Array Technologies, Inc. (NASDAQ:ARRY) Q1 2024 Earnings Call Transcript

Array Technologies, Inc. (NASDAQ:ARRY) Q1 2024 Earnings Call Transcript May 10, 2024

Array Technologies, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings, and welcome to the Array Technologies’ First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only. 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 Sheppard, Investor Relations at Array. Please go ahead.

Sarah Sheppard: Thank you, and welcome to Array Technologies first quarter 2024 financial conference call. On the call with me today are Kevin Hostetler, our CEO; and Kurt Wood, our CFO. Today’s call is being webcast from our Investor Relations site at ir.arraytechinc.com, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website. Today’s discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures can be found on our website. We encourage you to visit our website at arraytechinc.com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending.

As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, our expected results and other matters. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from the statements made today. We refer you to the documents we file with the SEC, including our most recent Form 10-K for a recent discussion of risks that may affect our future results. Although, we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements to conform these statements to actual results.

I’ll now turn the call over to Kevin.

Kevin Hostetler: Thank you, Sarah. Good afternoon, everyone. We started 2024 off with the momentum we experienced in the fourth quarter of 2023, continuing into the New Year. Beginning on slide 3, I’ll start with key highlights from our first quarter and some company-specific updates around our operational capabilities and product portfolio. We generated $153 million of revenue, slightly above the high end of the range we provided on our February earnings call. Adjusted gross margins came in at 38.3%, inclusive of a one-time $4 million benefit stemming from the successful resolution of a supplier quality issue. Excluding this one-time item, our adjusted gross margin was 35.7%, which was up 10 percentage points sequentially from the prior quarter, and up nearly 9 percentage points from the first quarter of 2023.

As a reminder, starting this quarter, we are reporting gross margins inclusive of the benefits derived from 45X, which to-date only reflects the contribution from domestic content related to our torque tube. Having said that, our core adjusted gross margin, excluding 45X benefits, would have been in the mid-20s range for the quarter, which is consistent with our underlying long-term target. We delivered $26.2 million of adjusted EBITDA, representing 17.1% of revenue, inclusive of the $4 million benefit mentioned earlier. And we generated $45.1 million of free cash flow to end the quarter with a cash balance of $288 million. Total available liquidity was approximately $465 million, when including the capacity on our undrawn revolving credit facility.

Moving to slide 4, we continue to see broad demand across all market segments and customer types. This includes EPCs, developers, independent power producers, and utilities across utility scale and distributed generation projects, both domestically and internationally. In Q1, we booked approximately $400 million of new business and experienced a book-to-bill ratio greater than 2.5 times to end the quarter with an order book of $2.1 billion. With this print, we have won $1.8 billion of new bookings cumulatively over the last four quarters. The quality of our new bookings remains consistent with our historical profile, and approximately 80% of our Q1 activity came from what we classify as Tier 1 customers. We have also seen success in gaining share of wallet from certain accounts that we strategically targeted over the last year.

New orders received in the quarter were strong in both North America and the Rest of World, which highlights continued strong global demand for Array products and services, including our energy optimization software and severe weather mitigating solutions. As was the case in the second half of last year and discussed on our year-end call, customers continue to place orders for projects with more elongated time frames for first deliveries than has historically been the case. As a result, our 12-month conversion rate of order book to revenue will be lower in 2024 than what we have experienced in prior years. This dynamic remains unchanged and is consistent with the commentary and guidance we provided on our year-end call. From an overall total perspective, our pipeline of high-quality, high-probability opportunities has continued to grow.

This highlights the demand for our portfolio of products and aligns with our expectation of robust industry-wide growth for utility scale solar, and solar continues to be one of the lowest cost options for satisfying the growing need for new energy generation capacity and replacement of aging energy-generating assets. This growth is also in part attributable to the trends I mentioned earlier, where customers are developing and contracting projects further out in time than they may have in the past. During the quarter, we continue to have focused dialogue with our customers, and in many cases, the asset owners to ensure we have the appropriate voice of customer represented across all aspects of our business. Throughout these conversations, customers reiterated that they are positive on both the trajectory of the industry and their individual business outlooks.

