Array Technologies, Inc. Q4 FY2024 earnings call

2024 Achievements - Broke ground on a new state-of-the-art manufacturing facility in Albuquerque, New Mexico for supply chain resiliency. - Improved and innovated product, software, and service solutions based on customer feedback, e.g., SmartTrack suite features. - OmniTrack terrain following tracker has over 20% of the order book. - Positive feedback on SkyLink and launched reusable packaging initiative. - Invested in SWAP robotics. - Remediated final material weaknesses and strengthened management team. - Worked with industry trade groups. ### 2025 Market Outlook - U.S. market stabilized towards end of 2024, expecting demand to stabilize with utility scale solar's robust value proposition driving mid- to high single-digit industry growth. Array expects 20% top line growth in 2025. - International: Brazil affected by currency devaluation, interest rates, and tariffs; Europe expected modest growth in 2025; actively evaluating Middle East for expansion. ### Innovation and Supply Chain - Attained 22 new patents in 2024, total 329 granted worldwide. - SkyLink platform and SmartTrack software enhancements with positive market response. - Invested in Swap Robotics for utility-scale solar robotic operations. - On track to provide 100% domestic content trackers in the U.S. first half of 2025 with certifications.

In the fourth quarter of 2024, Array Technologies achieved revenue of $275 million, and for the full year 2024, revenue was $916 million, which was above the midpoint of the previously communicated guidance range. The fourth quarter adjusted gross margin was 29.8%, an improvement of 410 basis points year-on-year, and the full year adjusted gross margin was 34.1%, an improvement of 680 basis points compared to full year 2023. Adjusted EBITDA in the fourth quarter was $45.2 million and $173.6 million for full year 2024. For the full year, the company generated $135 million of free cash flow and ended the year with a cash balance of $364 million. Sales in North America represented approximately 73% and 70% of the revenue in the quarter and full year, respectively. The OmniTrack terrain following tracker already represents over 20% of the order book and contributed almost 10% of the 2024 revenue.

2025 Outlook - First quarter revenue expected in the range of $260 million to $270 million and adjusted EBITDA margin in the range of 11% to 13%. - Full year 2025: Expected double-digit year-over-year increase in volume and revenue driven by market share recovery and shipments from delayed 2024 projects. Revenue forecasted to be within $1.05 billion to $1.15 billion. Adjusted gross margins expected to be within 29% to 30%. Adjusted SG&A expected in the range of $144 million to $152 million. Adjusted EBITDA expected between $180 million and $200 million. Adjusted diluted earnings per share anticipated in the range of $0.60 to $0.70. Free cash flow expected between $115 million and $130 million, with capital expenditures in the range of $30 million to $35 million.

• Brazil: Devaluation of real, volatile interest rates, and new tariffs on solar components slowing market growth for 3-4 more quarters. - U.S.: Ongoing project timeline pushouts. - Policy: Impact of Trump executive orders on IRA funds, with tax credits not subject to appropriation freeze. - Europe: Bankruptcy laws in Spain limiting ability to pick up half-done projects. - Steel prices: Increase in U.S. steel prices since January 1, affecting margin and pricing.

Q: Mark Strouse asked about why EBITDA margin in 1Q is lower and if there were safe harbor orders in 4Q or 1Q.

A: Keith Jennings said first quarter EBITDA margins are lower due to large shipment roll-off from 2024 Q4 and roll-off of 45X amortization; Kevin Hostetler said less than 10% of safe harbor orders in order book, and they're in dialogue for new ones.

Q: Jordan Levy asked about new orders backlog lag and initiatives to win incremental business.

A: Kevin Hostetler said win rate of new orders is ticking up, U.S. order book book-to-bill ratio was 1.5, with debookings in Brazil due to no defined start date, and they're in dialogue for new orders in Brazil.

Q: Vikram Bagri asked about 45X sharing and margin situation.

A: Keith Jennings said no explicit arrangements to share 45X, guiding comfortably towards 29%-30% gross margin, and pricing is reasonable.

Q: Brian Lee asked about gross margins, gross bookings, and go-get business.

A: Kevin Hostetler said Q1 gross margin is mid-20s, go-get is sub-10%, and there were debookings in Brazil; Keith Jennings mentioned guidance is based on backlog.

Q: Joe Osha asked about competitive environment in Europe and 45X credit selling.

A: Kevin Hostetler said Soltec's exit in Europe has some market share gain but Spain's bankruptcy laws limit picking up half-done projects; Neil Manning added opportunism in South America; Kevin Hostetler said not planning to sell 45X credits in near term.

Q: Maheep Mandloi asked about book and bill opportunity and tariffs impact.

A: Keith Jennings said guidance is comfortable with backlog, wait-and-see on book and bill; Neil Manning said well positioned on tariffs as 100% domestic content trackers will be provided in U.S. first half.

Q: Colin Rusch asked about R&D focus.

A: Neil Manning said focus on SkyLink wireless capability, 8-link row architecture for smaller parcels, and robotics for automated panel installation to lower customer costs.

Q: Philip Shen asked about structural gross margin vs peer.

A: Keith Jennings said different scale and market mix, our business should operate at 20+% gross margin over time, focused on structural soundness; Kevin Hostetler added considerations on steel usage and pricing related to 45X credits.