Array Technologies, Inc. (NASDAQ:ARRY) Q2 2024 Earnings Call Transcript

Array Technologies, Inc. (NASDAQ:ARRY) Q2 2024 Earnings Call Transcript August 8, 2024

Operator: Greetings and welcome to Array Technologies’ Second 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 second quarter 2024 financial conference call. On the call with me today are Kevin Hostetler, our CEO; Neil Manning, our President and COO; and James Zhu, our Chief Accounting Officer. 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 includes 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 filed 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. Today’s format will be a bit different from the prior quarters. I’ll start off with some key industry highlights, then Neil Manning, our President and Chief Operating Officer, will provide some operating highlights for the quarter. I’ll then return and cover the second quarter financial highlights and full year financial guidance, and provide a brief update on the progress on our CFO search. Then we’ll open the line up for your questions. We are pleased with our performance and execution in the second quarter, along with the continued demand we’re seeing in the market. Starting on Slide 3, I’ll begin with a summary of our second quarter and then discuss the latest industry environment and near-term market dynamics.

We achieved $256 million of revenue, slightly above the high end of the range we provided on our last earnings call. Adjusted gross margin came in at 35%, which included incremental 45X benefits through June 30, 2024, but were not previously factored into our guidance. Excluding these incremental benefits, our adjusted gross margin result was within the low 30s guidance range previously provided for the full year. Compared to the prior year, our adjusted gross margin performance reflected a 540 basis point improvement. As we move through the remainder of the year, we will continue reporting gross margins inclusive of both torque tube and structural fastener benefits derived from 45X, and there is still more work being done around the maximization of those credits.

We are actively pursuing multiple initiatives to obtain further clarity regarding the eligibility of additional parts that might qualify under 45X, in conjunction with negotiating the split of the 45X benefits with suppliers for parts we do not manufacture internally. However, as always, we also remain focused on achieving strong core gross margins through disciplined pricing, effective cost takeout initiatives and continued design innovations. Finally, we delivered $55.4 million of adjusted EBITDA, representing 21.7% of revenue, and we generated $1.8 million of free cash flow to end the quarter with a strong cash balance of $282 million. What additional update I’m thrilled to report on for the quarter is the remediation of our material weakness related to a lack of qualified personnel to perform control activities for financial statement preparation.

With the hiring of additional talented individuals in accounting and finance and the realignment of our accounting functions to strengthen internal controls, we were able to effectively close out this material weakness. I’m incredibly encouraged by the improved strength of our team moving forward. Additionally, with the implementation of an ERP system in Brazil in May, we are well on track to remediate our last remaining material weakness related to control activities within the STI business. This is truly a testament to our commitment to operational excellence, and I couldn’t be more proud of the focused investments we’ve made in people, processes and systems. Moving to Slide 4, I want to briefly reinforce the positive long-term momentum we’re seeing within the solar industry and the price outlook for the next few years.

According to data from the Federal Energy Regulatory Commission, solar represented over 80% of U.S. electric capacity additions through April to kick off the year. Looking over the next three years, FERC continues to expect solar to dominate new capacity additions by a large amount, and we’re optimistic about the incremental demand likely to be spurred by AI data center growth in the coming years. Our high probability pipeline remains robust, and we’re encouraged by our customers’ interest in our portfolio of products and services and the tailwind supporting utility scale solar as one of the lowest cost options to satisfy growing energy needs in the coming years. Speaking of tailwinds, you may have seen that I recently testified before Congress on the inflation reduction acts, positive impacts on solar manufacturing and American job growth.

Specifically for Array, the 45X tax credits are helping us increase our domestic production and onshore critical components and good paying jobs through the groundbreaking of our new Albuquerque manufacturing facility. We are also encouraged that the legislation has sweeping bipartisan impacts. So far, over 75% of the benefits from the IRA are impacting Republican controlled districts. Overall, the IRA is expected to facilitate nearly triple the current U.S. solar capacity by 2028 and we’re incredibly excited about Array’s role in helping develop a sustainable future for renewable energy in America. Regarding the latest IRA domestic content guidance that was issued in May, we are encouraged by the new elected Safe Harbor table that was introduced and believe it is a positive step forward for our customers pursuing the domestic content matter.