By and large, customers continue to communicate. They are seeing a softer first half of 2024 before seeing growth in the second half of the year. This is consistent with their prior communication and what we messaged and guided on our last call. The most common issue cited remain around permitting and interconnection, supply chain delays on long lead time equipment and the timing of financing. These issues continue to be broad-based across all segments and customer profiles as we have discussed in the past. But there are a handful of customers who are not seeing as much of an impact and projects are moving ahead in a normalized manner. We are also closely monitoring recent developments related to the AD/CVD petitions filed a few weeks ago. As you may have read in numerous media outlets, it is our stance that more duties will cause uncertainty and unnecessary project delays, holding the US back in meeting our clean energy deployment and manufacturing goals.

One advantage of Array’s offerings in this uncertain regulatory environment is the flexibility of our passive planting solutions, which can be adapted to fit virtually any module type for manufacturer at any point in the design and/or construction phase with minimal design changes. This removes the need to complete expensive and time-consuming drilling or modification of the torque tube providing the EPC and asset owners an immense amount of optionality. This becomes even more beneficial during times of uncertainty around module selection or module availability. We will continue to support and work with our customers like we have for many years as they assess and work to minimize any potential impact to their business from the recently filed AV CDD petitions.

In addition to our typical ongoing customer dialogue, we held a very productive customer summit at our office in Arizona earlier this year. This was part of a periodic program where we host diverse groups of industry participants at our offices around the globe. The summits cover a variety of topics, including a showcase of our technology, software and LCOE benefits, discussions on current market dynamics and candid feedback sessions on our products and service levels. The feedback received from our Q1 form was overwhelmingly positive in the event with the success across the board. Finally, I’d be remiss if I did take a few minutes to highlight some of the success we are seeing in Brazil. According to independent third-party data from ePowerBay, seven of the top 10 and 13 of the top 20, most efficient solar power plants for 2023 in Brazil, utilized Array-tracking technology.

The report side of the efficiency of projects using Array trackers was as much as 2% higher than other projects using different tracker offerings. And of course, the greater the energy production, the lower the levelized cost of energy and the better the return on investments. We are very proud of this accomplishment as it is truly a testament to the value of our technology, the breadth of our product and services portfolio and of course, our highly talented team in the region. We’re excited to continue our part in Brazil’s clean energy movement, and we feel well positioned with the latest version of our H250 product, which incorporates valuable elements from our flagship DuraTrack offering, including our taped articulated driveline. Our $2.1 billion order book already includes several bookings for this latest version of the H250 in both Brazil and Europe, and we look forward to driving further value to our customers through our enhanced product features and capabilities.

Turning to Slide 5. We recently hosted US Secretary of Energy, Jennifer Granholm, Senators Heinrich and Ray Luján, Senior President, Abby Hopper, and many of our customers’ employees at the groundbreaking of our new state-of-the-art manufacturing facility in Albuquerque. This facility will create good paying New Mexico jobs, strengthen our low-carbon domestic supply chain and boost American energy independence. We expect this facility to come online in the early 2026 time frame. While this facility is not required as part of our 45x strategy, it is part of our broader supply chain approach to reduce costs and lower enterprise risk around continuity of supply for certain key components. Moving on to Slide 6. We’ve introduced a few exciting hardware and software offerings this quarter.

First, we officially launched our patented Haile Alert Response, which is a groundbreaking set of software features designed to autonomously protect solar assets for haile damage and is currently available and backward comparable for use on our DuraTrack and OmniTrack systems. The Hail Alert Response system leverages fast weather prediction algorithms to pre-emotively stop Solar Trackers before an anticipated Hail events. This approach ensures that solar assets are safeguarded against potential damage, enhancing the longevity and durability of the investments. Some of these capabilities were unfortunately put to the test in a recent Hailstorm in Fort Bend County in Texas, which resulted in some sites being subject to three to four-inch size Hail.

There were eight sites with Array Trackers in the Fort Bend area with four of these sites located within a 10-mile radius of the worst impact of the storm. We confirm that operators of those four sites successfully utilized our Hail Response capabilities to Storm commission solar panels at the optimal 52 degree angle in advance of the storm reaching the sites. We are happy to report our Storm solution worked as designed and was very effective across the board. According to our customers and evaluations performed by our customer support teams, the solar facilities with Array Trackers experienced insignificant damage. This is obviously a strong proof point of the robustness of our severe weather mitigation capabilities, including the effectiveness of our hailstorm angle and is another example of how we provide an attractive ROI for the asset owner and help mitigate risk.

