Array Technologies, Inc. Price & Performance (ARRY)

I would like to welcome everyone to Array Technologies fourth quarter and year end twenty twenty four earnings conference call. I'm Gina Gunning, Array's 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. 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 COO and James Chiu. Our Chief Accounting Officer.

At ir..aratecinc.com.

Including audio and slides. 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. 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. As a reminder, the matters we are discussing regarding market demand and supply, our expected results and other matters. These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made on this call. We refer you to the documents we file with the SEC including our most recent Form 10 ks for a 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 will now turn the call over to Kevin. Thank you, Gina.

And I'll take a moment to publicly welcome both you and Keith to Array.

I speak for the entire executive team in saying we are excited to have both of you our partners. Good afternoon, everyone, and thank you for joining us today. 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. Keith Jennings, our Chief Financial Officer, will provide the fourth quarter and full year 2024 financial highlights and full year 2025 financial guidance. Starting on Slide three, 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. We had a strong fourth quarter driven by robust project execution. This in turn translated into better than expected financial results for the quarter and strong results for 2024. We achieved $275,000,000 of revenue in the fourth quarter and $916,000,000 of revenue for full year 2024 which was above the midpoint of our previously communicated guidance range. Fourth quarter adjusted gross margin came in at 29.8%, an improvement of four ten basis points year on year and full year adjusted gross margin of 34.1% represents an improvement of six eighty basis points compared to full year 2023.

We also delivered adjusted EBITDA of $45,200,000 in the fourth quarter and $173,600,000 for full year 2024. For the full year, we generated $135,000,000 of free cash flow ending the year with a strong cash balance of $364,000,000 As depicted on Slide four, several achievements highlighted are 2024. 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. We have and continue to improve and innovate our portfolio of [indiscernible] software and service solutions based on feedback we receive from our customers. Recent examples include our patented response and our automated snow response as integral parts of our SmartTrak suite of controller and software services. 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. We've received positive feedback on SkyLink since its launch and launched our reusable packaging initiative to enhance sustainability and reduce costs. Most recently, we made a significant investment in Swap Robotics which Neil will describe in more detail later.

We made organization 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. And lastly, we are an 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 and the elements supporting this strategy found within the Inflation Reduction Act. 2024 was a productive and successful year for Array and I'm proud of everything our team accomplished. Turning to Slide five, I'd like to provide an update on our order book. Our order book ended the year at $2,000,000,000 up 10% compared to 2023 year end. 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. [indiscernible] In particular, the domestic portion of our order book continues to build momentum with over 20% growth experienced over the course of 2024.

Our win rate continues to improve and we're seeing great traction with our recently expanded product software and services portfolios. 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. Our omni Array Terrain Following Tracker continues to gain traction in the market and contributed almost 10% of our 2024 revenue. 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. 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. Transitioning to Slide six, I want to take the time to walk through what we are seeing in the market both in the long term and short term.

Utility scale solar remains the cheapest and fastest growing energy source to meet the increasing demand for electricity. According to a study released last week, Vibrato and ConservAmerica, by 02/1935, 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. Peak demand growth rates exceed five times that of the past decade. Furthermore, Sia 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.

Utility scale solar is faster to deploy, lower in cost, has no ongoing variable input costs and utilizes a proven domestic supply chain. Thus, we see continued growth to meet the increased electricity demand in the coming decade. We've spoken in the past about the headwinds we have seen impacting the solar industry and pushing project timelines to the right. 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 push outs we experienced in the middle of the year. 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 '20 On the policy front, it has certainly been a dynamic start the year.

First, there has been much speculation regarding the IRA which is now being referred to as the American Energy Credits. As we've communicated in the past, our view remains that a full repeal of the American Energy credits is unlike 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.

Second, we'd like to add some context on the recent executive orders and their impact on our business, customers, 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. Regarding the freeze on dispersing IRA funds, this would apply only to appropriated funds that agencies have not yet Tax credits are considered mandatory spending and are not sub to appropriation. As such, they are outside the scope of this executive order. We continue to monitor developments on this front and we will continue to share information as it becomes clearer. 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. We are on track to provide 100% domestic content trackers in the first half of twenty twenty five and to be able to do so at scale and with the required certifications our customers are expecting, On the international front, in Brazil, the devaluation of the Brazilian real The volatile interest rate environment and newly introduced tariffs on solar components have significantly slowed market growth.

