Q2 2025 Array Technologies Inc Earnings Call
Greetings welcome to array Technologies, second quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Sarah Shepard, investor relations at array. Please go ahead.
Thank you. I would like to welcome everyone to array Technologies. Second quarter 2025 earnings conference call. I am joined on this call by Kevin Hostetler, our CEO Keith Jennings, our CFO and Neil Manning our president. And coo today's call is being webcast via our investor relations site at IR array Tech inc.com where the accompanying presentation and press release are also available.
In addition, the press release and the presentation detailing, our quarterly results have been posted on the website.
Today's discussion a financial results includes non-gaap measures. A Reconciliation of gaap to non-gaap financial measures can be found in the related presentation and on our website.
We encourage you to visit our website at ArrayTechInc.com for the most current information on our company.
As a reminder, the matters we are 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.
We refer you to the documents. We file with the SEC, including our most recent form, 10K, for discussion of risks, that may affect our future results.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results levels of activity, performance or achievements.
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'll now turn the call over to Kevin
Thank you, Sarah.
Good afternoon, everyone, and thank you for joining us today.
I'll begin with the brief business and market update then Neil Manning our president and chief operating officer will provide some product supply chain and Commercial updates for the quarter.
Keith Jennings, our Chief Financial Officer will then provide our second quarter 2025 financial highlights.
An updates on our full year 2025 Financial guidance.
Then we'll open the line up for your questions.
I'll begin on. Slide 5.
Our strong momentum continued from the first quarter, as we delivered second quarter revenue of 362 million, reflecting substantial growth, both year-over-year and sequentially.
From a volume standpoint.
2 Q was notably, our highest volume quarter in the last 2 years, with over 50% year-over-year, volume growth driven by our customer focused mindset, and enhanced execution, which is improving market share.
Looking at our first half of 2025, our volume was up significantly at 84% year-over-year.
This stands as a testament to our team's commitment to Excellence and versatility to quickly, adapt to changing business Cycles driven by varying project requirements and timelines.
We are reaping the benefits of the impactful work, we've initiated to strengthen the front end of our business, while also expanding and fortifying our supply chain Network, both domestically and internationally.
Thanks to the improved project. Mix and the rolloff of low margin Legacy volume. Commitment agreement projects. We saw our gross profit margins improve quarter over quarter. Overcoming the drag of incremental tariffs.
This is despite seeing the first evidence of tariff impacts on margins in the quarter.
Our bottom line performance is also exceptional driven by those, same volume increases and product mix improvements.
Net income to Common shareholders, came in at 28 million up over 138% compared to last year and a sequential Improvement of over 26 million dollars.
64 million, outperforming expectations, and driven by strong execution, and our exceptional second quarter volume delivery.
I am proud of the recent accomplishments, our team was able to achieve within a very active quarter.
In the quarter, we announced our definitive agreement to acquire APA solar and we remain on track to close the transaction in the coming weeks subject to the satisfaction of various closing conditions.
I look forward to bringing the APA team into the fold and can provide more updates following our anticipated close.
We also announced the issuance of new convertible notes that enabled us to eliminate the remaining balance of our high-cost Term Loan and repurchase a portion of our 2028 convertible notes at a meaningful discount.
Keith will talk more about the benefits of the convertible debt. Issuance our revised capital structure and the resulting impact on full year guidance.
Finally.
Our team also made significant strides in commercial efforts this past quarter.
While we expected some delays in the quarter relative to order intake. Activity driven by short-term regulatory uncertainty, we are pleased with our results and our team's execution in this environment.
Our customer-centric approach continues to drive value for our business and we have made clear improvements in the quality of our orderbook as a result.
Most notably, we were able to descope and reconfigure 2026 and 2027 projects associated with our sole remaining Legacy fixed-priced VCA.
This effort resulted in an improved higher margin order book with a more diverse product mix.
Excluding the Legacy VCA project reconfiguring noted, our gross new bookings were approximately 1 times booked to Bill and our customer, mix continues to improve.
Our direct engagement with utilities developers and independent power producers, or ipps pay dividends as the amount of our business. With these Tier 1 customers has accelerated
We continue to add new customers to our order book as well. And we remain committed to deepening our collaboration and relationships with the critical decision makers on solar projects.
As of quarter end roughly half of our order book. Now represents business directly with utilities ipps and developers. Several of which are new customers to array.
A clear reflection of our strengthening the front end of our business and our commitment to deepening the collaboration and relationships with these critical decision makers.
On the product mix front, we are excited by The Accelerated market adoption of our new products. And as of today, our omnitrack and Skylink new products. Now, constitute more than 35% of our order book
We expect attraction of these products to continue as customers look to build solar sites on increasingly difficult terrains.
Additionally, our team achieved a significant Milestone through the booking of our first project for our hail XP platform. Our most advanced tracker, designed for extreme weather events.
We're pleased with the initial customer reception for this groundbreaking offering following its launch in May and you will discuss more on its value and relevant use cases, later in the call.
Turning to slide 6. I want to reiterate the Strategic rationale and value. We expect from our acquisition of APA solar.
Upon consummation, this deal will Mark our first step in expanding our product portfolio beyond the core tracker, components and positions array to unlock significant value for our customers and shareholders.
We Believe engineered Foundation Solutions will continue to grow in importance for utility scale solar projects.