Turning to Slide 7. We wanted to highlight the recent work we’ve completed to educate and promote market participants around the benefits of our Patented Passive Wind Stow technology. This work extends out the dialogue we had with a customer. During that discussion, the customer noted they had two similar sites in close proximity of one another. One site utilized in Array Tracker with our Patented Passive Wind Stow capabilities and the other site utilized a competing tracker technology with Active Stow Technology. Overtime, the customer noted that the Array project consistently experienced better energy production and the customer asked for our help and articulating why. Our engineering team developed an innovative solution to low and simulate Patented Passive Wind Stow algorithms to determine the resulting energy losses from Stow events using High-Resolution Actual Wind Data.

With this model, which was verified by an independent report by DNB, we proved the Passive Stow can have more energy generation compared to Active Stow in medium-to-high wind regions. Specifically, the study shows that the energy enhancement can be as much as 4.3% annually. depending upon location and wind behavior. This is a very significant data point. Let me articulate what this means to the overall economics using a hypothetical 200-megawatt site. The incremental energy production from our Patented Passive Wind Stow facility operating in a high wind zone would create a net present value as high as $10 million over a three-year period. That’s about half the entire cost of the tracker or $0.05 per watt and is a tremendous ROI benefit to the asset owner.

On top of the enhanced energy yield, Passive Stow Technology is a mechanical solution, meaning it is simple and safe by design. Active Stow systems on the contrary, rely on Software Algorithms and External Wind Senses. This technology can easily trigger unnecessary stowing or potentially fail to show at all thus inserting increased complexity and unnecessary risk for the asset owner. We will continue to educate our customers, banking participants, and solar insurers on the inherent advantages and differentiation of our passive wind stow technology. We have made a summary of this report publicly available and encourage you to go to the product features page within the Products & Services section of our website at arraytechinc.com to access it.

Kurt will now provide additional color on the Q1 ’24 results and our 2024 outlook. I’ll then get some concluding remarks before opening the line for questions.

Kurt Wood: Thank you, Kevin. I would like to start off by providing some additional details around the first quarter results, and ask that you turn your attention to Slide 9. As Kevin mentioned, revenue came in slightly above the high end of our guidance range at $153 million, which was down 59% from Q1 ’23, and down 55% sequentially from the fourth quarter of 2023. Overall, we experienced declining volume in ASPs year-over-year in line with what we had communicated on our last call. Sales in North America represented 70% of our revenue for the quarter, with the remainder of our revenue coming from international locations. Before moving to gross margin, I’d like to briefly speak to the deferred revenue on our balance sheet and note we saw the balance increase by $20 million in the quarter, as customers made contractual deposits ahead of project deliveries scheduled for later this year.

We expect our deferred revenue to increase again in the second quarter as additional deposits come due in advance of our second half ramp in revenues. We achieved first quarter adjusted gross margins of 38.3%, an expansion of over 11 percentage points year-over-year, which was inclusive of the $4 million one-time benefit to cost of goods sold, Kevin mentioned earlier. Excluding that one-time benefit, we saw first quarter adjusted gross margins expand by 880 basis points on a year-over-year basis to 35.7% and by 10 percentage points sequentially versus Q4 of last year, inclusive of 45X benefits associated with our torque tube. Our ability to expand margins on lower volume is a testament to the considerable operational improvements we have made within the business.

Operating expenses of $46.7 million were down approximately 7% from $50.1 million during the same period of the previous year, and down 14%, or $7.3 million from the fourth quarter of 2023. This decline was driven by a year-over-year improvement in amortization expense relating to certain intangible assets from the STI acquisition and the non-recurring nature of several one-time items negatively impacting prior quarters. Adjusted EBITDA was $26.2 million when including the one-time $4 million benefit, compared to adjusted EBITDA of $67 million during the first quarter of 2023. GAAP net loss attributable to common shareholders was $11.3 million, compared to a GAAP net income of $17.2 million during the same period in the prior year. And basic and diluted loss per share was $0.07, compared to basic and diluted income per share of $0.11 during the same period in the prior year.

Adjusted net income was $9 million, compared to adjusted net income of $39.6 million during the first quarter of 2023, and adjusted basic and diluted net income per share was $0.06, compared to adjusted and diluted net income per share of $0.26 during the prior year period. Finally, our free cash flow for the period was $45.1 million versus $41.9 million for the same period in the prior year, demonstrating our continued focus on cash generation. Now we’d like to go to Slide 10 and conclude by affirming no changes to our prior guidance for the full year 2024 at this time. As a recap, we previously guided full-year revenue of $1.25 billion to $1.4 billion, adjusted gross margin in the low 30s percentage range, adjusted EBITDA of $285 billion to $315 billion, and adjusted EPS of $1 to $1.15.