Although the table is not yet final, we remain committed to supporting our customers and their domestic content needs. A domestically produced tracker is critical to achieve the 40% domestic content, and it will become increasingly important as this percentage threshold is increased in the coming years for the stipulations in the IRA. Moving on to the latest 2024 market dynamics, we achieved strong new bookings of $429 million within the second quarter. We did have some other adjustments to our total order book from commodity price updates, project scope changes, and FX impacts. However, although project cancellations were minimal, there were only four small international project cancellations representing less than 1% of our order book in total, and we’ve had no domestic project cancellations.

OmniTrack: However, despite all the positive long-term momentum we’re seeing for utilities in our solar, the industry is still struggling with short-term challenges that are continuing to cause issues with our customers near-term project timing, resulting in a reduction of our 2024 guidance. As we’ve discussed before, we continue to see a dynamic of elongated timelines between project awards and expected project start dates. However, during our standard recurring check-ins with our customers, we also witnessed a sharp uptick in anticipated project pushouts beginning at the end of the second quarter. A number of our customers’ domestic projects are still reporting volatility in timing due to a variety of factors we’ve outlined in previous quarters.

There are also a few newer near-term headwinds presenting timing challenges, which I’ll outline. The first new dynamic we’ve witnessed is related to the recent AD/CVD petitions. As we mentioned on our last earnings call, there was still a lot of uncertainty around potential tariffs and the situation remains fluid. Within the last couple of months, we’ve had some customers who opted to preemptively change panel selection, thereby delaying a project or are planning on delays in projects in consideration of a potential panel selection change. Fortunately, a lot of these delays stem from the uncertainty around the magnitude of potential tariffs. Once the impact of the tariffs is determined, customers can better understand the consequences on panel costs and make relevant decisions for specific projects to move forward.

As we’ve mentioned before, our patented piping solutions are flexible and we feel very well positioned to accommodate late design changes for module selection as our clamps don’t require pre drilling of the torque tube. Another new dynamic has been related to the domestic content elected safe harbor table. As I previously mentioned, this new clarity is certainly a positive overall for our customers and the industry. However, the guidance is still being vetted and not yet vital. As such, certain customers are taking additional time and delaying projects to navigate this new table and ensure they achieve the necessary amount of domestic content to qualify for the credit. One bright spot in light of these pushouts is that some customers who were not previously considering pursuing the domestic content adder are now reconsidering given the ease of use provided by the prospective table.

We remain committed to providing a high level of domestic content to meet our customers’ needs, and nearly 15% of our domestic order book is either specifying or evaluating domestic content. We also have a lot of interest in domestic content within our high probability pipeline. Finally, outside of the U.S., there has also been some unexpected macroeconomic delays in Brazil. Within the last couple of months, there has been a rapid devaluation of the Brazilian real in conjunction with existing pricing pressures on energy in the Brazilian market. Due to these dynamics, the economic cases for the power purchase agreements or PPAs for many solar projects have become less attractive. Developers of these projects are now signaling delays as they renegotiate the pricing of these PPAs. We still feel very strongly about our position in the brazilian market and the optimal performance of our products in region.

However, this short-term challenge will need to be resolved before we see a return to a more normalized project case. While we are disappointed at the level of customer pushouts being reported in the near-term and its impact on our 2024 guidance, we recognize that there are many industry factors outside of our control. We remain focused on engaging with our customers, increasing our operational vigor and managing everything we can within our purview. As we look to the future, a significant portion, about 80% of our order book, is currently scheduled for delivery between now and year-end 2025. And to be very clear, we still expect to be receiving orders for 2025 deliveries for several more quarters. We will continue to set ourselves up for success to support the future growth in 2025 and beyond and navigate near-term challenges to the best of our ability.

Now I’ll turn the call over to Neil to speak about some exciting product and business updates.