Apa's ability to build projects in all regions and within all types of soil conditions and to do so with traditional and readily available construction equipment.
Paired with arrays existing Suite of products designed to address various terrains.
Irregular sight boundaries and harsh weather conditions makes us uniquely positioned as a best-in-class partner to address our customers evolving project needs.
And further differentiates our portfolio.
Hybrid utility scale, projects or projects, utilizing both tracking, and fixed. Tilt, infrastructure are becoming more commonplace and fixed tilt is also uniquely positioned to support both data, center growth and Manufacturing onshoring trends.
Finally, the benefits of this deal will be notable.
The attractive valuation.
expectation of being EPs accretive and its first year,
Inherent tax advantages and significant opportunity for bilateral commercial synergies. Leaves us confident. This acquisition will deliver great value for our stakeholders
Turning to slide 7, I want to highlight a few of the near-term challenges our customers and the industry are facing, and what we are doing as an organization to position ourselves for success.
On July 4th the 1, big beautiful. Bill was officially signed into law and with its passage brought some significant changes for utility scale, solar tax credits.
instead of a phase down of the investment, in production tax credits,
Solar projects now, must either commence construction on or before July 4th 2026.
Additionally, the foreign entity of concern or fiok restrictions, apply for projects beginning Construction in 2026, but additional clarifications from the treasury Department are still required.
These 2 meaningful changes are presenting a more challenging environment for our customers to navigate as they reevaluate their project pipelines and Associated timelines and returns.
To address some of these new regulatory challenges array will continue to drive enhance, customer engagement, operational excellence, and resiliency, and continued expansion of our domestic supply chain.
Another near-term headwind relates to the executive order issued regarding adjusting Safe. Harbor criteria.
This order initiated a process for potential changes in Safe. Harbor Rules by mid August, which creates additional uncertainty for customers until further guidance is issued.
While the industry awaits such guidance on Safe Harbor, criteria array has sharpened. Its focus on compliance efficiency and customer needs to ensure that we are ready to support a potential acceleration of Safe Harbor, tracker sales.
We proactively launched a dedicated cross-functional team, that is refined our commercial Safe, Harbor offerings and streamline, The Proposal process. So that we are ready to address a potential uplift in demand.
In addition to our domestic content Advantage, arrays differentiated architecture also, lends itself well to Safe Harbor strategies. As it does not require pre-drilling into the torque tube for specific module selections.
Our IP protected design allows us to readily shift between module Brands versions and dimensions with our highly adaptable and quick to install clamp offerings.
Optionality is key in this regulatory environment and our Innovative Suite of product offerings are well suited to support our customer needs.
Tariffs and commodity pressures are also impacting tracker input costs. We've taken proactive steps to mitigate these effects including further, increasing our domestic Supply base.
Placing strategic forward buys of steel and ensuring our commercial contract structures allow for tariff cost recovery where possible.
Finally, with the changes to the regulatory environment, the industry is now facing. We expect further industry, consolidation will start to take place
Developers and epcs are increasingly looking for Integrated Solutions that reduce complexity mitigate risk and improve project timelines.
Through our pending acquisition of APA and other internal product updates. Our goal is to enhance our ability to deliver Integrated, high-value Solutions to our customers, that produce significant value over the life of a solar project.
I'll now turn it over to Neil to discuss some important products supply chain and Commercial milestones.
Thanks, Kevin. Let's turn to slide 8.
We launched our most advanced tracker, Helix P, in May.
Ray has been a leader in addressing these challenges with Solutions, such as our patented, hail alert response, capability and hosting the first several industry. Focused Insurance forums.
To continue bringing innovative solutions to the market to address extreme weather impacts through our product and engineering teams, we conducted deep research in collaboration with our customers to identify the most beneficial stow angle.
Optimizing the intersection between protecting modules and infrastructure costs.
The result of that research is hail XP with a still angle of 77 degrees. What we believe is the optimal still angle on the market.
Hxp is engineered upon the proven reliability of a raised door track platform and doesn't just protect from extreme weather. Risks was built to perform when it matters most
With direct input from our customers industry, insurers, engineering design, and test partners.
And purpose-built to meet today's toughest climate challenges.
Hxp features include seamless integration with a raised patented smart track. Automated hail alert response.
And passive window Technologies.
Raise 77° Stow capability with hail XP moves modules to the optimal tilt position. In either direction, regardless of wind conditions to mitigate hail impact,
Since our launch of Hell XP Market response has been fantastic.
we provided numerous quotes to customers and booked our first hexp project in the Texas, hail belt in the second quarter, the shipments planned in early 2026
The high cost related to extreme weather events. Continue to be a key factor in the economic modeling for projects.
An array intends to remain at the Forefront in this critical space.
On the slide 9.
I'm particularly proud to report that Array is completed, the supply chain, and certification efforts to deliver a 100% domestic content tracker per Table 1 of the IRA bill.
To deliver this capability. Array worked with key supply. Chain Partners to establish new domestic production lines for certain components applicable to our door, track and Obby, track product platforms.
As we announced earlier this week, we will be delivering a 200 megawatt AC. 100% domestic content, tracker solution to NG for the emerald green solar projects in Indiana, starting in the third quarter of this year.
Raise long-standing domestic supply chain continues to be a source of reliability and continuity for our customers.
