manning: At the end of 2020 for our United States supplier capacity stood in excess of 40 gigawatts annually with our global capacity at 75 Gigawatts.
Speaker Change: In parallel, our technical teams are driving a number of industry partnerships, particularly related to autonomous robotic module cleaning.
Neil Manning: This offers a rate tremendous optionality, where we can optimize supply for our customers tailored to their projects do geographic location and desires for local content, all while continuing our industry, leading lead times, while lowering overall project execution risk.
Speaker Change: As shown on the right, module cleaning can be a key application to maximize module performance for operators, particularly in areas of high wind and dust, such as the Middle East.
Speaker Change: To sum it up, Array continues to drive innovative and disruptive solutions.
Neil Manning: We partner with our suppliers to drive deliveries from a network of 50 locations domestically and another 75 internationally.
to deliver differential value to our customers.
Speaker Change: Now to slide 9, I want to highlight continued progress in the raised supply chain as we drive supply chain resiliency efforts in parallel with our domestic content goals.
Neil Manning: We also selectively leveraged our own facilities in Albuquerque, New Mexico, and Spain, and in Brazil to complement our supplier network and further derisk customer deliveries.
Speaker Change: We continuously add new suppliers in the United States and around the world to de-risk and further diversify our supply base.
Neil Manning: As previously committed we are on track to provide a 100% domestic content tracker in the United States in the first half of 2025 could offer certification on both a component and at a system level, which was proving important to our customers.
Speaker Change: At the end of 2024, our United States supplier capacity stood in excess of 40 gigawatts annually, with our global capacity at 75 gigawatts.
Neil Manning: We're proud of our longstanding United States centric supply chain at array with shorter delivery distances and trusted clean steel suppliers, who was able to lower carbon footprint for our deployed base when compared with other leading tracking suppliers in the industry.
Speaker Change: This offers a rate-tremendous optionality where we can optimize supply for our customers tailored to their project's geographic location and desires for local content, all while continuing our industry-leading lead times while lowering overall project execution risk.
Neil Manning: With that I'll turn the call over to Keith to give a more detailed update on 2024 results and provide full year 2025 guidance.
Speaker Change: We partner with our suppliers to drive deliveries from a network of 50 locations domestically and another 75 internationally.
Keith Jennings: Thank you Neil.
Speaker Change: We also selectively leverage our own facilities in Albuquerque, New Mexico, in Spain, and in Brazil to complement our supplier network and further de-risk customer deliveries.
Keith Jennings: Good afternoon, everyone I appreciate the privilege of speaking with you today.
Speaker Change: Since joining the company on January six I have been impressed by the quality of the organization and the strength of what <unk> customers and employees.
Speaker Change: As previously committed, we are on track to provide a 100% domestic content tracker in the United States in the first half of 2025 and offer certification on both a component and at a system level, which is proving important to our customers.
Keith Jennings: I'm incredibly excited about the future with array.
Speaker Change: I see tremendous opportunities ahead for our company as a leading provider of high quality solar tracking solutions.
Speaker Change: My financial commentary begins on slide 11, I would like to start off by providing some additional details around the fourth quarter and the full year 2024 results.
Speaker Change: We're proud of our longstanding United States-centric supply chain and array, where shorter delivery distances and trusted clean steel suppliers have enabled a lower carbon footprint for our deployed base when compared with other leading tracking suppliers in the industry.
Speaker Change: As Kevin shared in the fourth quarter and for the full year of 2024, we delivered strong financial results driven by exceeding the midpoint of our revenue guidance.
Speaker Change: With that, I'll turn the call over to Keith to give a more detailed update on 2024 results and provide full year 2025 guidance.
Speaker Change: Revenue in the fourth quarter was $275 $2 million down 19% from the prior year largely due to commodity correlated ASP declines and the project push outs, we began experiencing back in mid 2024.
Keith Jennings: Thank you, Neil. Good afternoon, everyone. I appreciate the privilege of speaking with you today. Since joining the company on January 6th, I have been impressed by the quality of the organization and the strength of what Array offers its customers and employees.
Speaker Change: When compared to the prior quarter.
I'm incredibly excited about the future with Array.
Speaker Change: Revenue was up 19%.
Speaker Change: Sequentially revenue and cash flow had positive momentum that was countered to historical seasonal fourth quarter trends.
Keith Jennings: I see tremendous opportunities ahead for our company as a leading provider of high-quality solar tracking solutions.
Thanks for watching!
Speaker Change: It's important to note dilip.
Speaker Change: My financial commentary begins on slide 11. I would like to start off by providing some additional details around the fourth quarter and the full year 2024 results.
Speaker Change: <unk> delivered volume measured in megawatts of generation capacity for the quarter were up 2% over the prior year and up 35% over the prior quarter.
Speaker Change: As Kevin shared, in the fourth quarter and for the full year of 2024, we delivered strong financial results driven by exceeding the midpoint of our revenue guidance.
Speaker Change: Across 2024, we experienced moderate ASP declines year over year in the U S and slightly higher ASP declines internationally in the U S.
Speaker Change: Revenue in the fourth quarter was $275.2 million, down 19% from the prior year, largely due to commodity-correlated ASP declines and the project pushouts we began experiencing back in mid-2024.
Speaker Change: This was primarily the result of price compression from falling commodity prices.
Speaker Change: Sales in North America represented approximately 73% and 70% of our revenue in the quarter and full year respectively.
When compared to the prior quarter, revenue was up 19%.
Speaker Change: In the fourth quarter adjusted gross margin improved by 410 basis points year over year, reaching 29, 8% sequentially.
Speaker Change: Sequentially, revenue and cash flow had positive momentum that was counter to historical seasonal fourth quarter trends.
Speaker Change: Sequentially adjusted gross margin declined by 560 basis points as guided primarily due to a large order shipping in Q4 of 2024 with the remaining balance to be shipped in Q1 of 2025. This is from our legacy fixed price volume commitment agreement, which was discussed.
Speaker Change: It's important to note, delivered volume measured in megawatts of generation capacity for the quarter were up 2% over the prior year and up 35% over the prior quarter.
Speaker Change: During the Q3 earnings call.
Speaker Change: Additionally, we experienced headwinds in Brazil from devaluation and additional tariffs.
Speaker Change: This was primarily the result of price compression from falling commodity prices.
Speaker Change: Total operating expenses of $227 million were up approximately $167 million from $54 million in the same period last year.
Thank you.
Speaker Change: Sales in North America represented approximately 73% and 70% of all revenue in the quarter and full year, respectively.
Speaker Change: In the fourth quarter, adjusted gross margin improved by 410 basis points year-over-year, reaching 29.8%.
Speaker Change: This increase was primarily driven by the $166 million noncash long lived assets and goodwill impairment charges related to the 2020 to STI acquisition.
Sequentially, Adjusted Gross Margin declined by 560 basis points.
Speaker Change: As guided, primarily due to a large order shipping in Q4 of 2024, with the remaining balance to be shipped in Q1 of 2025. This is from a legacy fixed price volume commitment agreement, which was discussed during the Q3 earnings call.
Speaker Change: The impairment charges were triggered by the decline in our stock price in Q4, resulting in a decrease in market capitalization, coupled with forecast updates to near term projections for certain markets in which STI operates.
Speaker Change: Adjusted EBITDA was $45 2 million representing.
Speaker Change: Additionally, we experienced headwinds in Brazil from devaluation and additional tariffs.
Speaker Change: Representing an adjusted EBITDA margin of 16, 4%.
Speaker Change: Total operating expenses of $220.7 million were up approximately $167 million from $54 million in the same period last year.
Speaker Change: This compares to adjusted EBITDA of $48 2 million and adjusted EBITDA margin of 14, 1% in the fourth quarter of 2023.
Speaker Change: On a GAAP basis net loss attributable to common shareholders in the fourth quarter of 2024 was $141 2 million compared to net income was $6 million in the prior year period.
Speaker Change: This increase was primarily driven by the $166 million non-cash long-lived assets and goodwill impairment charges related to the 2022 STI acquisition.