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. In Europe, our business is performing as expected and we anticipate modest market growth in 2025. Believe we are well positioned to capture market share in the region. We are actively evaluating additional markets for international where we announced opportunities in the first half of twenty twenty four. We are excited by the positive reception and the potential growth in the region. 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. With the guidance we introduced today, Array expects to exceed the market with 20% top line growth. 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. 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 twenty twenty five.

In fact, over 50% of our current order book is set to be delivered in 2025. Over the next couple of quarters Overall, customers are facing a range of both challenges and opportunities in the market. 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-twenty twenty four. Now, I'll turn the call over to Neil to speak about some exciting product and commercial updates. Thanks, Kevin. Turning to Slide seven, I'd like to share with you a recap about our innovation progress in 2024. We're driving results both within Array and with our ecosystem partners. I'm happy to report that Array attained 22 new patents in 2024, bringing a total of three twenty nine granted worldwide. Are quite pleased that our ideation programs are yielding meaningful differentiating capabilities for our our customers in hardware, software and installation efficiency. With a keen focus on ease and speed of installation, along with mitigating damage from extreme weather events for our customers, We're very pleased with the initial market response for our SkyLink platform and the enhancements to our SmartTrac software solutions for extreme hail and snow events.

It's important to note that Array's automated hailstow capability is truly automated and does not require human intervention to activate. 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. I'm happy to report that we now have over five gigawatts of SmartTrak software solutions in operation and an additional five gigawatts being deployed in the near term for backtracking and diffuse capabilities. We are now offering site specific productivity gain evaluations to our [indiscernible] to further their understanding of the financial benefit of Arrays SmartTrac functionality. 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. This solution combined with the automated STOW capability of Hail Alert Response further enhance our customers' ability to protect their assets during extreme weather events. This is notable as nearly 40% of The U. S. Market is prone to extreme hailstorms. And it's not just Array claiming success on our leading LCOE performance, and capabilities in extreme weather.

We validated our leading performance with third party engineering companies that power producers can independently verify the enhanced and industry leading value bring to their investments. You may recall the insurance form we held at our headquarters in July 2024 where we shared and discussed our differentiating capabilities in detail so that investment stakeholders can make informed decisions about their technology solutions. Moving to Slide eight, as a further example of our focus on innovation, I'd like to provide an update our investment in SwaffEr Products and other partnership programs.

Swap is a pioneer in utility scale solar robotic operations maintenance and automation solutions we chose to invest in at the end of twenty twenty four. We are quite excited about existing products to open new possibilities for enhanced project cycle time efficiency, field installation savings and optimization of capital expenditures. [indiscernible] Automated module installation powered by Swafford Products offers the potential for significant savings benefiting our customers looking to streamline project costs.

In parallel, our technical teams are driving a number of industry partnerships particularly related to autonomous robotic module cleaning. 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. To sum it up, Array continues to drive innovative and disruptive solutions to deliver differential value to our customers.

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. We continuously add new suppliers in The United States and around the world to derisk and further diversify our supply base.

At the end of twenty twenty four, our United States supplier capacity capacity stood in excess of 40 gigawatts annually with our global capacity at 75 gigawatts. This offers a rate tremendous optionality where we can optimize supply for our customers tailored to their projects geographic location and desires for local content. All while continuing our industry leading lead times while lowering overall project execution risk. We partnered with our suppliers to drive deliveries from a network of 50 locations domestically and another 75 internationally.

We also selectively leveraged our own facilities in Albuquerque, New Mexico and Spain in Brazil to complement our supplier network further derisk customer deliveries. As previously committed, we are on track to provide a 100% domestic content tracker in The United States the first half of twenty twenty five, it offers certification on both a component and at a system level is proving important to our customers. We're proud of our long standing Unite States centric supply chain at Array Array shorter delivery industry. With that, I'll turn the call over to Keith to give a more detailed update on 2024 results provide full year 2025 guidance. Deep?

Thank you, Neil. Good afternoon, everyone.