And I'd like to thank all the array team members involved for their contributions from reaching this important milestone.
We're proud to continue expanding our domestic footprint and working with high-quality suppliers across the United States.
On Shoring production creating meaningful employment and investing in solar manufacturing capabilities. This critical for the future of our industry. And our national security. An array is proud to be a long-standing leader in this effort.
You've heard us share numerous updates on our continued commercial engagement activities, and happy to share news on our most recent event in Chicago during July.
Our raid days program. First started in early 2024 continues to be extremely popular with developers, epc's and other industry stakeholders.
It gives us the Forum to share comprehensive updates on a raise development roadmap and solicit interactive feedback on areas of opportunity and Improvement.
Actioning prior feedback, we decided to Target a highly technical audience for our most recent event. And the response was tremendous.
We had over 70 engineers at 10 from all portions of the solar value chain for our largest array Days event to date.
We firmly believe the customer engagement input and feedback is an essential part of our success.
An array is pleased to present Innovative formats and knowledge sharing, mediums to Industry stakeholders driving Collective industry Improvement.
With that, I'll now turn it over to Keith to provide more details on our second quarter results. Keith
Thank you, Neil. Good afternoon.
My commentary on our second quarter Financial results. Begin on, slide 11.
We had a strong quarter.
Revenue was 362 million. Representing growth of 42% from the prior year and 20% sequentially.
Sequentially Consolidated. Asps were higher driven by higher International asps in our STI segment.
Delivered volume measured in megawatts of generation capacity for the quarter increased by 52% over the prior year and up, 13% sequentially surpassing last quarter's achievement as a second largest quarter of volume ships since 2023.
Year to date year-over-year. Volume growth was an impressive 84%.
In the second quarter.
Adjusted gross profit increased 12% year-over-year to $101 million, with an adjusted gross margin of 27.8%.
when compared to the prior year gross, margins declined, due to short-term commodity-driven pricing pressures Logistics related costs as we work to optimally position, inventory, for our customers and approximately 100 basis points of timing related drag from tariffs and other costs,
As we transition to an environment with increased rates and breadth of tariffs, what are the tariffs is recovered through an invoiced, surcharge or included in the selling price. The net result for the portion of tariffs that are contractually recoverable will often be increased Revenue period with a corresponding increase in cost of goods sold.
While the net results of recoverable, tariffs can be neutral from a dollar perspective. We estimate the drive of the denominator map will burden our 2025 gross margins by over 50 basis points.
Sequentially adjusted gross margin improved by 130 basis points. Overcoming the drag from tariffs primarily due to a higher mix of domestic projects. Our volume increase
volume driven benefits from 45x and no shipments in the quarter, under our lower margin Legacy DCA
Total operating expenses of 51 million increased approximately 4 million dollars from 46 million in the same period last year. Partially driven by some 1-time costs associated with the APA transaction.
Adjusted sgna was 38 million at 10.4% of revenues?
This is an improvement of approximately 300 basis points in volume-driven operating leverage from the prior year.
Adjusted Eva was 64 million representing an adjusted IBA margin of 17.5%.
This compares to an adjusted EBITDA of $55 million, with an adjusted EBITDA margin of 21.7% in the second quarter of 2024.
Sequentially adjusted. Eva was 23 million higher with adjusted IBA. Margins improving approximately 410 basis points, driven by the volume increase and the mix shift towards higher ASP, domestic sales.
Gaap net income attributable to Common stockholders in the second quarter was 28 million.
Up 138% compared to 12 million in the prior period.
Additionally, net income in the second quarter increased 26, million sequentially from the first quarter of 2025.
Our gaap, net income includes the benefit of the net gain on debt, refinancing transactions, executed in the quarter.
Diluted income per share was 19 cents compared to the diluted income per share of 8 cents in the prior year.
This improvement was partially driven by the approximately 20% discount capture gain we achieved on the repurchase of $100 million of our 2028 convertible notes.
Adjusted. Net income was 39 million up from 31 million in the second quarter of 2024 adjusted diluted net income per share was 25 cents compared to 20 cents in the prior year and 13 cents in the first quarter.
Net cash used for investing activities in the quarter was 7 million. Primarily driven by the ongoing investment in our new Albuquerque manufacturing facility.
Free cash flow for the period was 37 million. Compared to million dollars generated for the same period last year driven by working Capital Improvements.
Slide 13 summar is our leverage and liquidity position following the financing transactions completed this year.
Liquidity about 500 million dollars including availability, under our undrawn revolver.
In the quarter, we successfully executed debt Capital Market transactions that centered on refinancing near-term maturities.
Net cash used in financing activities was 11 million which included among other items.
The 345 million new convertible notes, issued.
233 million to repay the term loan and 78 million used to repurchase 100 million of face value of the existing 2028 convertible notes.
We ended the quarter with net debt, leverage ratio, of 1.7 times. And after the repayment of the term loan, we have no outstanding, senior security debt.
Slide 14 is a brief recap of the updates to our capital structure.
As I shared during my comments in the Q4 2024 earnings call in February 1 of my initial priorities upon joining, the array team was to assess our capital structure and allocation strategies.
The objectives were to create operating Runway and provide balance sheet, flexibility with optionality to support strategic growth choices.
Since then we shared on the call last quarter that we successfully amended and extended our revolving credit facility in early May.