Speaker Change: The impairment charges were triggered by the decline in our stock price in Q4, resulting in a decrease in market capitalization, coupled with forecast updates to near-term projections for certain markets in which SDI operates.
Speaker Change: Diluted loss per share was 93.
Speaker Change: Compared to diluted income per share of <unk> in the same period last year.
Speaker Change: Adjusted net income was $25 $1 million down.
Speaker Change: Adjusted EBITDA was $45.2 million, representing an adjusted EBITDA margin of 16.4%.
Speaker Change: Down from $26 4 million in the fourth quarter of 2023.
Speaker Change: Adjusted diluted net income per share was <unk> 16.
Speaker Change: This compares to adjusted EBITDA of $48.2 million and adjusted EBITDA margin of 14.1% in the fourth quarter of 2023.
Speaker Change: Compared to 17 in the prior year period.
Speaker Change: Free cash flow for the period was $44 6 million compared to $88 6 million for the same period last year.
Speaker Change: On a gap basis, net loss attributed with the common shareholders in the fourth quarter of 2024 was $141.2 million compared to net income of $6 million in the prior year period.
Speaker Change: A few comments on full year 2024.
Speaker Change: I'll just briefly highlight these on slide 12.
Speaker Change: Full year revenue was approximately $916 million, surpassing the midpoint of the guidance range, we provided during our Q3 call.
Speaker Change: Diluted loss per share was $0.93 compared to diluted income per share of $0.04 in the same period last year.
Speaker Change: This represents a 42% decline in revenue compared to 2023.
Speaker Change: Adjusted net income was $25.1 million, down from $26.4 million in the fourth quarter of 2023. Adjusted diluted net income per share was $0.16 compared to $0.17 in the prior year period.
Speaker Change: This was due to a decrease in both volume and ASP.
Speaker Change: Adjusted gross profit decreased to $312 2 million from $431 million in the prior year.
Speaker Change: Adjusted gross margin expanded by 680 basis points over the prior year to a record 34, 1%.
Speaker Change: Free cash flow for the period was $44.6 million compared to $88.6 million for the same period last year.
Speaker Change: Operating expenses increased to $524 7 million from 201 4 million in the prior year, primarily due to a $236 million noncash goodwill impairment charge and a $91 $9 million noncash <unk>.
A few comments on full year 2024.
I'll just briefly highlight these on slide 12.
Thank you.
Speaker Change: Full year revenue was approximately $916 million, surpassing the midpoint of the guidance range we provided during our Q3 call.
Speaker Change: Lived intangible asset write down related to the 2022 STI acquisition.
This represents a 42% decline in revenue compared to 2023.
Partially offset by lower head count related costs.
Speaker Change: This was due to a decrease in both volume and ASPs.
Speaker Change: Net loss attributable to common shareholders was $296 1 million.
Speaker Change: Adjusted gross profit decreased to $312.2 million from $430.1 million in the prior year.
Speaker Change: Compared to net income of $85 5 million in the prior year.
Speaker Change: Adjusted gross margin expanded by 680 basis points over the prior year to a record 34.1%.
Speaker Change: Diluted loss per share was $1 95 comp.
Speaker Change: Compared to diluted income per share of 56 in the prior year.
Speaker Change: Adjusted EBITDA was $173 6 million compared to $288 1 million in the prior year.
Speaker Change: Adjusted net income was $91 2 million compared to $171 9 million in the prior year.
Speaker Change: primarily due to a $236 million non-cash goodwill impairment charge and a $91.9 million non-cash long-lived intangible asset write-down related to the 2022 STI acquisition.
Speaker Change: Adjusted diluted net income per share was <unk> 60 down from diluted net income per share of $1 13 in the prior year.
partially offset by lower headcount-related costs.
Speaker Change: Finally <unk>.
Speaker Change: Net loss attributable to common shareholders was $296.1 million, compared to net income of $85.5 million in the prior year.
Speaker Change: Free cash flow for the year was $135 4 million compared to $215 million in the prior year.
Speaker Change: We ended the year with approximately $364 million in total cash on hand, an increase of $115 million from last year end.
Speaker Change: Diluted loss per share was $1.95 compared to diluted income per share of $0.56 in the prior year.
Speaker Change: Throughout the year net cash used in financing activities was $11 $8 million, primarily driven by $4 $3 million in payments on our term loan and a $4 $4 million reduction of other debt.
Speaker Change: Adjusted EBITDA was $173.6 million compared to $288.1 million in the prior year.
Speaker Change: Adjusted net income was $91.2 million compared to $171.9 million in the prior year.
Speaker Change: We ended the year with a net leverage ratio of one eight times, excluding our preferred shares.
Speaker Change: Adjusted diluted net income per share was 60 cents down from diluted net income per share of $1.13 in the prior year.
Speaker Change: Among my initial priorities as CFO are assessing our capital structure and allocation strategy.
Speaker Change: Strategic product remains investing in the growth of our business followed by further reducing our debt.
Speaker Change: Finally, free cash flow for the year was $135.4 million compared to $215 million in the prior year.
Speaker Change: As part of this process together with our board of directors, we are evaluating our targeted debt levels and leverage.
Speaker Change: We ended the year with approximately $364 million in total cash on hand, an increase of $115 million from last year end.
Speaker Change: Every capital structure and allocation decision will be made with a strong focus on strategy and discipline.
We successfully remediated our material weakness in 2024.
Speaker Change: Throughout the year, net cash use in financing activities was $11.8 million, primarily driven by $4.3 million in payments on a return loan and a $4.4 million reduction of other debt.
Speaker Change: We will build on that success as we continue to drive productivity and efficiency.
Speaker Change: 2025 guidance update.
Speaker Change: On slide 13.
Speaker Change: We ended the year with a net leverage ratio of 1.8 times, excluding our preferred shares.
Speaker Change: I will provide an outlook for the first quarter and full year 2025.
Speaker Change: Among my initial priorities as CFO are assessing our capital structure and allocation strategy.
Speaker Change: As Kevin mentioned earlier the level of stabilization, we experienced towards the end of 2020 for change the trajectory of our usual seasonal first quarter dip.
Speaker Change: Our strategic priority remains investing in the growth of our business, followed by further reducing our debt.
Speaker Change: We expect revenue in the first quarter to be in the range of $260 million to $270 million.
Speaker Change: As part of this process, together with our Board of Directors, we are evaluating our targeted debt levels and leverage.
Speaker Change: And adjusted EBITDA margin to be in the range of 11% to 13%.
Speaker Change: Every capital structure and allocation decision will be made with a strong focus on strategy and discipline.
Speaker Change: We believe it is important to provide this additional level of guidance to better understand the shape of our revenue forecast for 2025.
Speaker Change: We will build on that success as we continue to drive productivity and efficiency.
Speaker Change: For the full year, we are forecasting a double digit year over year increase in both volume and revenues driven by the recovery in market share coupled with shipments from delayed 2024 projects in our North America segment.
2025 Guidance Update
On slide 13,
Speaker Change: I will provide an outlook for the first quarter and full year 2025.
Speaker Change: We entered 2025 with $2 billion in our order book, which includes $594 million of remaining performance obligations of which we expect to recognize revenue on approximately 97% in 2025.
Speaker Change: As Kevin mentioned earlier, the level of stabilization we experienced towards the end of 2024 changed the trajectory of our usual seasonal first quarter dip.
Speaker Change: We expect revenue in the first quarter to be in the range of $260 million to $270 million, an adjusted EBITDA margin to be in the range of 11% to 13%.
Speaker Change: We expect to deliver full year 2025 revenue within the range of $1 <unk> to one 5 billion.
Speaker Change: We believe it is important to provide this additional level of guidance to better understand the shape of our revenue forecast for 2025.
Speaker Change: In terms of the first versus second half of the year split year will be slightly more heavily weighted towards the first half.
Speaker Change: For the full year, we are forecasting a double-digit year-over-year increase in both volumes and revenues driven by the recovery in market share, coupled with shipments from delayed 2024 projects in our North America segment.