Neil Manning:

SkyLink: Further, DC powered wireless communication simplifies cable management without the need for trenching, making installation easier and more efficient for our customers. Taken together, the combination of these new capabilities allows our customers to realize lower project costs and increase flexibility for more challenging site layouts, which are becoming more than norm in the industry. We have many customers already interested in SkyLink and has received a great response during a customer forum just last week. I encourage you to learn more about SkyLink value @array.com. [ph] Moving to Slide 6, another update that I’m excited to share relates to the insurance forum we hosted in July. We believe that this forum with the solar industry insurance companies was the first of its kind within the tracker industry.

We received a lot of engagement and valuable feedback. Around 35 insurance industry participants left the forum with new knowledge and understanding of Array’s technology, it’s design to withstand extreme weather and how we’re differentiated in real world performance from our competition. The importance of educating insurers on our tracking technology’s ability to mitigate severe weather risk is paramount, as is ensuring developers always see the value of differentiated tracker performance reflected in their overall project costs. We’re very pleased with the insights received from our inaugural events and are planning our next engagement with this audience for the fourth quarter of this year. Following the insurance forum, we posted another customer experience event last week, similar in format to the first quarter event we discussed on our last earnings call.

With 40 customers in attendance we spent a large portion of time discussing the features and benefits the innovative new SkyLight products. We continued our dialogue on the benefits of our passive versus active stow solution, along with updates to our industry-leading levelized cost of energy performance. We concluded the event with discussions on our operational improvements and gained candid feedback from attendees on additional business improvements that we can make. As I mentioned earlier, we already see many customer inbound inquiries at SkyLink as part of this event and our official launch, and we’re quite optimistic on its anticipated growth and positioning within the market. Moving to Slide 7, I’d like to spend a few moments reminding everyone about Array’s robust supply chain capabilities.

On a global basis, we have secured in excess of 50 gigawatts of capacity from our suppliers with over 30 gigawatts here in the United States. This access brings with it tremendous optionality to respond to unforeseen events and shocks that may occur around the world. Within that framework, I’m immensely proud of our long-standing U.S. focused presence with 31 domestic factories, including our facility in Albuquerque, New Mexico. Of note, the majority of our domestic suppliers have been part of our supply network for over three years, giving customers a great deal of confidence in Array’s ability to deliver, as evidenced by our top tier lead times and on time delivery performance in excess of 95% in recent quarters. Operational programs supporting our core margin improvement over the past eight quarters include inventory optimization along with focused commodity and cost out initiatives, and we continue to have programs in-flight that we’ll discuss in future periods.

The final point of supply chain, I’m excited to report that we’ll be able to support our customers’ domestic content needs with a 100% domestic Array tracker in the first half of 2025. Moving to ESG, I’m proud that Array has continued to make great progress towards its environmental, social and governance goals, as highlighted in our recently published 2023 disclosures. Notably, we have increased our renewable source of electricity in operations to 29% and 25% in 2022. Additionally, we have made significant strides in employee safety, emissions reductions and diversity and inclusion within our workforce. Especially pleased with our supply chain team’s engagement with our suppliers to accurately track our full greenhouse gas inventory and provide data to further reduce emissions and improve the environmental sustainability of our business.

With that, I’ll turn it back over to Kevin to give a more detailed update on second quarter financials and full year guidance. Kevin?

DuraTrack: Further, DC powered wireless communication simplifies cable management without the need for trenching, making installation easier and more efficient for our customers. Taken together, the combination of these new capabilities allows our customers to realize lower project costs and increase flexibility for more challenging site layouts, which are becoming more than norm in the industry. We have many customers already interested in SkyLink and has received a great response during a customer forum just last week. I encourage you to learn more about SkyLink value @array.com. [ph] Moving to Slide 6, another update that I’m excited to share relates to the insurance forum we hosted in July. We believe that this forum with the solar industry insurance companies was the first of its kind within the tracker industry.