During the quarter, we continued our capital structure. Focus further, optimizing the balance sheet and positioning ourselves with optionality for long-term value creation.
We issued 345 million of new 2.875% convertible senior notes maturing in 2031.
with the proceeds, we repay the remaining 233 million of the outstanding balance of our terminal, which unlocked the full maturity extension of our revolving credit facility from mid 2027 to October 2028
We use 78 million to repurchase at a discount. A hundred million dollars of principle of the 1% convertible senior notes due in 2028 generating, meaningful, shareholder value,
Together these financing activities extended our average debt maturity by approximately 2 years and improved the balance in profile of the materialities due in 2028 and 2031.
Additionally, this reduced our annualized cash interest expense by $9 million.
We also use 35 million from the proceeds to acquire cap calls on the new controller notes. Effectively, elevating the conversion price also new notes from $8.12 to $12.74 per share. Providing important protection against dilution and aligning with our focus on prudent financial management.
Overall, we have strengthened our capital structure. Create a flexibility for a strategic options such as the APA solar acquisition.
We expect to continue to generate strong and consistent cash flow. Driven by positive earnings to sum up. We are more confident in our ability to remain agile with ample balance sheet, flexibility to respond to both risks and opportunities.
Let's shift our attention to slide 15 for our updated 2025 guidance.
Which does not include any benefit from the acquisition of APA, which is yet to close and remain subject to the satisfaction of various closing conditions.
Given our strong performance for the first half and the high level of contracted deliveries, we are raising our revenue outlook for the full year and increasing the midpoints of our profitability guidance for the remainder of 2025.
We expect continued booking momentum through the second half of 2025.
After very positive actions taken on existing orders, our order book is currently $1.8 billion, which includes $645 million of remaining performance obligations.
We now expect full year, 2025 Revenue within the range of 1.18 to 1.215 billion dollars. Increasing the midpoint of the whole range by nearly 100 million dollars or 9%
Additionally in the second half of the year. We expect a roughly 60/40 split in revenues between Q3 and Q4 reflecting our typical seasonality.
We expect adjusted gross margin to be between 28 and 29%.
This includes the negative impact of accounting for tariff pass through and elevated inventory. And product delivery costs
155 million primarily due to incremental investment in sales, customer Excellence channels and additional Staffing to support 2026 growth initiatives.
Adjusted Eva is expected to range between 185 and 200 million, adjusted diluted earnings per share is forecasted to be in the range of 63 to 70 cents.
free cash, flow remains between 115 and 130 million in 2025, after Capital expenditures, which is forecasted to remain in the range of 30 to 35 million, and primarily driven by project timing, at our new Albuquerque facility,
The strength of our strategy, our team and our ability to perform in Dynamic market conditions.
Thank you for your time today. Now, back to Kevin for closing remarks.
Thank you, Keith.
To sum up, Q2 was a quarter of strong execution, both commercially and operationally, exceeding expectations for both revenue and earnings performance.
Array is executing with discipline scaling with purpose and investing in the right areas to capture the opportunity ahead.
We remain confident in our strategy, our team and our ability to deliver long-term value for our shareholders.
Thank you for your continued support. And we look forward to updating you again next quarter.
With that, we will now open the call up for your questions.
Operator.
Thank you. The floor is now open for questions. If you do have a question, please press star 1 on your telephone keypad at this time. If your question has been answered, you could remove yourself from the queue by pressing 1.
So it's star 1 to ask a question. Please hold while we poll.
And our first question comes from Mark Strath from JP Morgan. Go ahead, Mark.
Uh, yes. Good afternoon. Thank you very much for taking our questions. Um, Kevin, I wanted to go back to slide 7. Uh, you call out some of the headwinds or, uh, kind of uncertainties, I guess, that your customers are facing at the moment. Uh, I know Keith mentioned that they are seeing kind of continued booking momentum in the second half of this year, but just kind of curious how we should think about, kind of, the very near term with everything that's going on. Uh, you know, obviously a lot of uncertainty in Q2 as well. And, in my opinion, you put up a good bookings number in Q2. So, uh, just kind of curious if you can kind of...
Help us parse out kind of 3. Cube bookings in particular uh or if you're looking more kind of a rebound later this year, when uh hopefully some of these headwinds are out of the way. Thank you.
Yeah, thanks for the question mark. So let me start by describing kind of how Q2 unfolded and as we as we expected Q2 was fairly muted um until the very last few weeks of the quarter where we saw a really good amount of acceleration in terms of bookings. And this is really about customers, trying to get capacity locked in and get their programs locked in. I think what we're expecting as you go forward uh based on what we have is we have a lot of quotes and a lot of interest.
And less Awards. So separate those 2 buckets in terms of people really converting the quotes and interests and even if we're told we're, the likely winner of that project holding back giving the final award until there's real Clarity. Moving forward, um, under under the rules, and the new definitions. So I think that's what we're going to expect to see lots of activity. Our customers are telling us, their pipelines are as good as ever, um, and we're just really, really active. So, it's just a matter of how much Clarity can we receive in the, um, you know, the next near tranche of clarity expected mid August and then again, some, by the end of August, and whether that Clarity will be enough for customers to move forward, in a full fashion and load, I think as it relates to Safe, harboring is a great example.