I appreciate the privilege of speaking with you today. Since joining the company on January 6, I have been impressed by the quality of the organization and the strength of what Array offers its customers and employees. I'm incredibly excited about the future with Array Array. I see tremendous opportunities ahead for our company as a leading provider of quality solar tracking solutions. My financial commentary begins on Slide 11. I would like to start off by providing some additional details around the fourth quarter the full year 2024 results. 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. $275,200,000 down 19% from the prior year largely due to commodity correlated ASP declines and the project push outs we began experiencing back in mid-twenty twenty four. When compared to the prior quarter, revenue was up 19%. Sequentially, revenue and cash flow had positive momentum that was counter to historical seasonal fourth quarter trends. 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.

Across 2024, experienced moderate ASP declines year over year in The U. S. And slightly higher ASP declines internationally in The U. S. This was primarily the result of price compression from falling commodity prices. [indiscernible] Sales in North America represented approximately 7370% of our revenue in the quarter and full year respectively. In the fourth quarter, adjusted gross margin improved by four ten basis points year over year reaching 29.8%. Sequentially, adjusted gross margin declined by five sixty basis points As guided, primarily due to a large order shipping in Q4 of twenty twenty four, with the remaining balance to be shipped in Q1 of twenty twenty five.

This is from a legacy fixed price volume commitment agreement which was discussed during the Q3 earnings call.

Additionally, we experienced headwinds in Brazil from devaluation and additional tariffs. Total operating expenses of $220,700,000 were up approximately $167,000,000 from $54,000,000 in the same period last year. This increase was primarily driven by the $166,000,000 non cash long lived asset and goodwill impairment charges related to the 2022 STI acquisition. 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.

Adjusted EBITDA was $45,200,000 representing an adjusted EBITDA margin of 16.4%.

This compares to adjusted EBITDA of $48,200,000 and adjusted EBITDA 14.1% in the fourth quarter of twenty twenty three.

On a GAAP basis, net loss attributable to common shareholders in the fourth quarter of twenty was $141,200,000 compared to net income of $6,000,000 in the prior year period. Diluted loss per share was $0.93 compared to diluted income per share of $0.04 in the same period last year. Adjusted net income was $25,100,000 down from $26,400,000 in the fourth quarter of twenty twenty three. Adjusted diluted net income per share was $0.16 compared to $0.17 in the prior year period. Free cash flow for the period was $44,600,000 compared to $88,600,000 for the same period last year. A few comments on full year 2024. I'll just briefly highlight these on Slide 12. Full year revenue was approximately $916,000,000 surpassing the midpoint of the guidance range we provided during our Q3 call. This represented a 42% decline in revenue compared to 2023. This was due to a decrease in both volume and ASPs. [indiscernible] Adjusted gross profit decreased to $312,200,000 from $430,100,000 in the prior year.

Adjusted gross margin expanded by six eighty basis points over the prior year to a record 34.1%. Operating expenses increased to $524,700,000 from $201,400,000 in the prior year. Primarily due to a $236,000,000 non cash goodwill impairment charge and a $91,900,000 non cash long lived intangible asset write down related to the 2022 STI acquisition. Partially offset by lower headcount related costs. Income per share of $0.56 in the prior year. Adjusted EBITDA was $173,600,000 compared to $288,100,000 in the prior year. Adjusted net income was $91,200,000 compared to 171 point $900,000 in the prior year. Adjusted diluted net income per share was $0.6 down from diluted net income per share of $1.13 in the prior year. Finally, free cash flow for the year was $135,400,000 compared to $2.00 $15,000,000 in the prior year, We ended the year with approximately $364,000,000 in total cash [indiscernible] an increase of $115,000,000 from last year end. Throughout the year, net cash used in financing activities primarily driven by $4,300,000 in payments on our term loan and a $4,400,000 reduction of other debt. We ended the year with a net leverage ratio of 1.8 times excluding our preferred shares. Among my initial priorities as CFO, are assessing our capital structure, and allocation strategy.