We received a lot of engagement and valuable feedback. Around 35 insurance industry participants left the forum with new knowledge and understanding of Array’s technology, it’s design to withstand extreme weather and how we’re differentiated in real world performance from our competition. The importance of educating insurers on our tracking technology’s ability to mitigate severe weather risk is paramount, as is ensuring developers always see the value of differentiated tracker performance reflected in their overall project costs. We’re very pleased with the insights received from our inaugural events and are planning our next engagement with this audience for the fourth quarter of this year. Following the insurance forum, we posted another customer experience event last week, similar in format to the first quarter event we discussed on our last earnings call.

With 40 customers in attendance we spent a large portion of time discussing the features and benefits the innovative new SkyLight products. We continued our dialogue on the benefits of our passive versus active stow solution, along with updates to our industry-leading levelized cost of energy performance. We concluded the event with discussions on our operational improvements and gained candid feedback from attendees on additional business improvements that we can make. As I mentioned earlier, we already see many customer inbound inquiries at SkyLink as part of this event and our official launch, and we’re quite optimistic on its anticipated growth and positioning within the market. Moving to Slide 7, I’d like to spend a few moments reminding everyone about Array’s robust supply chain capabilities.

On a global basis, we have secured in excess of 50 gigawatts of capacity from our suppliers with over 30 gigawatts here in the United States. This access brings with it tremendous optionality to respond to unforeseen events and shocks that may occur around the world. Within that framework, I’m immensely proud of our long-standing U.S. focused presence with 31 domestic factories, including our facility in Albuquerque, New Mexico. Of note, the majority of our domestic suppliers have been part of our supply network for over three years, giving customers a great deal of confidence in Array’s ability to deliver, as evidenced by our top tier lead times and on time delivery performance in excess of 95% in recent quarters. Operational programs supporting our core margin improvement over the past eight quarters include inventory optimization along with focused commodity and cost out initiatives, and we continue to have programs in-flight that we’ll discuss in future periods.

The final point of supply chain, I’m excited to report that we’ll be able to support our customers’ domestic content needs with a 100% domestic Array tracker in the first half of 2025. Moving to ESG, I’m proud that Array has continued to make great progress towards its environmental, social and governance goals, as highlighted in our recently published 2023 disclosures. Notably, we have increased our renewable source of electricity in operations to 29% and 25% in 2022. Additionally, we have made significant strides in employee safety, emissions reductions and diversity and inclusion within our workforce. Especially pleased with our supply chain team’s engagement with our suppliers to accurately track our full greenhouse gas inventory and provide data to further reduce emissions and improve the environmental sustainability of our business.

With that, I’ll turn it back over to Kevin to give a more detailed update on second quarter financials and full year guidance. Kevin?

OmniTrack: Further, DC powered wireless communication simplifies cable management without the need for trenching, making installation easier and more efficient for our customers. Taken together, the combination of these new capabilities allows our customers to realize lower project costs and increase flexibility for more challenging site layouts, which are becoming more than norm in the industry. We have many customers already interested in SkyLink and has received a great response during a customer forum just last week. I encourage you to learn more about SkyLink value @array.com. [ph] Moving to Slide 6, another update that I’m excited to share relates to the insurance forum we hosted in July. We believe that this forum with the solar industry insurance companies was the first of its kind within the tracker industry.

We received a lot of engagement and valuable feedback. Around 35 insurance industry participants left the forum with new knowledge and understanding of Array’s technology, it’s design to withstand extreme weather and how we’re differentiated in real world performance from our competition. The importance of educating insurers on our tracking technology’s ability to mitigate severe weather risk is paramount, as is ensuring developers always see the value of differentiated tracker performance reflected in their overall project costs. We’re very pleased with the insights received from our inaugural events and are planning our next engagement with this audience for the fourth quarter of this year. Following the insurance forum, we posted another customer experience event last week, similar in format to the first quarter event we discussed on our last earnings call.