Speaker Change: Q1, 2025 revenue is expected to decline by mid single digit percent from Q4 2024 before we see our traditional seasonal ramp up in quarters, two and three followed by the traditional seasonal drop off in Q4.
Speaker Change: We entered 2025 with $2 billion in our order book, which includes $594 million of remaining performance obligations of which we expect to recognize revenue on approximately 97% in 2025.
We also expect year over year revenue growth in both the first and second halves of 2025, when compared to the same periods of the prior year.
We expect our adjusted gross margins for the year to be within the range of 29% to 30% the roll off of prior year 45, ex amortization drives the year on year reduction in adjusted gross margin.
Speaker Change: We expect to deliver full year 2025 revenue within the range of $1.05 to $1.15 billion.
Thank you.
Speaker Change: In terms of the first versus second half of the year split, the year will be slightly more heavily weighted towards the first half.
Speaker Change: We also expect these margins to fluctuate slightly quarter to quarter due to shifts in project geographic and product mix as well as fixed cost absorption.
Speaker Change: Q1 2025 revenue is expected to decline by mid-single-digit percent from Q4 2024, before we see our traditional seasonal ramp-up in quarters 2 and 3, followed by the traditional seasonal drop-off in Q4.
Speaker Change: For adjusted SG&A, we expect a range of $144 million to $152 million.
Speaker Change: Adjusted EBITDA is expected to range between $1 80 and $200 million.
Speaker Change: We also expect year-over-year revenue growth in both the first and second halves of 2025 when compared to the same periods of the prior year.
This guidance reflects improved profitability driven by our structural cost enhancements to improve efficiency and scale as well as the benefits from 45 X.
Speaker Change: We expect our adjusted gross margins for the year to be within the range of 29% to 30%. The roll-off of prior year 45X amortization drives the year-on-year reduction in adjusted gross margin.
Speaker Change: At the midpoint this represents a 9% year over year increase in adjusted EBITDA earnings.
Speaker Change: For adjusted diluted earnings per share, we anticipate a range of 60 to 70.
Speaker Change: Representing an 8% year over year increase at the midpoint.
Speaker Change: We also expect these margins to fluctuate slightly quarter to quarter due to shifts in project, geographic, and product mix, as well as fixed cost absorption.
Speaker Change: We expect our effective tax rate to be between 24% 25%.
Speaker Change: Preferred dividends are expected to total approximately $15 million per quarter with approximately $30 million as the cash or pik portion and the remainder attributable to the accretion of the instrument.
Speaker Change: For adjusted SG&A, we expect a range of $144 to $152 million.
Speaker Change: Adjusted EBITDA is expected to range between $180 and $200 million. This guidance reflects improved profitability driven by our structural cost enhancements to improve efficiency and scale, as well as the benefits from 45X.
Speaker Change: Free cash flow is expected to be between $115 million to $130 million in 2025 after capital expenditures, which is expected to be in the range of 30% to $35 million.
Speaker Change: At the midpoint, this represents a 9% year-over-year increase in adjusted EBITDA earnings.
Speaker Change: Overall, we anticipate a growing highly profitable and cash generative business in 2025.
Speaker Change: For adjusted diluted earnings per share, we anticipate a range of $0.60 to $0.70, representing an 8% year-over-year increase at the midpoint.
Speaker Change: Credibly pleased to be a part of the MAA team.
Kevin: Company with a bright future no back to Kevin for closing remarks.
Speaker Change: We expect our effective tax rate to be between 24 and 25 percent.
Kevin: Thank you Keith.
Speaker Change: As I reflect on the opportunities ahead for our business I feel optimistic and grateful for our mission driven employees, who have devoted their time and energy to position the company for ongoing success.
Speaker Change: Preferred dividends are expected to total approximately $15 million per quarter, with approximately $30 million as the cash or PIC portion and the remainder attributable to the accretion of the instrument.
Speaker Change: With this strong foundation in place, we are well positioned to capture new opportunities.
Thank you. Thank you.
Speaker Change: Free cash flow is expected to be between $115 and $130 million in 2025 after capital expenditures, which is expected to be in the range of $30 to $35 million.
Speaker Change: And we remain very optimistic about the value proposition and demand within the utility scale solar industry.
Speaker Change: Looking ahead, we will stay focused on what we can control prioritizing business growth customer relationships product innovation and operational efficiency.
Speaker Change: Overall, we anticipate a growing, highly profitable and cash-generative business in 2025. I am incredibly pleased to be a part of the Array team, a company with a bright future. Now back to Kevin for closing remarks.
Speaker Change: With that we will now open the call up for questions operator.
Speaker Change: Thank you we will now be conducting a question and answer session.
Thank you, Keith.
Speaker Change: If you would like to ask a question. Please press star and then one telephone keypad.
Speaker Change: As I reflect on the opportunities ahead for our business, I feel optimistic and grateful for our mission-driven employees who have devoted their time and energy to position the company for ongoing success.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star and then two if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: The first question, we have is from Mark Strouse of Jpmorgan. Please go ahead.
Speaker Change: Great. Thank you very much for taking our questions.
Speaker Change: Looking ahead, we will stay focused on what we can control, prioritizing business growth, customer relationships, product innovation, and operational efficiency.
Speaker Change: Keith can I start with you first of all congrats on the new role look forward to working with you.
Just looking at the <unk> guide, though so I. Appreciate the revenue is first half weighted can you just talk about what's weighing on EBITDA margin in <unk> compared to the rest of the year.
Speaker Change: With that, we will now open the call up for questions. Operator?
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press the star and then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
And then I have a follow up thank you.
Speaker Change: Great. Thank you Mark Thank you for the kind wishes.
Speaker Change: The first quarter.
Speaker Change: EBIT margins are forecasted to be lower because we still have the second half of the large shipment that we start to push through from Q4 of 2024, and we also have the roll off of some 45 ex amortization that we just won't see in the.
Speaker Change: You may press star and then 2 if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Mark Strauss: The first question we have is from Mark Strauss of JCP Morgan. Please go ahead.
Speaker Change: In the quarter.
Speaker Change: Those are primarily two reasons for that.
Speaker Change: Great. Thank you very much for taking our questions. Keith, can I start with you? First of all, congrats on the new role. I look forward to working with you. Just looking at the one-cue guide though, so appreciate that revenue is first half weighted. Can you just talk about what's weighing on EBITDA margin in one cue though compared to the rest of the year?
Speaker Change: Okay, and then just a quick follow up were there any safe work, sorry Safe Harbor orders.
Speaker Change: We received an <unk> or thus far into <unk>.
Speaker Change: Yeah.
Speaker Change: I think when we look at our order book, we have less than 10% or so of safe water sorry of safe Harbor orders in the order book they have not been.
No, I have a follow-up. Thank you
Thank you, Mark. Thank you for the kind wishes.
Speaker Change: Our focus for us Kevin.
Speaker Change: Even the margins are forecasted to be lower because we still have the second half of the large shipment that we start to push through from Q4 of 2024.
Speaker Change: That would be the 10% that's in the order book or some of the legacy Safe Harbor.
Speaker Change: Programs that we have in terms Mark I think you are probably reflecting on our we're seeing.
Speaker Change: And onset of new Safe Harbor orders and if Thats kind of the question. We're certainly in dialogue now we don't have any in our order book from from the newness and companies trying but we're certainly in dialogue with customers that are evaluating that now and nothing in the existing order book.
Speaker Change: And we also have the roll-off of some 45x amortization that we just won't see in the in the quarter And so those are you know, primarily the two reasons
Speaker Change: Okay, and then just a quick follow-up, were there any Safe Harbor orders that you received in 4Q or thus far into 1Q?
Speaker Change: Likely some in Q1.
Speaker Change: Okay. Yes that was my question. Thank you very much.
Speaker Change: Okay.