Expect that question to come up relative to this. We are really really active in customer dialogues. Uh relative to Safe harboring internally. We formed a really outstanding team meeting daily. We've refined our bills of materials for safe harboring for our customers. We've completed a tour of our major, uh, suppliers in North America to ensure they have burst if needed for Safe Harbor.
Pent-up demand of orders, waiting for this Clarity before we see that whole wave flow through. But we feel pretty good about the ones we're in communication with at this point.
Okay, thank you. Kevin. And then just a quick follow-up, uh, regarding the the Legacy fixed price VCA. Can you just give us a bit more color on what the the scoping and reconfiguring. Exactly means and how to think about the the financial impact of that over the next couple of years.
Yeah, so I I think first let's start with the financial impact over the next couple of years, it's very positive for us. So what you have is you have a legacy VCA as you know, that was fixed price contract on very old very, very low steel pricing. That we really had no way to get out of, um, despite um, evaluating it with external law firms and what have you? So, we were fixed at incredibly low margin business and in many cases, uh, business that we did not make a profit on, um, the challenge is this customer in particular had some projects slipped, a few of them slipped out of the timeline that the fixed price VCA. Remember we've talked openly about that expiring at the end of 26. So as some of these projects slipped from 26 to 27, they fell out of that very, favorable pricing position and as such got repriced and became no longer really viable for this, customer to move forward with secondarily in working with this customer. We found that in order to optimize
Their programs going forward. They, they needed some additional say component trees and things that were also not covered under the previous. Um, negotiated VCA. As we modeled the new bills of materials, the margins went up substantially. So you have a positive margin impact in our backlog. From 2 things 1, the cancellation of projects that were no longer valuable at those low price points. That would have been a 2027 impact and 2 repricing at kind of think of it as current market pricing, some of the existing bills of materials that are needed to go forward to 2026.
Um, look the net of that is a a reduction in backlog, but an increase in the backlog margin percentage and margin dollars. So we're actually very pleased with the fact that we work with this customer to get more predictable in terms of what they really will build. And obviously to get the pricing right for what we'll build.
Remaining in that order.
Very much.
Yeah.
Thank you. Our next question comes from John Windham from UBS. Go ahead, John.
Hey, perfect. Thanks for taking the questions. Um, I was hoping if you could talk a little bit about I know it's been a lot of focus on the US and policy. Um, but any highlights you have on progress internationally, appreciate it.
So hey, hey John, it's Neil. I'll take that one. So, as we talked about in the prepared remarks, we had a really strong first half internationally. Um, so we feel good about that. Now, what we are seeing in certain markets also is some unevenness quarter to quarter on bookings. So, we'll have a strong quarter followed by a softer quarter. So, you know, that's kind of the dynamic we're seeing, particularly as you look at one of our strong, you know, legacy markets in Brazil, where, you know, interest rates have now hit 15%, which is the highest since 2006. And that's not really causing projects to cancel, but they are being pushed to the right from proceeding. So that macro environment, economically, along with what had been a rainy season earlier in the year, is driving lower rates due to the hydroelectric power coming onto the grid. Is this causing, you know, continuous uncertainty in Brazil?
Um, and then in Europe, we're seeing, you know, some of that unevenness I talked about. So now what we're doing about that obviously is continued to diversify our footprint, with additional sales and applications engineering resources um, in South America and other areas in Europe where we feel that the rate value proposition is particularly well received. So we're really focused on the markets where we think our product portfolio is best suited and where customers
Will appreciate the value that we bring to the table. So, you know, we're optimistic overall on our International, um, diversification efforts and we'll see as some of our other markets, uh, recover over time, we're very bullish on how our diverse creation efforts will play out in the coming quarters.
Maybe if it's okay, I can sneak in a follow-up question. Um thanks for going through on talking to slide 14 right now. Um,
You know, the obstacles coming into 2025 and how you've addressed them, um, just on the capital structure, any key, sort of the items on the to-do list, um, that you want people to be aware of.
The moment, we are very happy with the outcome of our capital structure and the work that, um, we have done. We view the, um,
You know, the end result here as an opportunity to, you know, to operate the business uh and execute our strategy over the next few years. Um, the you know, the missing piece from this page in the capital structures. Of course the um uh the preferred Equity, uh, tranche we, you know, continue to view that as reasonably priced long-term capital in this interest rate environment, if the interest rate environment changes, then we can, you know, start to look at that differently because we're always trying to, you know, create more value for our shareholders. Uh, but at the moment, you know, with the first real maturity being in 2027 at this, uh, in 2028 now at this time,
you know, we're focused on executing over the next 3 years, rebuilding, this business, uh, going forward and position ourselves as a
Strong player in the utility-scale solar market.
Perfect. Thanks for taking the question.
Thank you. And our next question comes from Joseph. OSHA from Guggenheim Partners. Go ahead, Joseph.
Um, hi there. Thanks for for taking the question. I I just want to double check some math here. You did mention the the booked bill of 1. I know there are lots of puts and takes but but are you saying leaving aside some of the, the adjustments to the backlog that that you had 360 million in in new bookings, this quarter? I just want to make sure I'm getting that, right?
yes, approximately
Okay. Thank you. Setting that up. We had a book sales that approximates once. Yes, yep, okay. Just checking to make sure I was putting those pieces together right? Um, yep, to be clear.
Give us a backdrop or operator. Yes, yes, yes.