With 40 customers in attendance we spent a large portion of time discussing the features and benefits the innovative new SkyLight products. We continued our dialogue on the benefits of our passive versus active stow solution, along with updates to our industry-leading levelized cost of energy performance. We concluded the event with discussions on our operational improvements and gained candid feedback from attendees on additional business improvements that we can make. As I mentioned earlier, we already see many customer inbound inquiries at SkyLink as part of this event and our official launch, and we’re quite optimistic on its anticipated growth and positioning within the market. Moving to Slide 7, I’d like to spend a few moments reminding everyone about Array’s robust supply chain capabilities.

On a global basis, we have secured in excess of 50 gigawatts of capacity from our suppliers with over 30 gigawatts here in the United States. This access brings with it tremendous optionality to respond to unforeseen events and shocks that may occur around the world. Within that framework, I’m immensely proud of our long-standing U.S. focused presence with 31 domestic factories, including our facility in Albuquerque, New Mexico. Of note, the majority of our domestic suppliers have been part of our supply network for over three years, giving customers a great deal of confidence in Array’s ability to deliver, as evidenced by our top tier lead times and on time delivery performance in excess of 95% in recent quarters. Operational programs supporting our core margin improvement over the past eight quarters include inventory optimization along with focused commodity and cost out initiatives, and we continue to have programs in-flight that we’ll discuss in future periods.

The final point of supply chain, I’m excited to report that we’ll be able to support our customers’ domestic content needs with a 100% domestic Array tracker in the first half of 2025. Moving to ESG, I’m proud that Array has continued to make great progress towards its environmental, social and governance goals, as highlighted in our recently published 2023 disclosures. Notably, we have increased our renewable source of electricity in operations to 29% and 25% in 2022. Additionally, we have made significant strides in employee safety, emissions reductions and diversity and inclusion within our workforce. Especially pleased with our supply chain team’s engagement with our suppliers to accurately track our full greenhouse gas inventory and provide data to further reduce emissions and improve the environmental sustainability of our business.

With that, I’ll turn it back over to Kevin to give a more detailed update on second quarter financials and full year guidance. Kevin?

SkyLink: Further, DC powered wireless communication simplifies cable management without the need for trenching, making installation easier and more efficient for our customers. Taken together, the combination of these new capabilities allows our customers to realize lower project costs and increase flexibility for more challenging site layouts, which are becoming more than norm in the industry. We have many customers already interested in SkyLink and has received a great response during a customer forum just last week. I encourage you to learn more about SkyLink value @array.com. [ph] Moving to Slide 6, another update that I’m excited to share relates to the insurance forum we hosted in July. We believe that this forum with the solar industry insurance companies was the first of its kind within the tracker industry.

We received a lot of engagement and valuable feedback. Around 35 insurance industry participants left the forum with new knowledge and understanding of Array’s technology, it’s design to withstand extreme weather and how we’re differentiated in real world performance from our competition. The importance of educating insurers on our tracking technology’s ability to mitigate severe weather risk is paramount, as is ensuring developers always see the value of differentiated tracker performance reflected in their overall project costs. We’re very pleased with the insights received from our inaugural events and are planning our next engagement with this audience for the fourth quarter of this year. Following the insurance forum, we posted another customer experience event last week, similar in format to the first quarter event we discussed on our last earnings call.

With 40 customers in attendance we spent a large portion of time discussing the features and benefits the innovative new SkyLight products. We continued our dialogue on the benefits of our passive versus active stow solution, along with updates to our industry-leading levelized cost of energy performance. We concluded the event with discussions on our operational improvements and gained candid feedback from attendees on additional business improvements that we can make. As I mentioned earlier, we already see many customer inbound inquiries at SkyLink as part of this event and our official launch, and we’re quite optimistic on its anticipated growth and positioning within the market. Moving to Slide 7, I’d like to spend a few moments reminding everyone about Array’s robust supply chain capabilities.