Speaker Change: I think when we look at our order book, we have less than 10% or so of safe harbor orders in the order book. They have not been a focus for us. Kevin? No, that would be the 10% that's in the order book are some of the legacy safe harbor orders.
Speaker Change: The next question, we have is from Jordan Levy of <unk>. Please go ahead.
Speaker Change: Hey, Thanks, guys Tomorrow.
Speaker Change: Jordan. Thanks for taking the question first question, it's great to hear the pipeline's growing 60% year over year, but could you. Please comment on why you orders backlog sort of lagged behind and what kind of initiated feedbacks on taking to win incremental business to grow the backlog. Thank you I have a follow up.
Speaker Change: programs that we have. In terms, Mark, I think you're probably reflecting on are we seeing an onset of new safe harbor orders? And if that's kind of the root of the question, we're certainly in dialogue now. We don't have any in our order book from the newness.
Speaker Change: Yes sure Matt This is Kevin let me take that.
Speaker Change: We think we're pretty pleased with the win rate of new orders, it's continuing to tick up as it has for over year and year on year. The percentage of win rate is up substantially. So we are very pleased with that one of the things that we experienced in Q4 that we experienced in Q3 has been the view of the net orders.
Speaker Change: and companies trying, but we're certainly in dialogue with customers that are evaluating that now. Nothing in the existing order book, but likely some in Q1.
Yeah, that was the question. Thank you very much.
Good questions.
Speaker Change: The next question we have is from Jordan Levy of Truist. Please go ahead.
Speaker Change: Coming into the order book.
Speaker Change: One thing we noted in the prepared commentary is that our U S. Order book for example, our book to Bill ratio was one five so very strong momentum in the North American business offset by some.
Jordan Levy: Hey, thanks guys. It's Moe, also Jordan. Thanks for taking the question. First question, it's great to hear the pipeline is growing 60% year over year, but could you please comment on why new orders backlog sort of lag behind and what kind of initiatives you guys are taking to win incremental business to grow the backlog? Thank you. I have a follow-up.
Speaker Change: De booking of orders in Brazil.
Speaker Change: Youll recall, we've said it for a couple of quarters now that we're still sticking.
Speaker Change: Sticking to our same rules and guidelines here that if we don't have a defined start date on our program we pull it out of the order book. So we had some de bookings in Brazil.
Thank you for tuning in.
Yeah, sure, Mo. This is Kevin. Let me take that.
Speaker Change: So we think we're pretty pleased with the win rate of New Orders.
Speaker Change: We pulled out of the order book masking some of the strength, we had in the North American Order book.
Speaker Change: tick up as it has for over a year. And year on year, the percentage of win rate is up substantially. So we're very pleased with that. One of the things that we experienced in Q4 that we experienced in Q3, has been the view of the net orders coming into the order book.
Speaker Change: <unk>.
Speaker Change: I think we're towards the end of the day bookings in Brazil, and I also want to be clear that we haven't had any of those orders in Brazil cancel so they're sitting on the sidelines waiting for new data and new PPA negotiations at this point.
Speaker Change: One thing we noted in the preferred commentary is that our U.S.
Speaker Change: Before they roll back into the order book.
Speaker Change: Gotcha. Thanks, Thanks for the comments and maybe following on your comment on declining Asps.
Speaker Change: Order book, for example, our book-to-bill ratio was 1.5, so very strong momentum in the North American business.
Speaker Change: What kind of questions.
Speaker Change: In Q2.
Speaker Change: Debooking of orders in Brazil. You'll recall we've said it for a couple of quarters now that we're still sticking to our same rules and guidelines here, that if we don't have a defined start date on a program, we pull it out of the order book. So we had some debookings in Brazil.
Speaker Change: I'm sorry, what was pricing dynamics, so look we're seeing pricing actually fairly disciplined and I think what the.
Speaker Change: What you have to think about is the fact that.
Speaker Change: Steel aluminum and logistics makes 70% of our bill of material, we've talked about that historically.
Speaker Change: that we pulled out of the order book, masking some of the strength we had in the North American order book.
Speaker Change: And steel alone has come down over 30% in the previous two years and Thats whats really weighed down.
Speaker Change: and you know I think we're towards the end of the debookings in Brazil and I also want to be clear that we haven't had any of those orders in Brazil canceled so they're sitting on the sidelines waiting for new dates and new PPA negotiations at this point before they roll back into the order book.
Speaker Change: Asps. So it's truly the ASP declines have been a function of commodity.
Speaker Change: Not a function of giving up price in the market I think our competitors have stayed.
Speaker Change: Fairly disciplined.
Speaker Change: We're not seeing large price war is what we are seeing is look as expected. There is some trickling into some of the 45 X benefits into some pricing as we're competitive on large orders.
Speaker Change: Gotcha, thanks for the comment. And maybe following on your comment on declining ASPs, what kind of pricing dynamics are you seeing into 2025?
Speaker Change: Our bundles of projects that was as we expected for well over a year.
Speaker Change: I'm sorry, what was pricing dynamics? So, look, we're seeing pricing actually fairly disciplined. I think what the...
Speaker Change: We're all responding accordingly, but I would say certainly in North America, it's been a very very still quite disciplined market I would say, it's less disciplined as you go around the world certainly it's getting less disciplined in Brazil with the.
What you have to think about is the fact that
Speaker Change: You know steel, aluminum, and logistics make 70% of our bill of material. We've talked about that historically.
Speaker Change: The issues that the marketplace is having I would say Europe is a little bit.
Speaker Change: A.
Speaker Change: Little bit better than Brazil, not quite as disciplined as the U S and thats a function of a lot of smaller competitors in the European business. So U S. We feel really good about the discipline and when you think about the fact that as Keith talked about in his prepared remarks.
Thank you.
Speaker Change: We're not seeing large price wars. What we are seeing is, look, as expected, there is some trickling in of some of the 45X benefits into some pricing as we're competitive on large orders or bundles of projects.
Speaker Change: It shouldnt be lost on the market that in our Q4 were actually up in volume year over year.
Speaker Change: That was, you know, as we expected for well over a year. We're all responding accordingly. But I would say certainly in North America, it's been a very, very still quite disciplined market.
Speaker Change: That's a significant swing right.
Speaker Change: That is significant when you think about the recovery of the business on a volume basis finally, returning to year over year growth in volume, but that decline asps due to steel now why that's so important and why I want to mention it is that you now have hyper growth of steel creeping back into the market in the last few weeks you have the threat of tariffs.
Speaker Change: I would say it's less discipline as you go around the world. Certainly, it's getting less discipline in Brazil with the issues that the marketplace is having. I would say Europe is a little bit, you know,
Speaker Change: That are threatening on the imported steel, which is allowing the domestic steel producers to raise their steel price.
Keith Jennings: little bit better than Brazil, not quite as disciplined as the U.S. And that's a function of a lot of smaller competitors in the European business. So, U.S., we feel really good about the discipline. And when you think about the fact that, as Keith talked about in his prepared remarks,
Speaker Change: That's a good dynamic for us to get back into the 'twenty two 'twenty three steel pricing is a really really strong dynamic for array. So.
We look forward to that we're mindful of that with our customers. Both in terms of trying to help our customers lock in some steel savings.
Yes.
Speaker Change: It shouldn't be lost on the market that in a Q4 we're actually up in volume year over year
Speaker Change: But at the same time elevated steel prices creeping in getting more normalized back to the 'twenty two 'twenty three.
That's a significant swing, right?
Speaker Change: That's significant when you think about the recovery of the business on a volume basis, finally returning to year-over-year growth in volume, but that declined ASP due to steel. Now why that's so important and why I want to mention it is that you now have hyper growth of steel creeping back into the market in the last few weeks.
Speaker Change: We welcome that in the industry.
Speaker Change: Thank you, ladies and gentlemen, we do request that you. Please keep it to one question at a time.
Speaker Change: Next question, we have from Vikram <unk> of Citi. Please go ahead.
Speaker Change: You have the threat of tariffs that are threatening on the import of steel, which is allowing the domestic steel producers to raise their steel price.