Pretty good. Um and just following on that Keith in the past, you said that you guys do some work, sort of looking at what's out there and assessing your competitive position and and you were kind enough to share when I was down there. Some thoughts about what you think your market share is. Um, do you might you be willing to share some some updated thoughts based on, you know how the bookings are trending?
look, um,
You know, because of the nature of this industry um and the project nature of how things shift, everyone has puts and takes uh each quarter. But you know, when you look at our business delivering 84% volume growth year to date year-over-year, even if someone was to be um you know very precise and and ask us to remove whatever volume we saw pushed out to 2024. I think we would still be delivering very strong volume. Growth ahead of what the industry is deploying in terms of use of the state to scales. So are being attached to the grid. So we are very comfortable with our win rate. We're very comfortable with our position, and we continue to believe that when you
Measure across the cycle. We are doing far better than whatever the point-in-time measures were for 2024.
Quarter sequential growth. That's pretty significant at this point. We're continuing sequential growth quarter over quarter. Um, again indicative of the market share recovery that we saw coming in our order both, um, prior. So remember for for multiple quarters. Now we've been communicating to the market that on a true project by project basis. When we look at an order by order project, by project, in our order book, our win rate has been equal to or higher than our historical.
Average market share that still holds true. So, hopefully, that's helpful for you.
It is. Yeah thanks. Thanks very much for the detailed answer. Thank you.
You're welcome. Thank you.
And our next question comes from Brian Lee from Goldman Sachs. Go ahead, Brian.
Hey guys, good afternoon. Thanks for taking the questions. Um, I guess first 1 just on the um the update uh, updated Revenue Outlook is that um,
All volume driven, you know, project timelines, for me up here or is there any price embedded in there as well? I know you talked about, uh, price capture potentially in the second half. Wondering if you can update us on, you know, whether price has been a Tailwind or is expected to be so, you know, maybe into 2026 if not, um, you know, showing up in the second half and then I had a follow-up.
Hi Brian. Thank you for the question. Um, in terms of the, the revenue guide upwards of of, of moving, the midpoints by 9%, I would say most of that is volume. So if I was to do a quick, you know,
20 of that is is, is is volume versus price. I think that we're seeing much more, um,
volume movement project, execution, uh, scope increases, um, than we're seeing price in 2025
Okay, that that's helpful but but there is some, some amount of price in there. And, and, and I guess based on bookings,
Some amount in there. I given that, you know,
The commodity um steel and aluminum as you know Commodities have had both moved up in the first part of 2025 we priced off those. Uh so some Q4 deliveries uh we'll see that benefit uh but I would say that most of what we're seeing that's driving the revenue outperformance is is volume and engineered selling and scope increases.
That makes sense. That's helpful. Um, second question. Just on the gross margins. Um, you know, if, if we back into what's implied for the second half, it's sort of like, a 30% plus or minus gross margin. And, and you guys were doing, you know, much more. So in the mid 20s through the first half, um, I know, even the 30% implied for the second half has some tariff embedded in there and then other things. So how should we think about kind of the Run rate? I know there was some Legacy stuff and mix related issues in in the first half of the year is that all kind of be
Behind you. Now, with some of the doping you mentioned earlier on the Legacy VCA where this run rate in the second half is indicative of kind of, you know, the growth margin um uh trend line. We should be thinking you're you're going to be on heading into 2026. Um, just trying to, you know, parse out whether there's anything in the first half of this year that's repeating or, or that's all kind of behind you at this point. Thanks guys.
Question, Brian. Um, look, um, we don't have any further shipments on the...
the Legacy VCA contract for the remainder of 2025, and as Kevin uh, articulated earlier we have
Had a very productive conversation with the customer where we've gone through and we've been able to improve the gross margins in that product port in that project portfolio. Uh, but that will hit more. So in 2026 and 2027,
So, in terms of the run rate implied by the guidance, in terms of 29% to 30% for the second half of 2025, I think we can model that going forward. Um, as you know, the run rate for, you know, maybe the first half of next year until we get a chance to, uh, you know, come back with a full guide on, um, on 2026. But we're comfortable that the guide we've given for the full year is within.
Reach and and we have a path to it. And and also we're looking forward to the addition of um APA uh a successful close and then we'll update the overall guidance at that point in time for the year.
All right, I think
if I could help just with 1,
1 of the
Commentary on the gross margin is really about the tariffs that we talked about. And what you really saw in the tariffs is they kicked in more meaningfully after June 1st. So, as we were obligated to pay those tariffs, there's a lag in time.
That we take and we have to take we've paid those tariffs. Now we have to look at those tariffs and those specific bills of materials that they apply to then we have to go back and build those customers. So part of what you saw there that we use in our commentary, the word transitory tariffs. There is a portion of those tariffs that we fully expect to recover as we get through the process of assigning. The proportion of those inbound tariffs by bills of materials to our customers and then begin passing those through. But um but again we were clear in our commentary about there's also a portion of the tariffs and and uh as Keith introduced us to that term today denominator math on the call that when you pass through a tariff, we don't get to mark up the Tariff at our, at our standard, gross margin. So there is this natural weight as you pass through tariffs on that gross margin. So we address that on the call as well because you're passing through,
That and so it's a very Dynamic environment. So what we believe, when we publish this at this point in time, is that the 208 to 29% is doable. Most of that pull down from the prior deed of 29 to 30, uh, really is just denominator Mass. Uh, and so, uh, you know, we do have some higher cost for Logistics and positioning of inventory in warehousing, but the denominator math is a drug. And so, you know, we'll have to try to figure that out as we go forward.