As communicated when we issued our 2024 guidance on February call, our revenue profile is back half-loaded. We expect Q2 revenues to grow sequentially from Q1 to the range of $225 million to $235 million and continue to expect sequential growth in both the third and fourth quarters, with the fourth quarter being the peak revenue for 2024. In regards to the recent ADCVD petition that Kevin touched upon earlier, this does inject some uncertainty into the year. While customers are digesting the news and awaiting further details, we are hearing of some starting to plan scenarios that could mitigate, in part or in whole, potential short-term risks to their business imposed by any new tariff. Part of those mitigation plans may include prioritizing projects designed with models sourced from manufacturers that would potentially be subject to new tariffs ahead of other projects prior to any tariff going into effect.

Whether these plans get put into effect remains to be seen and is dependent on how the petitions around ADCVD play out over the next few months. Given how recent this news is and the many unanswered questions around how the petition will ultimately play out, we are not in a position at the time of this call to quantify any impact for our full-year guidance, whether that be a potential risk or a net opportunity. We will provide further updates on a future earnings call when we have clarity and if there is any material impact for our full-year expectations. Now, I’ll turn the call back over to Kevin for some closing remarks.

Kevin Hostetler: Thank you, Kurt. We are very excited about the continued positive momentum in the business. During the quarter, we officially launched new features to our severe weather mitigation offering, including hail alert response, and we successfully rolled out the next generation of our H-250 product. We continue to see our portfolio of products well-received by our customers as evidenced by approximately $400 million of new bookings in the quarter, with a very healthy order book of $2.1 billion at the end of the quarter, which includes a meaningful amount of orders for 2025. This gives us greater visibility into the next year than historically would be the case at this time of the year. We remain very excited for solar in general and more importantly, for Array to capitalize on the industry growth with our diverse product and service portfolio. We’ll now open the call up for questions. Operator?

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Q&A Session

Operator: [Operator Instructions] The first question that we have comes from Mark Strouse of JPMorgan.

Mark Strouse: I wanted to start with your pricing strategy for — I think there’s been some concern with investors that you’re lowering your pricing. That might be kind of sacrificing margins. Obviously, you’re reiterating your guidance for the year, but just kind of curious for your bookings for delivery in 2025 and beyond. Are you still confirming kind of that mid to high 20s gross margin for the non-45x gross margins?

Kevin Hostetler: Hi Mark, it’s Kevin. Thanks for the question. Look, we’re not ready to give 2025 guidance relative to margin at this point. I’ll just reiterate that we’ve been very consistent in our messaging around our margins and our ability to hit those mid-20s margins over time. And we’ve done that not by our price reductions weren’t as a result of sacrificing margin, which is really quite evident here in Q1. It was really about those structural cost reductions that we’re keeping a piece and passing a piece on to our customers. That’s really what drove the increase in the momentum in market share recovery, as well as continued margins at the rate that we thought we would at the mid-20s. So we remain confident in our ability to do that as we go forward.

We have yet to see how the market plays out relative to passing on 45x benefits. I think that’s something we’ll just have to wait a few quarters to see how that transpires. But as far as this year, we’ve reaffirmed our guidance in the low 30s overall gross margin inclusive of 45x benefits. And thus far, we’re continuing to see those mid-20s margins without the 45x benefits. So we feel very comfortable in our strategy playing out.

Mark Strouse: Okay. And then this question might be somewhat difficult to answer. So maybe we could follow up offline, but just with the upside and downside with AD/CVD, I know there’s a lot of moving parts, but maybe can you talk about kind of what you saw two years ago with the early 2022 AD/CVD investigation kind of puts and takes that you saw with your market share? And how much of that do you think was driven by that AD/CVD case?

Kevin Hostetler: I think we were — look, we were a net benefit of AD/CVD back in 2022. As you recall, we gained several points of market share that were really as a result of our structure in that, as many of you on the call know, that with our torque tubes and our clamp solution, we do not pre-drill into the torque tube for spacing. We have a very flexible system that allows us to withstand changes in modules much later in the game, all the way up into time of installation. And I think that benefited us greatly last time as our customers were changing modules, and frankly throughout UFLPA, as our customers were changing modules readily just prior to installation. And our particular product configuration really allowed that and was very supportive of that.