Vikram: You mentioned, a tripling of 45 extra customers, but if I exclude the first quarter metrics. The last nine months indicate margins will be about 19%, which is squarely in line with what you reported.
Speaker Change: That's a good dynamic for us. To get back into the 22-23 steel pricing is a really, really strong dynamic for Array. So we.
Speaker Change: We look forward to that. We're mindful of that with our customers, both in terms of trying to help our customers lock in some steel savings, but at the same time, elevated steel prices creeping in, getting more normalized back to the 22-23. We welcome that in the industry.
Speaker Change: Fiscal 'twenty for the second lien that has been no change in pricing in the 45 VIX shedding is not happening is don't expect to happen in 2025 either.
Speaker Change: Are you were you anticipating hitting a 45 day. So this margin is sort of like you know.
Speaker Change: Could could come down into shifting as anticipated.
Speaker Change: I anticipated.
Speaker Change: Thank you. Ladies and gentlemen, we do request that you please keep it to one question at a time.
Speaker Change: So thank you for the question.
Speaker Change: First let me say this we have no explicit arrangements.
Speaker Change: The next question we have is from Vikram Bagri of SETI. Please go ahead.
With our customers to share 45 X.
Speaker Change: Hey Kevin, you mentioned the tripling of 45x to customers, but if I skew the first quarter metrics, the last nine months indicate margins will be about...
Speaker Change:
Speaker Change: When you look at the guidance for the full year.
Speaker Change: For gross profit margin.
Speaker Change: We are guiding.
Speaker Change: Very comfortably towards the.
Speaker Change: fiscal 24. Does that mean there has been no change in pricing, the 45x sharing has is not happening, don't expect to happen in 2025 either?
Speaker Change: 29% to 30% range.
Speaker Change: Sure.
Speaker Change: We also.
Speaker Change: I believe that the.
Speaker Change: The shape of the year and the mix.
Speaker Change: or you're anticipating sharing of 45X, so this margin is sort of like, you know, could come down if the sharing is higher than anticipated.
Speaker Change: We are reasonably comfortable with the pricing that we have seen out there as Kevin said, we are reasonably comfortable with the fact that the.
Speaker Change: So, thank you for the question. First, let me say this. We have no explicit arrangements with our customers to share 45X.
Speaker Change: Rising steel prices should offer us some expansion of margins.
Speaker Change: And so we have not done anything.
Speaker Change: With different in our pricing, we have not offered 45 X up in contracts.
When you look at the guidance for the full year,
Speaker Change: Do believe that there is some bit of leakage and sharing in the profit pool, but we have no explicit arrangements to share that with our customers.
Speaker Change: Yes.
Speaker Change: Just adding on and again to be really clear the only difference in gross margin year over year that youre seeing is the roll off of the prior year 45 X.
Speaker Change: We also believe that the shape of the year and the mix
Amortized benefits that were the residual for 'twenty, three that contractually and through our accounting.
Speaker Change: We're reasonably comfortable with the pricing that we have seen out there, as Kevin said. We're reasonably comfortable with the fact that the current rise in steel prices should offer us some expansion of margins.
Speaker Change: The team working with our outside accounts, we had to amortize throughout the year of 2024, that's the biggest deviation year over year, you solve for that and it's solid continued margin performance here.
And so we have not done anything.
Speaker Change: was different in our pricing. We have not offered 45x up in contracts. We do believe that there is some bit of leakage and sharing in the profit pool, but we have no explicit arrangements to share that with our customers.
Brian Lee: The next question we have is from Brian Lee of Goldman Sachs. Please go ahead.
Brian Lee: Hey, guys. Good afternoon, thanks for taking the questions.
Speaker Change: Keith looking forward to working with you.
Brian Lee: <unk>.
Speaker Change: Yeah, and just adding on again, to be really clear, the only difference in gross margin year-over-year that you're seeing is the roll-off of the prior year, 45X.
Brian Lee: Ed.
A handful of numbers related questions. So many of the animals are out there.
Brian Lee: We'll get down to one question per analyst so.
Brian Lee: On the gross margins I guess, if I back into.
Speaker Change: Amortized benefits that were the residual for 23 that contractually and through our accounting
Brian Lee: The view you have for Q1.
Brian Lee: For the year it seems like Youre doing maybe little torn EES gross margin in Q1, and then it's low or needs for the balance of the year.
Speaker Change: team working with our outside accountants. We had to amortize throughout the year of 2024. That's the biggest deviation year over year. You solve for that and it's solid continued margin performance here.
Brian Lee: I mean, I guess is that right and is that low <unk> mills in Canada all right.
Brian Lee: Presented as margin level.
Speaker Change: Youre structurally targeting and seeing on new bookings and it seems like the Q1 number is sort of an anomaly.
Brian Lee: The next question we have is from Brian Lee of Goldman Sachs. Please go ahead.
Brian Lee: Just two housekeeping ones.
Brian Lee: What was the gross bookings numbers and then I think you said there was some deeper levels.
Brian Lee: Hey guys, good afternoon. Thanks for taking the questions. Welcome to the team. Keith, looking forward to working with you.
Kevin: Kevin and then how much.
Brian Lee: I had a handful of numbers-related questions, so maybe I'll just throw them all out there. It seems like we're getting down to one question per hour. On the gross margins, I guess, if I back into...
Brian Lee: Yes.
Speaker Change: Business did you add 24, it sounds like for the 25 guidance States Dom.
60% backlog shippable for 25 years similar amount on demand, but just wanted to kind of come back. Thanks guys.
Brian Lee: the view you have for Q1 and the balance of the year. It seems like you're doing maybe low 20s gross margin in Q1 and then it's low 30s for the balance of the year.
Speaker Change: Yes, let me take a couple of those fee.
Speaker Change: Ill, probably take them in reverse order if thats the way I can remember them right.
Speaker Change: The the go get is very minimal when we entered 2024, we had what would've been a typical amount of go get somewhere in that 2025% range would have been normal for us in our forecast we've taken a more conservative approach.
Brian Lee: I mean, I guess, is that right and is that low 30s really kind of the more representative margin level that, you know, you're structurally targeting and seeing on new bookings? Because it seems like the Q1 number is just sort of an anomaly.
Speaker Change: In 2025 and to go get is certainly at this point sub 10% and I would say nicely sub 10%. So we feel that the go get that's in our plan now is certainly more than compensated with our book and ship business. That's D. G that software in that services more than will compensate for any go get.
Speaker Change: And then, just two housekeeping ones, what was the gross bookings number? Because I think you said there was some de-bookings, Kevin. And then, how much go-get business did you have in 24? It seems like for the 25 guidance based on.
Speaker Change: 50% backlogged, shipping for $25 million, you're assuming about $100 million they'll get, but just wanted to kind of compare and contrast. Thanks, guys.
Speaker Change: So we've added a little bit of cushion there and our conservative forecast it in terms of the gross margin for Q1.
Speaker Change: I think youre low twenty's, there's probably a bit off it's probably mid twenties.
Speaker Change: And then it.
Speaker Change: Stabilizes at a higher level throughout the following three quarters and again the biggest driver in that is when we talked in the past about sort of the low margin BCA, we're talking to very very low margin fixed price PPA that was signed back in 2021, and we still have another year. After this to deal with a couple of projects as we ship that.
Speaker Change: in our forecast. We've taken a more conservative approach in 2025 and the go-get is, you know, certainly at this point sub-10 percent, and I would say nicely sub-10 percent. So we feel that the go-get that's in our plan now is certainly more than compensated with our book and ship business that's DG.
Speaker Change: Through that is the only thing weighing down on the margin in Q1 material.
Speaker Change: Okay.
Speaker Change: Just a quick one.
Speaker Change: Gross versus net.
Speaker Change: We've not provided the gross versus net historically, we will just continue to focus on the net bookings number but suffice to say it was certainly greater than $50 million of deep bookings in Brazil in the quarter.
Speaker Change: Very helpful. Thanks, guys.
Speaker Change: Youre welcome.