Our strategic priority remains investing in the growth of our business, followed by further reducing our debt. As part of this process, together with our Board of Directors, we are evaluating our targeted debt levels and leverage. 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. We will build on that success as we continue to drive productivity and efficiency. 2025 guidance update. On Slide 13, will provide an outlook for the first quarter and full year 2025. As Kevin mentioned earlier, the level of stabilization we experienced towards the end of twenty twenty four changed the trajectory of our usual seasonal first quarter dip. We expect revenue in the first quarter to be in the range of $260,000,000 to $270,000,000 and adjusted EBITDA margin to be in the range of 11% to 13%. We believe it is important to provide this additional level of guidance to better understand the shape of our revenue forecast for 2025. We For the full year, are forecasting a double digit year over year increase in both volume driven by the recovery in market share coupled with shipments from delayed 2024 projects in our North America segment.

We entered 2025 with $2,000,000,000 in our order book which includes $594,000,000 of remaining performance obligations of which we expect to recognize revenue on approximately 97% in 2025. We We expect to deliver full year 2025 revenue within the range of $1,050,000,000 In terms of the first versus second half of the year split, the year will be slightly more heavily weighted towards the first half. Q1 twenty twenty five revenue is expected to decline by mid single digit percent from Q4 twenty twenty four. Before we see our traditional seasonal ramp up in quarters two and three followed by the traditional seasonal drop off in Q4. We also expect year over year revenue growth in both the first and second halves of twenty twenty five 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. [indiscernible] 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.

For adjusted SG and A, we expect a range of $144,000,000 to $152,000,000 Adjusted EBITDA is expected to range between 180 and $200,000,000 This guidance reflects improved profitability driven by our structural cost enhancements to improve efficiency and scale as well as the benefits from 45x. At the midpoint, this represents a 9% year over year increase in adjusted EBITDA earnings. For adjusted diluted earnings per share, we anticipate a range of $0.6 to $0.7 representing an 8% year over year increase at the midpoint. We expect our effective tax rate to be between 2425%. Preferred dividends are expected to total approximately $15,000,000 quarter. With approximately $30,000,000 as the cash or PIK portion the remainder attributable to the accretion of the instrument. Free cash flow is expected to be between $115,000,000 and $130,000,000 in 2025, after capital expenditures, which is expected to be in the range of $30,000,000 to $35,000,000 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. Thank you, Keith. 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.

With this strong foundation in place, we are well positioned to capture new opportunities and we remain very optimistic about the value proposition and demand within the utility scale solar industry. Looking ahead, we will stay focused on what we can control. Prioritizing business growth, customer relationships, product innovation and operational efficiency. With that, we will now open the call up for questions. Operator Array?

Thank you.

Will now be conducting a question and answer session. First question we have is from Max Dras. JPMorgan. Please go ahead.

Great. Thank you very much for taking our questions. Keith, can I start with you? First of all, congrats on the new role. Look forward to working with you. Just looking at the 1Q guide though, so appreciate that revenue is first half weighted. Can you just talk about what's weighing on EBITDA margin? In 1Q though compared to the rest of the year? Now I have a follow-up. Thank you.

Great. Thank you, Mark. Thank you for the kind wishes. The first quarter EBITDA margins are forecasted to be lower because we still have the second half of the large shipment that we started to push through from Q4 of twenty twenty four. And we also have the roll off of some $45,000,000 amortization that we just won't see in the quarter. And so those are primarily the two reasons for the adjusted EBITDA. Okay.

And then just a quick follow-up. Were there any safe harbor orders that you received in 4Q or thus far into 1Q?

I think when we look at our order book, we have less than 10% or so of safe order sorry, 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 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 [indiscernible] from the newness 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.

Array.

Yes, that was the question. Thank you very much.

The next question we have is from Jordan Levy of Truist.

Hey, thanks guys. It's Mo on for Jordan. Thanks for taking the question. First question, it's great to hear pipeline is growing 60% year over year, but could you please comment on why your orders backlog sort of lagged behind? And what kind of initiatives you guys are taking to win incremental business to grow the backlog I have a follow-up Yes. Sure, Mo. This is Kevin. Let me take that. So we think we're pretty pleased with the win rates of new orders. It's continuing to 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.

One thing we noted in the prepared commentary is that our U. S. Order book, for example, our book to bill ratio was 1.5.

So very strong momentum in the North American business.