As it relates to this filing, look, we really just don’t have a lot to say that it’s too new. The filing hasn’t been fully taken up yet, and we don’t know what those results are, and we’re not — certainly not in a position to yet understand in the first three weeks the impact on this year. So we’re going to remain silent on that until you get further down the understanding of how this is going to be received by the federal government and what their approach to continuing, either to continue the investigation or not, and then what ideas they have for potential tariffs and the impact of that market. We’re certainly in touch with our customers on that, on a daily basis, just coming back from the ACP conference after several days. But again, there’s not a set understanding of the full impact of that to our marketplace.

And I’d be remiss if I tried to guess at this point.

Mark Strouse: Fair enough. Thanks, Kevin.

Kevin Hostetler: Thanks, Mark

Operator: Thank you. The next question we have is from Christine Cho of Barclays. Please go ahead.

Q – Christine Cho: Thank you for taking my call – my question. So just on the gross margin point, if we back out this $4 million supplier settlement, gross margins was still 35%. You’re guiding to low 30s. So just as it pertains to 1Q, was there anything else notable driving this quarter higher like any sort of like catch up from 2023. And then with respect to the cadence of gross margins, should we think that it should be pretty consistent in the low 30% range for the remainder of the year? Or should we think that maybe it’s kind of slowly decreases from like 1Q?

Kurt Wood: Hi, Christine, this is Kurt. I appreciate the question. I think you clocked it right with the onetime benefit of the $4 million, that was about 2.6 percentage points of margin in the quarter. That was clearly a onetime item related to debt settlement. So we did see gross margins, obviously, each project will have a slightly different margin profile. We did see a little bit more that benefited from 45x in this quarter. So you that 35.5-ish that you referenced, that’s about where we came in, but it did benefit a little bit more from a heavier weighting of 45x. We do think that as we look through the remainder of the yearly closer to the mid to low 30s that we talked about. And we did mention on the last call that there is a certain amount of 45x, call it, power that we left in case there was some good backs that we had to do.

We won’t be the first movers in that type of advantage. And that would obviously mean that we’re assuming a little bit lower gross margin, you’re talking a couple of hundred basis points in any direction in the quarter in the back half than what you’re seeing in the first half here. I hope that answered your question.

Q – Christine Cho: Yes. That was helpful. And just my follow-up. You mentioned in your prepared remarks that deposits was positive this quarter. And it is positive for the first time in a while, has anything changed contractually on how you collect these? Or is it just a function of your bookings this quarter being a lot larger than what exited your backlog versus last year?

Kurt Wood: That necessarily — you – Kevin mentioned in his prepared remarks that — and we’ve mentioned this even in the call last time that we are seeing a little bit more of a long-dated time frame from when we get the bookings to when the project will actually be shovel ready. Obviously, from a developer standpoint, ETC they don’t want to put cash down on a longer time frame that will hurt their IRR. So what we’re seeing is we get bookings, the cash is really meant to be — to compensate us for any at-risk capital we put to work to buy the inventory. So what we do expect is that there will be a little bit of a time lag between the booking itself and when the contract is signed to ultimately when we get the deposit. What we typically try to do is align that deposit to when we get the actual inventory exposure on our end to mitigate that.

Now obviously, there’s some cancellation penalties in there, but that doesn’t require them to put any cash upfront for us. So that dynamic has changed a little bit over the last year as these time frames have got elongated. But I think that’s pretty consistent, what you’ll see throughout the industry.

Operator: Thank you – [Operator Instructions] The next question we have comes from Brian Lee of Goldman Sachs. Please go ahead.

Q – Brian Lee: Hi, guys. Good afternoon. Thanks for taking the question. I’ll try to keep it to one here. Kevin, you mentioned on the guidance, you’re reiterating the range for revenue, it’s flat volume, which when you back into it, would imply like pricing is down somewhere between 10% to 20% year-on-year based on the guidance low-high. I know you don’t want to get into 2025 margins, but you have some bookings and a decent part of backlog here now that you said gives you better visibility into the next year than you normally would have. So presumably, you have a view on pricing. Would you think that 2025 relative to the down 10% to 20% you’re implying for 2024? It is about an equal price decline year, better or worse? Just trying to get a sense for what you’re seeing in terms of the pricing trends based on the early part of the year for bookings and backlog that you have right now? Thank you.