Speaker Change: stabilizes at a higher level throughout the following three quarters and again the biggest driver in that is when we talked in the past about the low margin VCA
Speaker Change: Yes.
Speaker Change: The next question, we have some John <unk> of Guggenheim Partners. Please go ahead.
Speaker Change: Hi, there first.
Speaker Change: Question I'm wondering if you can comment on whether there's been any change in the competitive environment.
Speaker Change: We're talking a very, very low-margin fixed-price VCA that was signed back in 2021, and we still have another year after this to deal with a couple of projects. As we ship that through, that is the only thing weighing down on the margin in Q1 that's material.
Speaker Change: Following coltec going away in Europe, and I've got one quick follow up.
Speaker Change: Yes, so not in Europe, there's been a change in competitive so remember <unk> competed with us and two of our larger markets and Thats, primarily Spain and Central Europe, and then Brazil, Theres certainly been a change in Brazil itself has gone away and we've been able to pick up several projects. However, the bankruptcy.
Thank you.
Just quickly on the gross bookings versus net.
Speaker Change: We've not provided the gross versus net historically. We'll just continue to focus on the net bookings number. But suffice to say, it was certainly greater than 50 million of debookings in Brazil in the quarter.
Speaker Change: Laws in Spain don't allow inter loping at this point yet so there's a period of time, where we have to stay away from those projects. Despite those customers looking for an alternative because their projects are.
Speaker Change: Kind of kind of in progress, but highly at risk at this point.
Speaker Change: So that's one of the challenges.
Outside of the additional sort of market share gain that you would normally get where people say well now there is only there is one fewer player in Europe in the near term, we're certainly seeing some of that but if you're asking are we able to run in and pick up a bunch of there have done projects. The laws in Spain don't allow that yet there's a time for.
Speaker Change: Factors that we have to deal with and just to add some color for South America, we were opportunistic in one large project.
Speaker Change: And we believe there'll be follow on from there, so where appropriate where we can pick up projects. We're absolutely doing so we have many customers.
Speaker Change: To be clear in Brazil customers came to us.
Speaker Change: And asked us to very quickly.
Speaker Change: Refresh our bids to go back and take on some projects and we're certainly doing that.
Speaker Change: That's great and then just one very quick follow up I'm wondering if you all have contemplated selling off any 45 X credits I know you take a haircut, but it's money now versus money later, just wondering if that might be part of the plan. Thank you.
Speaker Change: Outside of the additional sort of market share gain.
Speaker Change: You would normally get where people say well now there is only there is one fewer player in Europe in the near term, we're certainly seeing some of that but if you're asking are we able to run in and pick up a bunch of there have done projects. The laws in Spain don't allow that yet there's a time factor that we have to deal with and just add some color for South America, we were.
Speaker Change: Not in the near term because most of our 45 X is filed by our vendors and we have with every vendor a different agreement and how those manifests itself to us.
Speaker Change: Or opportunistic and one large project.
Speaker Change: In terms of either a rebate or a reduction in cogs or what have you. So we have varying agreements with our vendors, but 45 X portion of credits that we have will specifically be for some of the components that we manufacture in our existing Albuquerque facility and then as we expand the Albuquerque facility will have an ability to go after more for.
Speaker Change: And we believe there'll be follow on from there, so where appropriate where we can pick up projects, we're absolutely doing so well.
Speaker Change: Many customers.
Speaker Change: To be clear in Brazil customers came to us.
Speaker Change: And asked us to very quickly.
Speaker Change: Refresh our bids to go back and take on some projects and we're certainly doing that.
Speaker Change: Five X credits on a direct basis and at that point. If we have excess credits then we would evaluate selling them at a discount but again you would want us to be in an excess.
Speaker Change: That's great and then just one very quick follow up I'm wondering if you all have contemplated selling off any 45 X credits I know you take a haircut, but it's money now versus money later, just wondering if that might be part of the plan. Thank you.
Speaker Change: Credit standpoint for that but we're still a cash taxpayer so.
Speaker Change: Alright, thanks, Brian likely to covenant.
Speaker Change: Yes that makes sense.
Speaker Change: Not in the near term because most of our 45 X is filed by our vendors and we have with every vendor a different agreement and how those manifests itself to us.
Speaker Change: The next question. We have is from my Hapeman Geely of Mizuho Securities. Please go ahead.
Speaker Change: In terms of either a rebate or a reduction in cogs or what have you. So we have varying agreements with our vendors to 45 X portion of credits that we have we will specifically be for some of the components that we manufacture in our existing Albuquerque facility and then as we expand the Albuquerque facility will have an ability to go after more.
Speaker Change: Hey.
Speaker Change: Taking the question just two quick but first on the guidance just wanted to understand that.
Speaker Change: As any book and Bill opportunity on top of the guidance you kind of laid out over here for this year.
Speaker Change: And secondly on the data.
Speaker Change: And with.
Speaker Change: Most of the talk tubes are probably made in the U S for you guys, but I'm thinking for the other components.
Speaker Change: 45 X credits on a direct basis and at that point. If we have excess credits then we would evaluate selling them at a discount but again you would want us to be in excess <unk>.
Speaker Change: The rotors are and other things.
Speaker Change: Both impacted by these incremental got it.
Speaker Change: <unk> standpoint for that but we're still a cash taxpayer so.
Speaker Change: On steel and aluminum boats for you. Thanks.
Brian Lee: Thanks, Brian the Likeliest covenant.
Speaker Change: So I'll take the book and Bill and then you can take the tariffs.
Speaker Change: Yes that makes sense.
Speaker Change: Tariffs.
Speaker Change: <unk>.
Speaker Change: The guidance that we've given we feel very comfortable with given where we have already things in the backlog.
Speaker Change: The next question we have is from Mohit <unk> of Mizuho Securities. Please go ahead.
Speaker Change: Hey.
Speaker Change: There are opportunities to take some bookings into the year early given our lead times are average of 14 weeks and still deliver.
Speaker Change: Thanks for taking the question just two quick but first on the guidance just wanted to understand if there's any book and bill opportunity on top of the guidance you kind of laid out over here for this year.
Speaker Change: And maybe there was some upside, but we'd have to see that and at the moment as you know given the uncertainty in the marketplace out there.
Speaker Change: Secondly on the data.
And at the most of that talk to you about probably made in the U S. For you guys, but I'm thinking for the other components.
Speaker Change: Everyone says.
Speaker Change: Almost in a wait and see mode, even though we still have orders we still are delivering what we have but at this point in time, we are holding to our guidance on revenues.
Speaker Change: The rotors are and other things.
Speaker Change: It was impacted by these incremental got it.
Speaker Change: Waiting to see what happens with the administration and clarity.
Speaker Change: On steel and aluminum boats for you. Thanks.
Speaker Change: Hey, Anthony I'll weigh in on the tower front. So overall, we feel well positioned on tariffs in this climate.
Speaker Change: So I'll take the book and Bill and then you can take the.
Speaker Change: Tariffs.
Speaker Change: And everyone that we are the original high domestic content provider trackers domestically in the U S.
Speaker Change: Look the guidance that we've given we feel very comfortable with given where we have already things in the backlog.
Speaker Change: We've been really forthcoming about having the ability to be on 100% domestic content tracker here in the first half regardless and so we feel really well positioned as you mentioned you've talked to which is the highest runner and a bill of materials sourced from U S. Two mills with steel coil that comes from.
Speaker Change: There are opportunities to take some bookings into the year early given our lead times, an average of 14 weeks and still deliver.
Speaker Change: And maybe there was some upside, but we'd have to see that and at the moment as you know given the uncertainty in the marketplace out there.
Speaker Change: Domestic mills that are melted and poured.
Speaker Change: Everyone.
Speaker Change: Almost in a wait and see mode, even though we still have orders we still are delivering what we have but at this point in time, we are holding to our guidance on revenues.
Speaker Change: Here in the U S. Unlike other providers, who may be importing that coiled who may be subject to tariffs. So in general if youre, well really well positioned on tariffs.