Thank you. And our next question comes from dimpo gassi from Bank of America, go ahead. Your line is open.
Thank you for taking my question here. Um, my name is more focused on big picture? Um, Kevin can you talk a little bit about the Project Lead times that you're seeing today and any impact from the Department of interior permitting news or is that too soon? Uh to see anything as yet.
Yeah, we haven't seen anything as of yet. Obviously, it's discussion point with our customers but we've not had any impacts or uh impacts either positively or negatively yet.
I think everyone's still waiting for the, for the additional Guidance with clarity.
Thank you.
And I should also note that a big part of the Department of interior notification, um, applies to Federal lands and and it's clear that less than 5% of solar projects. Have anything to do with Federal lands. Um that's very different if we were on the Wind side of the business that has a much higher percentage that's on Federal Land. Solar does not utilize Federal lands a whole lot. So just know that
Thank you. And our next question comes from Philip Stein from Roth Capital Partner. Go ahead.
Philip, your line is open.
Uh, sorry about that. Um, thanks for taking the questions. Uh, you guys have had some of these deb bookings.
And 1 time, VCA issues crop up over the recent quarters. Uh I think Keith you were just talking about, you don't expect any more for the back half of this year. Uh just want to ask a general question to what degree are? We fully passed this? Um, do you expect uh, you know, not to have these issues uh Beyond this year and can we focus on net? Bookings, and Netbook to Bill ahead. Thanks.
um,
I'm not sure that we can make a, a commitment that we will never have the bookings in this business. This is a project focused business and so, um, you know, as important as delivering on projects are, you know, working and and making the best of our
Portable and backlog is also part of the business. I think what we've done this quarter is really a net positive. As a team, we inherited a large volume commitment that maybe when it was signed, it was viewed very positively, but in the current commodity price environment, it was not.
And whenever we shipped on there, we spent a lot of the earnings calls, describing, why the margins, you know, showed volatility or down.
So we decided that we should take a really good commercial. Look at it. Look at the time table the window in which um the contract runs, what projects can viably be executed and delivered in those contracts and we had a very uh, definitive conversation with a customer who recognized our positions. Um, we yes, some things fell out but that just was simply a function of of time. They could not execute, uh, within this. Now, the time period, the things that they can execute, then we went through and reconfigured updated the schematics added products and
And until that firms up more, um, on a broader basis, we're just simply not going to bring it into the order book in the first place. We'll keep it on the sidelines. So we've taken a much more conservative approach of what goes into the order book. And as you know, for for many quarters now, we've been having much more diligent conversations with our customers to ensure that they have the required equipment timeline, labor availability, all of the above financing. So that we diminish, that that debunking thing. So and it's actually been much cleaner in the last several quarters and this was 1 that I'm really thrilled that we proactively, engage the customer and we are thrilled with the result. I I think our investors will be thrilled with the results that the overall margin in our backlog. Just went up significantly.
Great. Uh, very useful caller. Thanks to you both on that, um, shifting to back to the eeo. Um, you know, what do you guys expect to come from this? Uh, based on your
Um, lawyers and so forth. And do you expect retroactivity to be, um, off the table or or is it a a risk that um, you're closely following and and then depending on the different scenarios? Uh,
What do you expect in terms of bookings following? The EO August 18th, maybe you touched on this a little bit earlier. But, uh, 1 understand, I think we touched on it a bit earlier, but I'm not going to fill. I'm not going to go and and try to guess what's going to come out, right? I think, um, as as you know, I've I'm very close to this, uh, executive committee of ACP getting briefed on this, on a regular basis. But look, this is a really, really Dynamic environment. Things are changing all the time, lots of gains gamesmanship happening, uh, on the hill. So I'm not going to put myself in the middle of that and try to guess at. What's going to come out on the 18th? I think what we've been doing internally is focus on multiple different Avenues and being prepared, for any 1 of the scenarios that come out will be able to be ready to support our customers needs and that's been our Focus. It's just continuing to control what we can as management and then be ready to react to any news that comes out in any Avenue, and we've got multiple plans ready to do that. So,
that's where I would leave that.
Thanks. Kevin.
Thank you. And our next question comes from Colin Rusch from Oppenheimer. Go ahead.
Hi there. This is Andre Adams on for Colin. Um, just to start, can you walk through how you're thinking about pricing opportunity, given the new policy environment that we're in and the appreciation in wholesale electricity prices?
Well, look, we don't pretend to be experts at PPA pricing. And, you know, we leave that up to the individual developers and ipps, however, however, I will tell you that in our conversations with them, they seem fairly bullish on their abilities, to pass through cost increases through higher PPA rates. They've continued to reiterate that to us over the past several months. So I'll leave that for them to apply on. And generally when we feel in our business, uh, relative to pricing, obviously we have the pricing that we can drive through Commodities and 1 of the biggest levers we have for pricing is in new product development where we're continuing to develop new products that are compelling and and focused on our customers economics and saving them money. More specifically, the Omni track, the sky link, the hail XP are all examples of where we're adding greater value to our customer and that opens the availability for us to raise prices on those product lines versus the duratrack, for example. So,
So for us getting a creative margin at higher price is much more related to continually putting out new products. Um, that have a creative margin to the ones, they're replacing. That's a big area of focus for us.