Kevin Hostetler: I think Brian, it’s really hard to impact that, because again, we’re in a hyper deflationary steel environment here in the very near-term. So when you think about that from a steel pricing, just even year-to-date deals, down from the spot price of last week. The last time I looked, it was down circa 36%, so very significant. So it’s really hard to translate that. And I don’t think I’m ready to translate that into a margin view for you just yet. It would be too premature to do that. So remember, what we’ve said on our last call that of that pricing decline, and I certainly have issue with your high end of 20%, it’s not nearly that. Of the pricing decline of what we’re seeing now and what we’re booking now, the disproportionate amount of that pricing decline is purely related to commodities.

And then there is a portion that is in the, I would say, low to mid-single digits that is our passing on of some of our cost savings to our customers. But the far disproportionate amount of ASP decline on a period-over-period is related purely to commodities, which, again, our customers are very savvy and expect us to pass on those costs very effectively. So hopefully, that helps.

Brian Lee: Yeah. No, that’s helpful. I’ll take the rest offline. I appreciate it.

Kevin Hostetler: Thanks, Brian.

Operator: Thank you. The next question we have comes from Joe Osha of Guggenheim Partners. Please go ahead.

Joe Osha: Hi, thank you for taking my question. I’m wondering if we can have an update on the status of your clamp, the panel clamps and the 45x Saga, has that ship sailed? Or is there still a chance that we might see those be able to qualify? Thank you.

Kevin Hostetler: I think it’s too early to tell. We don’t have the final information on that. We continue to lobby for plants. And remember, we’ve been consistent in saying that there’s two different areas that plans may fall under. One is under the structural fastener definition. That one has certainly a higher value to it under that, I think it’s $2.28 per kilogram. The other one is structural fasteners, under a definition, under the structural steel element that can be considered part of that torque structure, which has a lower dollar amount, but certainly can fit into that definition. We’re still doing our part to continue to lobby and to provide our backup for why we think clamps are structural fasteners. If they’re not, we feel pretty comfortable that they’ll at least be part of the other, but less valuable piece of thing.

And look, we’re still – when you ask me when do you think we’re going to have part of that, wish I knew. This is something that we continue to see the came down the road. We are expecting some form of additional domestic content guidance here in the next few weeks, but we are not unsure of what all will be covered in that release.

Joe Osha: Thank you.

Kevin Hostetler: And again, I’ll take this opportunity to remind everyone on the call that we have yet to put the value of structural factors into our guidance for this year.

Operator: Thank you. The next question we have comes from Jordan Levy of Triust Securities. Please go ahead.

Jordan Levy: Good afternoon, all. Maybe I just want to see if you could provide us some update after a nice bookings quarter again on how customers are reacting to kind of the price decreases in DuraTrack versus the rollout of H250 as well as OmniTrack just the dynamics you’re seeing there?

Kevin Hostetler: Yes, sure. So let me unpack it a little bit different. The OmniTrack is starting to really gain traction for no pun intended there. We’re starting to see acceleration. And as we’ve discussed in the past, that the large quantity of quotes that we’re starting to see those now turn into orders, and we’re very happy with the trend on that. What we’re seeing in the DuraTrack versus H250, we internationally, the new version of the H250 is doing really, really well and will very quickly become the dominant platform for our international business, certainly in Spain and in Brazil, at least in those two regions. And then relative to the H250 in the US, look, it’s not gaining any traction as the reduced price on DuraTrack is just winning.

What we look at is our win rate internally. And I can just say that our win rate — we’ve been very pleased in certainly in the last, say, six months of our win rate just continuing to uptick with our revised pricing. And we think we did a really sweet spot of the value proposition of DuraTrack for our customers. And our win rate versus those lower-priced other offerings in the market, we’re just really pleased at this point. So yes, I think that’s going to continue.

Kurt Wood: This is Kurt. The only thing I would add on the OmniTrack is we’ve got multiple orders in our order book from that in all regions of our — that we’d say it. So that’s being well received. And as Kevin mentioned, right now, the DuraTrack is winning here in the States. And given the choice between an H250 or DuraTrack, is people will go for the higher quality product or higher featured product, I should say, it was DuraTrack.

Jordan Levy: That really makes sense. Thank you.

Operator: Thank you. The next question we have comes from Kashy Harrison of Piper Sandler. Please go ahead.