Speaker Change: Wait to see what happens with the administration and clarity.
Speaker Change: And we will be 100% content here in the U S. First half so we feel well positioned overall.
Speaker Change: Hey, Anthony I'll weigh in on the tower front. So overall, we feel well positioned on tariffs in this climate.
Speaker Change: Alright, Thanks, Keith Kevin.
Speaker Change: And everyone that we are the original high domestic content provider trackers domestically in the U S.
Speaker Change: The next question, we have so I think again, just if I could just add onto that.
Neil Manning: Let me just add one more comment to what Neil said, while our bill of material is secure from tariffs.
Speaker Change: We've been really forthcoming about having the ability to be on 100% domestic content tracker here in the first half regardless and so we feel really well positioned as you mentioned you've talked to which is the highest runner and a bill of materials sourced from U S. Two mills with steel coil that comes from.
Neil Manning: As a secondary impact of tariffs and thats, the raising of domestic steel prices because U S steel prices feel they can.
Neil Manning: And it shouldn't be lost on anyone on this call that since the beginning of the year U S. Steel prices are up 30% that is very very significant that's not.
Speaker Change: Domestic mills that are melted and poured.
Speaker Change: Here in the U S. Unlike other providers, who may be importing that coiled who may be subject to tariffs. So in general we feel really well positioned on tariffs and we'll be 100% content here in the U S. First half so we feel well positioned overall.
Neil Manning: Okay.
Neil Manning: That's a significant increase in it as a response to U S steel producers feeling that they have air cover now to begin raising prices domestically. So for us that's about ensuring that we're pricing effectively we're monitoring steel prices and the benefit we have in our contracting system is that we don't lock still in.
Kevin: Alright, Thanks, Keith Kevin.
Speaker Change: The next question, we have so I think again, if I could just add on to that.
Neil Manning: And commit to a steel price until we fully contract that order.
Speaker Change: Let me just add one more comment to what Neil said, while our bill of material is secure from tariffs.
Neil Manning: So for us at <unk>.
Neil Manning: Rates upside opportunity in terms of ASP.
Neil Manning: But no downside risk in terms of margin the way we price. So I think we feel we're pretty position, but I want everyone to recognize that just because you have domestic steel doesn't mean, you're not going to have a <unk>.
As a secondary impact of tariffs and thats, the raising of domestic steel prices because U S steel prices feel they can.
Speaker Change: And it shouldn't be lost on anyone on this call that since the beginning of the year U S. Steel prices are up 30% that is very very significant that's not.
Neil Manning: Rice impact in the marketplace I think we will just of what you've seen 30% increase since January one.
Speaker Change: Okay.
Speaker Change: That's a significant increase in it as a response to U S steel producers feeling that they have air cover now to begin raising prices domestically. So for us that's about ensuring that we're pricing effectively to work.
Neil Manning: The bulk of that 30% over 20% coming since the announcement of what we like to call here the superbowl tariffs.
Neil Manning: Alright.
Speaker Change: We're monitoring steel prices and the benefit we have in our contracting system is that we don't lock still in and commit to a steel price until we fully contract that order.
Colin Rusch: Thank you. The next question we have is from Colin Rusch of Oppenheimer. Please go ahead.
Colin Rusch: Thanks, So much guys can you talk a little bit about key areas that you're focused on in the R&D effort to make incremental improvements on existing portfolio of products.
Speaker Change: So for us at <unk>.
Speaker Change: Rates upside opportunity in terms of ASP.
Speaker Change: But no downside risk in terms of margin the way we price. So I think we feel we're pretty position, but I want everyone to recognize that just because you have domestic steel doesn't mean, you're not going to have a <unk>.
Yes, so we've been really upfront. This is Neil I'll take that one so as we talked about in the prepared remarks.
Colin Rusch: Feel really good about the investment we've made in Skylake bring wireless capability also kind of customizing. What we had is it legacy 32 linked row into eight linked ROE architecture that allows us to be more adaptable to smaller parcels that were seeing more and more of in the space.
Speaker Change: Rice impact in the marketplace I think we will just of what you've seen 30% increase since January one.
Speaker Change: The bulk of that 30% over 20% coming since the announcement of what we like to call here the superbowl tariffs.
Colin Rusch: You know as we talked about.
Speaker Change: Alright.
Colin Rusch: Also around a lot of focus now on robotics and.
Speaker Change: Yeah.
Colin Rusch: Automated assisted panel installation, so what youre seeing our R&D teams really focused on is helping our EPC and developer customers have a more optimized deployment experience, helping cut their costs down from a field standpoint, so whether it's with skylake reducing trenching.
Speaker Change: Thank you. The next question we have is from Colin Rusch of Oppenheimer. Please go ahead.
Thanks, So much guys can you talk a little bit about key areas that you're focused on in the R&D effort to make incremental improvements on existing portfolio of products.
Speaker Change: Yes, so we've been really upfront. This is Neil I'll take that one so as we talked about in the prepared remarks.
Colin Rusch: Wireless capability or with investments in alternative options for easier installation when it comes to modules. So that's where a lot of our focus and attention is going making things easier for our customers to lower their overall costs as part of an overall utility scale solar deployment.
Speaker Change: Feel really good about the investment we've made in Skylake bring wireless capability also kind of customizing. What we had is it legacy 32 links row into eight linked ROE architecture that allows us to be more adaptable to smaller parcels that were seeing more and more of in the space.
Great. Thanks, so much guys.
Speaker Change: As we talked about.
Philip Shen: The next question, we have is from Philip Shen of Roth Capital Partners. Please go ahead.
Speaker Change: Also around a lot of focus now on robotics and automated assisted annual.
Philip Shen: Hey, guys. Thanks for taking my questions.
Speaker Change: Collation, so what youre seeing our R&D teams really focused on is helping our EPC and developer customers have a more optimized deployment experience, helping cut their costs down from a field standpoint, so whether it's with skylake, reducing trenching wireless capability or with investments and alter.
Speaker Change: Talked about the solid margin performance after accounting for the 45 ex amortization.
Philip Shen: That said.
Speaker Change: One of your peers has margins that could be couple of hundred basis points higher how should we think about the differences in your structural gross margin.
Speaker Change: Percentage versus your closest public peer is it just conservatism in your outlook or.
Speaker Change: <unk> options for easier installation when it comes to modules. So that's where a lot of our focus and attention is going making things easier for our customers to lower their overall costs as part of an overall utility scale solar deployment.
Speaker Change: Is there some price action that could be driving.
Speaker Change: So I know you've said maybe.
Speaker Change: Maybe not but just wanted to kind of explore that a little bit more for for the 2025 gross margin. Thanks sure.
Speaker Change: Great. Thanks, so much guys.
Speaker Change: So.
Philip Shen: The next question, we have is from Philip Shen of Roth Capital Partners. Please go ahead.
Speaker Change: I don't know, which peer you're referring to.
Speaker Change: But when we see our bonds to be clear thanks Roger.
Hey, guys. Thanks for taking my questions.
Speaker Change: Talked about the solid margin performance after accounting for the 45 ex amortization.
Speaker Change: Fair enough. Thank you. Thank you for the clarity.
Speaker Change: <unk>.
Speaker Change: We are two different scale organizations and we ought to think about 45 X and its context quantify VIX is a U S.
Philip Shen: That said.
Speaker Change: One of your peers has margins that could be.
Couple of hundred basis points higher how should we think about the differences in your structural gross margin.
Speaker Change: Market.
Percentage versus your closest public peer is it just conservatism in your outlook or.
Speaker Change: Two it operates only in the U S and so our mix of products and markets are different than theirs, our model how we operate.
Speaker Change: Is there some price action that could be driving.
Speaker Change: So I know you've said, maybe not but just wanted to kind of explore that a little bit more.
Speaker Change: Than theirs and so for US we've always said that X 45 X in the U S. Our business should operate at a 20 plus percent gross margin over time, and we think we are getting there across 2025.
Speaker Change: For the 2025 gross margin outlook. Thanks sure.