On a global basis, we have secured in excess of 50 gigawatts of capacity from our suppliers with over 30 gigawatts here in the United States. This access brings with it tremendous optionality to respond to unforeseen events and shocks that may occur around the world. Within that framework, I’m immensely proud of our long-standing U.S. focused presence with 31 domestic factories, including our facility in Albuquerque, New Mexico. Of note, the majority of our domestic suppliers have been part of our supply network for over three years, giving customers a great deal of confidence in Array’s ability to deliver, as evidenced by our top tier lead times and on time delivery performance in excess of 95% in recent quarters. Operational programs supporting our core margin improvement over the past eight quarters include inventory optimization along with focused commodity and cost out initiatives, and we continue to have programs in-flight that we’ll discuss in future periods.

The final point of supply chain, I’m excited to report that we’ll be able to support our customers’ domestic content needs with a 100% domestic Array tracker in the first half of 2025. Moving to ESG, I’m proud that Array has continued to make great progress towards its environmental, social and governance goals, as highlighted in our recently published 2023 disclosures. Notably, we have increased our renewable source of electricity in operations to 29% and 25% in 2022. Additionally, we have made significant strides in employee safety, emissions reductions and diversity and inclusion within our workforce. Especially pleased with our supply chain team’s engagement with our suppliers to accurately track our full greenhouse gas inventory and provide data to further reduce emissions and improve the environmental sustainability of our business.

With that, I’ll turn it back over to Kevin to give a more detailed update on second quarter financials and full year guidance. Kevin?

Kevin Hostetler: Thanks Neil. Moving to Slide 9, I’ll start off by providing some additional details around the second quarter results. As I previously mentioned, revenue came in slightly above the high end of our guidance range at $255.8 million, which was down 50% from the second quarter of 2023 and up 67% sequentially from the first quarter of 2024. As expected and communicated on prior calls, we experienced declining volume and ASPs year-over-year. Sales in North America represented over 70% of our revenue for the quarter, with the remainder of our revenue coming from international locations. We achieved second quarter adjusted gross margin of 35%, an improvement of over 500 basis points year-over-year. As mentioned earlier, we were able to recognize some incremental 45X benefits through June 2024 in the second quarter.

The team has worked diligently in our assessment of qualifying components and are very pleased with the maximization of these benefits through our recent vendor negotiations. As some elements of 45X are still being clarified, the team will continue to work to validate additional components that may qualify. Operating expenses of $46.4 million were down approximately 8% from $50.2 million during the same period of the previous year. This decline was driven by year-over-year improvement in headcount related expenses, which more than offset the incremental cost incurred through severance and recruiting fees. Adjusted EBITDA was $55.4 million compared to adjusted EBITDA of $115.6 million during the second quarter of 2023. GAAP net income attributable to common shareholders was $12 million compared to GAAP net income of $52.4 million during the same period in the prior year and basic and diluted income per share was $0.08 compared to basic and diluted income per share of $0.34 during the same period in the prior year.

Adjusted net income was $30.6 million compared to adjusted net income of $74.3 million during the second quarter of 2023 and adjusted basic and diluted net income per share was $0.20 compared to adjusted basic and diluted net income per share of $0.49 during the prior year period. Finally, our free cash flow for the period was $1.8 million versus $15 million for the same period in the prior year. Now I’d like to go to Slide 10 and provide a more detailed update to our full year 2024 guidance. Given the pushout dynamics that we discussed towards the start of the call, we now expect revenue for the year to be in the range of $900 million to $1 billion. Again, this reduction from our previous guidance is a reflection of customers continued project timing challenges across issues such as interconnection and permitting, securing long lead time equipment like high voltage circuit breakers and transformers, financing, labor resource constraints, and more.

In addition, ADCVD, new domestic content guidance and the dynamics we discussed in Brazil are other new near-term headwinds impacting customers and our guidance. But to be clear, all of these issues are only causing project pushouts, not project cancellations, and we remain committed to supporting our customers in any way we can while they work through these dynamics. Moving on to adjusted EBITDA, we now expect our full year range to be between $185 million to $210 million, attributable to the top line reduction from customer project pushouts. However, we have been able to mitigate some of the resulting adjusted EBITDA impact through an increase in our adjusted gross margin guidance from the anticipated recognition of additional 45X benefits.