Offset by some de booking of orders in Brazil. You 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 de bookings in Brazil. That we pulled out of the order book, masking some of the strength we had in the North American order book. And I think we're towards the end of the de 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 dates and new PPA negotiations at this point before they roll into the order book.

Gotcha. Thanks for the comments. And maybe following on your comment on declining ASPs, what kind of pricing dynamics are you seeing into 2025?

I'm sorry, what was pricing dynamics?

So look, we're seeing pricing actually fairly disciplined. I think what what you have to think about is the fact that steel, aluminum and logistics make 70% of our bill of material. We've We've talked about that historically. And steel alone come down over 30% in the previous two years. And that's what's really weighed down the ASP. So it's truly the ASP declines have been a function of come not a function of giving up price in the market. I think our competitors have stayed fairly disciplined. 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. That was as we expected for well over a year. We're all responding accordingly, but I would say certainly still quite disciplined market. I would say it's less disciplined as you go around the world. Certainly, it's getting less discipline in Brazil with the the issues that the marketplace is having. I would say Europe is a 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, it's It shouldn't be lost on the market that in a Q4, we're actually up in volume year over year. That's a significant swing, right? 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 decline 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 market in the last few weeks. 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. That's a good dynamic for us to get back into the '22, twenty three steel pricing is a really, really strong dynamic for Ray. 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, But at the same time, elevated steel prices creeping in getting more normalized back to the 2022, twenty three, we welcome that in the industry.

Thank you. Ladies and gentlemen, we do request that you The next question we have is from Vikram Bagri of Citi. Please go ahead.

Hey, Kevin. You mentioned a tripling of 45x to customers But if I exclude the January metrics, the last nine months indicate margins will be about 19%, which is clearly in line with what you reported in fiscal 'twenty four. The third thing, there has been no change in pricing, the 45x sharing is not happening. You don't expect to happen in 2025 either. Or you were anticipating shipping of $45 So this margin is sort of like could come down if the sharing is higher than anticipated?

So thank you for the question. First, let me say this. We have no explicit arrangements our customers to share 45x. When you look at the guidance, for the full year for gross profit margin We're guiding very comfortably towards 29% to 30% range. We also believe that the shape of the year and the mix We're reasonably comfortable with the the pricing that we have seen out there, as Kevin said, are reasonably comfortable with the fact that the current rise in steel prices should offer us some expansion of margins. And so we have not done anything was different in our pricing. We have not offered 45x up in contracts. We do believe that there is some bit of leakage in sharing in the profit pool, but we have no explicit arrangements to share that with our customers.

Yes. 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 45 amortized benefits that were the residual for 2023 that contractually in through our accounting 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.

The next question we have is from Brian Lee of Goldman Sachs. Please go ahead.

Hey, guys. Good afternoon. Thanks for taking the question. Welcome to the team, Keith. Looking forward to working with you. 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 analyst. So on the gross margins, guess, if I back into the view you have for Q1 and the balance of the year, it's seems like you're doing maybe low 20s gross margin in Q1 and then it's low 30s for the balance of the year. I mean, I guess, is that right? And is that low 30s really kind of the more representative margin level that you're structurally targeting and seeing on new bookings? Because it seems like the Q1 number is sort of an anomaly. And then just two housekeeping ones. What was the gross bookings number because I think you said there were some de bookings Kevin? And then how much get go get business did you have in 'twenty four? It seems like for the 'twenty five guidance based on 50% backlog shipping for $25,000,000 you're assuming about $100,000,000 you'll get, but just wanted to kind of compare and contrast.

Thanks, guys.

Yes.

Let me take a couple of those. The go off probably take them in reverse order. That's the way I can remember them, right? So the the go get is very minimal. When we entered 2024, we had what would have been a a typical amount of Goget somewhere in that 20%, 25% range would have been normal for us in our forecast. We've taken a more conservative approach in 2025 and the go get is certainly at this point sub-ten percent, and I would say nicely sub-ten 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 that software and that services more than will compensate for any go get. So we've added a little bit of cushion there in our conservative forecasted In terms of the gross margin for Q1, I think your low 20s is probably a bit off. It's probably mid mid-20s.

And then it's 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, 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 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.

Just quickly on the gross bookings 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 $50,000,000 of de bookings in Brazil in the quarter.

Very helpful. Thanks guys.