Speaker Change: So.
I don't know, which peer you're referring to.
Speaker Change: But when we issued our bonds to be clear thanks Roger.
Speaker Change: As Kevin said, there is a profit pool that 45 X has.
Speaker Change: Fair enough. Thank you. Thank you for the clarity.
Speaker Change: Broadened in the U S for suppliers customers and us.
Speaker Change: We are two different scale organizations, and we ought to think about 45 X and its context quantify VIX is a.
Speaker Change: As technology providers, and I think that the.
Speaker Change: Is going to be some leakage across the system. We have no explicit agreements to share 45 X vending customers. So we're not explicitly giving it away, but is there a leak to be competitive.
Speaker Change: U S.
Speaker Change: Market.
Speaker Change: A tool.
Speaker Change: Operating only in the U S and so our mix.
Speaker Change: <unk> end markets are different than theirs.
Speaker Change: Guest soap so we're focused on what we can control we are focused on the <unk>.
Speaker Change: Our model, how we operate is different than theirs and so for US. We've always said that X 45 X in the U S. Our business should operate at a 20 plus percent gross margin overtime and we think we are getting there across 2025.
Speaker Change: Suppliers that we have partnered with <unk> to deliver our goods.
Speaker Change: Our focus on making sure our margins are structurally sound. So about a 45 base goes away, we still have a profitable and cash generative business, Kevin just one clarity I'll make Keith it's mid Twenty's margins.
As Kevin said look there's a profit pool that 45 X has.
Speaker Change: We've been at those margins consistently now for many many quarters.
Speaker Change: Broadened in the U S for suppliers customers and us.
Speaker Change: We committed to bringing those those.
Speaker Change: Structural what we call legacy core array margins.
Speaker Change: As technology providers and I think that.
Speaker Change: When you when you correct for different sourcing strategies to maximize 45 X that is we certainly maintain those those mid twenty's margins for many quarters and when I say that caveat of correcting for things.
Speaker Change: He is going to be some leakage across the system. We have no explicit agreements to share 45 ex any customers. So we're not ex specific giving it away, but is there a leak to be competitive.
Speaker Change: Yes. So so we are focused on what we can control we are focused on the <unk>.
Speaker Change: As an interesting game, we play here and that's about.
Speaker Change: The mix of foreign steel versus U S steel and the more U S. Steel we use the more 45 tax credits, we get so paying more for steel.
Speaker Change: Suppliers that we are partnered with to deliver our goods.
Speaker Change: Our focus on making sure our margins are structurally sound. So about a 45 base goes away, we still have a profitable and cash generative business, Kevin just one clarity I'll make Keith it's mid Twenty's margins.
Speaker Change: On one side lends itself to more credits.
Speaker Change: And youre solving for that right.
Speaker Change: If we and solving for customers that want different levels of domestic content. Some customers that don't care about domestic content that want price price price.
Speaker Change: We've been at those margins consistently now for many many quarters.
Speaker Change: We committed to bringing those those.
Speaker Change: We are still able to supply that and bring in foreign steel, but we forgo 45 X credits right and we have to think about that as we price our products to our customers and what they want because there are cases for example, it would still be more advantageous for us.
Speaker Change: Structural what we call legacy core array margins.
Speaker Change: When you when you correct for different sourcing strategies to maximize 45 X that is we certainly maintain those those mid twenty's margins for many quarters and when I say that caveat of correcting for things. There's a there's an interesting game, we play here and that's about.
Speaker Change: Two by U S steel because we may be at a particular inflection point on our credit schedule for example.
Speaker Change: The utilization of U S steel creates a higher rebate to us from that steel supplier. So theres a lot to go in that but relative to to US. We think without 45 X. Our margins are very very sound at this point and we'll continue to get better with our cost out initiatives as we continue to pursue a <unk>.
Speaker Change: The mix of foreign steel versus U S steel and the more U S. Steel we use the more 45 tax credits, we get so paying more for steel.
Speaker Change: On one side lends itself to more credits.
Speaker Change: And youre solving for that right.
Speaker Change: If we and solving for customers that want different levels of domestic content. Some customers that don't care about domestic content that want price price price.
Speaker Change: And full of really strong cost out initiatives going throughout the year.
Speaker Change: Sure.
Kevin: Thanks, Kevin.
Speaker Change: One quick follow up here, what is the plan to accelerate bookings.
Speaker Change: We are still able to supply that and bring in foreign steel, but we forgo 45 X credits right and we have to think about that as we price our products to our customers and what they want because there are cases for example, it would still be more advantageous for us.
Speaker Change: Next trackers been booking business that is multiples of your bookings.
Speaker Change: Yes look I'm not get a comparison you could if you could.
Phil: Sorry go ahead, Phil I'm, not going to comparison X trackers bookings because frankly, when we look at our order book and win rate on stuff that we're up against we're really pleased with our win rates. So.
Speaker Change: Two by U S steel because we may be at a particular inflection point on our credit schedule for example.
Speaker Change: The utilization of U S steel creates a higher rebate to us from that steel supplier. So theres a lot to go in that but relative to to US. We think without 45 X. Our margins are very very sound at this point and we'll continue to get better with our cost out initiatives as we continue to pursue a hat.
Phil: I don't have an answer for you on how they do bookings how they measure them what they're doing we only know that when we look at the universe of projects and our win rate on projects, we're really pleased with our win rate on those projects.
Phil: That's the only thing I'll focus on.
Philip Shen: Well, Phil Okay, well I would add is.
Speaker Change: Full of really strong cost out initiatives going throughout the year.
Philip Shen: Bookings in the order books are not GAAP numbers and everyone has a little different shade on it in the GAAP numbers in your 10-K's 10-Q's, we all have to report remaining performance obligations.
Speaker Change: Sure.
Speaker Change: Thanks, Kevin.
Speaker Change: One quick follow up here, what is the plan to accelerate bookings.
Speaker Change: Next trackers been booking business that is multiples of your bookings.
Speaker Change: Yeah look I'm not get a comparison you could if you could.
Philip Shen: And I would ask you to look at the difference between their auto book and the remaining performance obligations.
Speaker Change: Sorry go ahead, Phil I'm, not going to comparison X trackers bookings because frankly, when we look at our order book and win rate on stuff that we're up against we're really pleased with our win rate. So.
Philip Shen: Our remaining performance obligations at the end of 2020 or were roughly $594 million has to see we're guiding.
Speaker Change: I don't have an answer for you on how they do bookings how they measure them what they're doing we only know that when we look at the universe of projects and our win rate on projects, we're really pleased with our win rate on those projects.
Philip Shen: Towards between one five and 1.15 billion. So we have a strong way of covering what will <unk>.
Philip Shen: We are projecting in revenues, so I would say that that's an important a very important metric silicon.
Speaker Change: That's the only thing I'll focus on.
Speaker Change: Well, Phil Okay, well I would add is.
Speaker Change: Great I appreciate that Keith and Kevin. Thank you I'll pass it on.
Philip Shen: Bookings in the order books are not GAAP numbers and everyone has a little different shade on it in the GAAP numbers in your 10-K and 10-Qs We all have to report remaining performance obligations.
Speaker Change: Ladies and gentlemen that is all the time, we have today and with that this concludes today's conference. Thank you for joining US you may now disconnect your lines.
Philip Shen: And I would ask you to look at the difference between their auto book and the remaining performance obligations.
Philip Shen: Our remaining performance obligations at the end of 2020 or were roughly $594 million as you see we're guiding already.
Philip Shen: Towards between one five and 1.15 billion. So we have a strong way of covering what will.
Philip Shen: Protecting and revenues so I would say that that's an important a very important metric silicon.
Speaker Change: Great I appreciate that Keith and Kevin. Thank you I'll pass it on.
Speaker Change: Ladies and gentlemen that is all the time, we have today and with that concludes today's conference. Thank you for joining US you may now disconnect your lines.
Speaker Change: Okay.
Speaker Change: Yes.
Yeah.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Hum.