Kashy Harrison: Good afternoon. Thanks for taking the question and congrats on the Q1. Kevin, on slide 4 and in your prepared remarks, you talked — you mentioned that I think more than 80% of your customers are Tier 1 in nature. Can you also give us a sense of what proportion of your backlog has essentially fully derisked the critical equipment, permitting and interconnection, I understand that the backlog is over multiple years, but I’m just trying to get a sense of how derisked the volumes that land in 25 are or even 26%.

Kurt Wood: Yes. I think, Kash, you are always putting something into backlog. First of all, we have to be — we have a high confidence level. We have a start date. We’ve been awarded the order. And we have, over the last, say, 12 months to 18 months, added several other criteria in that to get to our confidence in this project going forward. So, we do look at the level of comfort in the financing. We look at interconnection permit. And we recently, about maybe six months ago started adding surety of supply of the high voltage components, the breakers and things of that nature. So, I don’t know that I have data for you in terms of what percentage of that. I can only say, it’s better today than it would have been six months ago, because we’ve added several other filters for it to get into our backlog.

Kashy Harrison: Appreciate it. Thank you.

Operator: Thank you. The next question we have is from Vikram Bagri of Citi. Please go ahead.

Vikram Bagri: Good afternoon, everyone. Kevin, in your prepared remarks, you mentioned that Array is strategically getting share from, or wallet share from, with some clients. I was wondering, like, what do you do differently with these clients, one? And besides these selected customers, do you believe you’re gaining share overall in the market? And then, on a relative note, I wanted to ask about pricing differently. Has there been more pricing action on your part beyond what you did earlier in the year, either with the selected clients or overall? Thank you.

Kevin Hostetler: A lot to unpack there, Vikram. Let me just say that what we’re doing to gain share is, first of all, taking the analytical approach to our value proposition and ensuring that we’ve got the right product priced effectively for the market and then ensuring that our organization has been aligned to drive cost savings on a continual basis that we can pass on to our customers. So that’s really what’s the changed. It’s been clarity of value proposition. And then the other thing has been certainly increasing my personal engagement in the marketplace, that’s something that we’ve been doing a great deal of an engaging customers personally and sharing the value propositions with the customers and giving them a sense of the amount of innovation and new product that we have coming this year.

We’ve done all of the above, and I think the customers are responding quite well as we’ve engaged them, such as having a customer forum here 45 days ago where we brought many customers in for a several-day event to give them a sense of that new product development funnel, the value proposition, the software improvements, all of those things. And I think the customers are paying attention to those things, and it’s making a difference. The thing such — the two that we highlighted here on the call of the automated hail response and the wind stow study are incredibly significant. And we could empirically show our customers in mid and high wind sites that we generate 2%, 3%, 4% more energy every year for that life of that asset at 30 years, it’s incredibly significant.

And I think our customers are responding really well to those things. We’re not getting into a pricing war. That’s certainly not happening at this point in the market. We’re just being smarter and selective about those orders that we really want to a win and pursue.

Vikram Bagri: Thank you.

Operator: The next question we have comes from Dushyant Ailani from Jefferies. Please go ahead.

Dushyant Ailani: I just had one on DLM has talked about updating its western solar plant by 22 million acres, how do you see yourself in a position for that? And any timing on that as well?

Kevin Hostetler: I’m sorry, I couldn’t hear. We have a bad connection. Can you repeat the question?

Dushyant Ailani: Sure, can you hear me now? The question was, yeah, the question was that DLM has basically talked about updating its western solar plant by 22 million acres on the western, for the western states. Do you — can you speak on the timing of that and how you see yourself positioning for that?

Kevin Hostetler: Well, certainly, it will really be up to our customers, those developers that will be out there positioning for that business, and then we’ll certainly work with the IPPs, developers, and PCs to take our fair share of that business. We’re excited about it. I think it’s a very good move and certainly we’ll participate. But we’ll do that through our customers, not directly.

Operator: Thank you. The next question we have comes from Philip Shen of ROTH MKM. Please go ahead.

Philip Shen: Hey Kevin and Kurt, thanks for taking my questions. How do you expect Q2 and Q3 bookings to trend? Have you seen activity take a pause or be impacted given the uncertainty around the new ADC tariffs? And then separately, from a housekeeping standpoint, can you share what the international versus US mix was in the Q1 bookings? Thanks.