You're welcome.

The next question we have is from Joe Osha of Guggenheim Partners. Please go ahead. Hi there.

Yes, first question, I'm wondering if you can comment on whether there's been any change in the competitive environment following Soltek going away in Europe And I've got one quick follow-up. [indiscernible] in Europe. There's been a change in the competitive. So remember Soltech competed with us in two of our larger markets and that's primarily Spain and Central Europe and then Brazil. There's certainly been a change in Brazil as Sol has gone away and we've been able to pick up several projects. However, the bankruptcy laws in Spain don't allow interloping at this point. [indiscernible] 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 kind of in progress, but highly at risk at this point. So that's one of the challenges.

So outside of the additional sort of market share gain that you would normally get where people say, well, now there's only there's 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 their half done projects, the laws in Spain don't allow that yet. There's a time factor that we have to deal And just to add some color for South America, we were opportunistic in one large project, and we believe there'll be follow ons from there. So where appropriate where we can pick up projects, we're absolutely doing so.

We have many customers and to be clear in Brazil, customers came to us and asked us to very quickly refresh our bids to go back and take on some projects and we're certainly doing that. That. That's great. And then just one very quick follow-up. I'm wondering if you all have contemplated selling off any 45x 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. Not in the near term because most of our 45x is filed by our vendors and we have with every vendor a different agreement in how those manifests itself to us in terms of either a rebate or reduction in COGS or what have you. So we have varying agreements with our vendors. The 45x 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, we'll have an ability to go after more 45x 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'd want us to be in an excess credit standpoint for that, but we're still a cash taxpayer. So [indiscernible] Yes, that makes sense.

The next question we have is from Maheep Mandloy of Mizuho. Securities. Please go ahead.

Hey, thanks for taking the question. Just two quick parts. 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? And secondly, on the tariffs, and most of the talk tubes are probably made in The U. S. For you guys. I'm thinking for the other components, that the rotors and other things, Are those impacted by these incremental tariffs on steel and aluminum imports for you? [indiscernible] So I'll take the book on Bill and then you can take the return Look, the guidance that we have given we feel very comfortable with given where we have already things in the backlog. There are opportunities to take some bookings into the year Array, given our lead times at average of fourteen weeks and still deliver and maybe deliver some upside. But we have to see that at the moment, as you know, given the uncertainty in the marketplace out there, we everyone's just 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're holding to our guidance on revenues and wait to see what happens with the administration and clarity.

And Anthony, I'll weigh in on the tariff front. So overall, we feel well positioned on tariffs. In this climate. I'll kind of remind everyone that we're the original high domestic content provider of trackers domestically in The U. S. We've been really forthcoming about having the ability to be on 100% domestic content content tracker here in the first half.

Regardless. And so we feel really well positioned. As you mentioned, you have Torque tube, which is the highest runner-in-depth build materials, sourced from U. S. Tube mills with steel coil that comes from domestic mills that are melted and poured here in The U. S. Unlike other providers who may be importing that coil 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.

The next question we have is from I think, yes, if I could just add on to that.

Let me just add one more comment to what Neil said. While our bill of material is secure from tariffs, There's a secondary impact of tariffs and that's the raising of domestic steel prices [indiscernible] U. S. Steel prices feel they can. 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 That's a significant increase and it's a response to U. S. Deal producers feeling that they have air cover now to begin raising prices domestically. So for us, that's about ensuring that we're pricing effective effectively, that we're monitoring steel prices and the benefit we have in our contracting system is that we don't lock steel in and commit to a steel price until we fully contract that order. [indiscernible] So for us, it creates upside opportunity in terms of ASP, but no downside risk in terms of margin the way we price. So I think we're we feel we're pretty positioned But I want everyone to recognize that just because you have domestic steel doesn't mean you're not going to have a price impact in the marketplace. I think we will. Just of what you've seen 30% increase since January 1.

The bulk of that 30% over 20% coming since the announcement of what we like to call here the Super Bowl tariffs, right?

Thank you. Next question we have is from Colin Rusch of Oppenheimer.

Thanks so much, Hess. Can you talk a little bit about key areas that you're focused on in the R and D effort to make incremental improvements on the existing portfolio of products?