Thank you. And our next question comes from
Julie from Missoula. Go ahead.
Hey, uh, thanks for taking the questions here. Uh, I just want to on the uh, uh, on your track and, uh, APA kind of being, you know, a bigger mix going forward. How do should we think about the margins? Uh, compared to the rest of the business here in this particular for the ux
Of our, uh, order book that is significant traction, significant growth, um, 2 new products that were recently launched, so we're very, very excited about that. We'll continue to optimize the omnitrack filim material and ensure that it's a, it's an accretive product to the portfolio. So we feel very good about that for, for both products and our ability to price that because remember what we're saving is millions of dollars of grading uh for our customers as it relates to the Omni track and its ability to combine with the APA, the APA foundations. Um they have a great amount of flexibility in terms of terrain following in themselves and when you combine theirs with ours on omnitrack we will have by far a leading flexibility in the marketplace. I don't think there's any other product that's going to be able to touch the amount of flexibility in terrain either. If you want to design a site to be perfectly level on uneven Terrain.
Or to follow the terrain, we have the ability, and by combining both products, we can truly master that entire segment of terrain-following systems.
Okay, thank you.
Thank you. And our next question comes from Dillon Nasuno from Wolfe Research. Go ahead, your line is open.
Yeah. Hi. Thanks for taking my question. Um, so just on the kind of the Q2 revenue outperformance.
You are assuming some kind of regulatory-related project, delays that didn't show up.
Can you just kind of give us a sense on what's in it and the assumptions for the annual guidance?
Are you assuming, you know, other delays? Um, and then I think previously, on a previous call, you had said that there was no kind of additional go-get business embedded in guidance. Is that still the case?
Yeah. Let me, let me take the back end of that first. Yeah, so for for multiple quarters, we've had no remaining. Go get to get to the midpoint of guidance. Um, although we increase the midpoint of guidance that statement is still true. Even now at the higher guidance level, we never intimated that we expected a bunch of push-ups out of Q2 and that was in our numbers. That was not the case. What you saw in the Q2 overdrive was simply our operational ability to accelerate for customers tied with customers desire, or willingness to accelerate projects. So, they came to us and asked for acceleration, we were operationally in a position to do so, and we executed
That's it. Okay. Yeah. And I think what we might be? Well, I think what you might have heard was how we viewed the bookings environment in Q2 that we might we we thought it was going to be clouded by the regulatory environment and that it may be softer than we saw. But in the end, as Kevin articulated, we were very happy with how it ended for us. Despite the regulatory environment, despite the um the executive orders that extended the uh the period. Um on the 1 DB related to solar out to uh August 16th that we were able to um you know, achieve close to a 1 to 1 uh book to Bill ratio um when adjusted for all the D scoping.
Thank you. And our last question comes from Vicr Bagri from City. Go ahead.
Good evening everyone. Uh, I want you to ask the market market market, your questions slightly differently. I understand ascertaining market. Share quarter to quarter due to the nature of the business is somewhat difficult. Uh, but when you look at the bookings, are these deep bookings, all of them have happened because of the inability of the developer to execute on the project. Or have you seen in some of these do bookings? That they've switched providers? Uh, for for any reason, if you can, if you can share any thoughts that you, you've seen like all these projects getting canceled or they have
Having some projects that have been burned or executed on with a different company. Thank you.
Yeah, go ahead. So, if you can, I'll start and then I'll turn it over to Kevin so I can see definitively that...
From 2024, when the company spoke about the push outs, we didn't lose any orders to anyone.
With the reconfiguration exercise we went through with this particular customer, we know that the things that came out of our audible were simply things that came out of the contract window. And so, um, we don't think it's going to another customer, sorry, competitor. Uh, we just believe that that.
In.
Full transparent dialogue with the customer data is not able to execute on that project because of 1 reason or another. So that's my view On It. Kevin, yeah. I could say sitting here and going through our our backlog and pipelines personally, with with pretty much everyone around the, the table. Now we do this on a regular basis every other week. We've not had any projects that I could recall that have been taken away from array given to a competitor. That's that's not what's happened at any of our, our deep booking or D scoping. It's typically been a project canceled or in the case of the ones we're talking about today. It's projects that are no longer viable if they can't get that deep discounted earlier. Negotiated price point uh, that project is not filed on for them so they therefore will not move forward.
Thank you. But anything.
As we've said multiple times when we look at a project by project win rate that we do on a regular basis as a leadership team and we look, we know exactly who we lose a project to why we lost it to, whether it be priced specifications, uh, some esoteric geographical limit on ours, versus someone else's. We look at all that stuff on a regular basis. We're not losing, um, we're our win rate again. I'll I'll repeat that that our win rate has been higher than our historical market share, which is gaining, right? That's that's that's indicative of positive momentum.
And you see that again. Don't lose sight of 84% volume growth.
First half of the first half in an industry that is single to high, you know, high single-digit growth.
That's pretty significant.
That's great to hear. Thank you very much.
Thank you. This does conclude today's conference. We appreciate your participation. You may disconnect your lines at this time, and have a wonderful day.