Yes.

So we've been really upfront. This is Neil. I'll take that one. So as we talked about in the prepared remarks, feel really good about the investment we've made in SkyLink bringing wireless capability, also kind of customizing what we had as a legacy 32 link row into an eight link row architecture that allows us to be more adaptable to smaller parcels that we're seeing more and more of in the space. As we talked about also around a lot of focus now on robotics and automated assisted panel installation. So what you're seeing our R and 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 SkyLink reducing trenching, 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.

Great.

Thanks so much guys. The next question we have is from Philip Shen of Roth Capital Partners. Please go ahead.

Hey guys, thanks for taking my questions. Talked about the solid margin performance after accounting for the 45% amortization.

That said, one of your peers has margins that could be a couple hundred basis points higher How should we think about the differences in your structural gross margin percentage versus your closest public peer, is it just conservatism in your outlook or is there some price action that could be driving that?

So I know you've said maybe not, but just want to kind of explore that a little bit more.

For the 2025 gross margin outlook.

So [indiscernible] I don't know which peer you're referring to. But when we think about Thanks, Tracker. Fair enough. Thank you. Thank you for the clarity.

We are two different scale organizations and we have to think about 45x in its context. 45x is a U. S. [indiscernible] [indiscernible] operates only in The U. S. Array so our mix of products and markets are different than theirs. Our model, how we operate is different than theirs. And so for us, we've always said that x 45x 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.

As Kevin said, look, there's a profit pool that 45x has broadened in The U. S. For suppliers, customers and us as as technology providers. And I think that is going to be some leakage across the system. We have no explicit agreements to share 45x with any customers. So we're not explicitly giving it Array. But is there a leak to be competitive? I would guess so. So we are focused on what we can control We are focused on the suppliers that we are partnered with to deliver our goods We are focused on making sure our margins are structurally sound so that if $45 goes away, we still have a profitable and cash generative business. [indiscernible] Just one clarity I'll make, Keith, is it's Mid-20s.

Margins.

We've Been At Those Margins Consistently Now For Many, Many Quarters. As We Committed To Bringing Those Structural, What We Call Legacy Core Array Margins When You Correct For Different Sourcing Strategies To Maximize 45x That Is. We've Certainly Maintained Those Those Mid-20s Margins For Many Quarters. When I Say That Caveat Of Correcting For Things, There's An Interesting Game We Play Here And That's About The Mix Of Foreign Steel Versus U. S. Steel and the more U. S. Steel we use, the more 45x credits we get. So paying more for steel on one side lends itself to more credits and you're solving for that, right?

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.

We are still able to supply that and bring in foreign steel. But we forego 45x credits. Right? And we have to think about that as we price our more advantageous for us to buy U. S. Steel because we may be at a particular inflection point on our credit schedule, for example, that the utilization of U. S. Steel creates a higher rebate to us from that steel supplier. So there's a lot to go in that. But relative to to us, we think without 45x, our margins are very, very sound at this point and will continue to get better with our cost Thanks, Kevin.

One quick follow-up here. What is the plan to accelerate bookings NextTracker has been booking business that is multiples of your bookings. Phil, look, I'm not going to compare You could sorry, go ahead.

Phil, I'm not going to compare us to NextTracker's bookings because frankly when we look at our order book and win rate on stuff that were up again we're really pleased with our win rate.

So 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, our win rate on projects, we're really pleased with our win rate on those projects. Right? That's the only thing I'll focus on.

Well, Phil, what I would add to the mix is Bookings and order books are not GAAP numbers and everyone has a little different shade on it. But in the GAAP, numbers in your 10 Ks and 10 Qs, we all have to report remaining performance obligations.

And I would ask you to look at the difference between their auto book and their remaining performance obligations. Our remaining performance obligations at the end of twenty twenty four roughly $594,000,000 As you see, we're guiding all revenue towards between $1,050,000,000 and $1,150,000,000 So we have a strong way of covering what we'll projecting in revenues. So I would say that that's an important a very important metric to look at. Great. Appreciate that, Keith and Kevin.

Thank you. I'll pass it on.

Ladies and gentlemen, that is all the time we have today. And with that, it concludes today's conference. Thank you for joining us. You may now Thank you.