For adjusted EPS, we now expect between $0.64 and $0.74 for the year, again due to the top line reduction. Given our latest anticipated revenue mix, we are now expecting our effective tax rate to decrease to 24% to 26% from our previous guidance of 26% to 28%. On free cash flow, we now expect a range of $60 million to $100 million for the year. This reduction is largely reflective of the changes to our top line and the anticipated impact on our working capital to end the year. We expect our capital expenditures to be approximately $25 million for the year, which is primarily driven by spend related to our new Albuquerque manufacturing facility. Finally, looking ahead to the third quarter specifically, we expect revenue to be in the range of $220 million to $235 million.

Before opening the line for questions, I want to provide a brief update on our CFO search process. In June, we engaged a globally recognized CFO search firm. Two weeks ago, we received our first slate of candidates for our review, and we initiated our preliminary interview shortly thereafter. In addition to the candidates identified initially by our search partner, we’ve received numerous inbound indications of interest from industry colleagues as well. These have been passed along to our search partner for their additional screening and potential inclusion in our process. We will continue our initial screening interviews to pare down our list of candidates over the next several weeks. It’s my expectation that this process will take between three and six months to fully vet our final candidates and move to the opera stage.

To quickly wrap up, we have a lot of exciting innovation, customer and industry initiatives going on at Array. I am proud of our execution within the quarter and I’m confident in the resilience of our team and business as we navigate through near-term customer project delays and look to the bright long-term outlook for utility-scale solar. With that, we will now open the call up for questions. Operator?

Operator: Thank you. [Operator Instructions] The first question we have is from Matthew Strauss of JPMorgan. Please go ahead.

Q&A Session

Matthew Strauss: Yes, great. Thank you very much for taking our questions. My one question, I wanted to talk about the fasteners that are now in the 45X guide now include, I mean, just kind of what gave you the confidence to do that? You do have some kind of IRS. And then, Kevin, you’ve talked about kind of a wide range of expectations for what that fastener credit could be, just where in that range you were landing with your guidance here? Thank you.

Kevin Hostetler: Yes, thanks, Matt. I’m sorry you came through a little bit broken up on our end, but I think the crux of your question was around the new addition of some of the structural fastener elements into the quarter. And then I think I heard the second part in terms of where we land on expectations, was it of clamps? Was that the point?

Matthew Strauss: Yes, exactly. Yes, thank you. Sorry for the line here. That’s okay. So, as we’ve discussed all along, we have several components that we believe qualify under the structural fasteners as currently defined. And what we’ve done, much like we’ve done for other elements under 45X is we go through a pretty extensive process having a third party company come in and interview and validate how we define something, the engineering parameters of it, how it overlays with the definition provided under the existing definition of structural fasteners. We then have that reviewed by a third party accounting firm as well, and we then form an opinion that that would qualify. Our sourcing team then immediately engages those particular vendors in the negotiation of those contracts.

And what you’re seeing now is the beginning, the washing in of some of those components that we know qualify, that we have now a definitive negotiated agreement and sharing agreement of those benefits with. That’s going to continue on. There’ll be additional components added as we go throughout the year and as we negotiate those contracts with sub vendors. And the reason we’re not as clear as giving a definitive dollar amount is, we don’t really think that’s going to be helpful in any given quarter because there’s this constant wash-in and catch-up. So for example, some of what you’ll see in Q2 is the catch-up for Q1 and Q2 on certain components. And I think the way we’ve approached it has been to very consistently say, look, we’re running a much better business than we have two years ago, for example, with or without 45X.

So what we say is, look we’re really pleased with our core margin performance being in the mid-twenties with no IRA benefits. We’re very comfortably there now and we’re going to communicate that routinely to the market. Second level of communication to the market was we felt that we would be in the low 30s gross margins with the initial benefits we were receiving from torque tube. We’re communicating to the market. That’s playing out as expected as well. And now the new conversation is that we expect to be in the low to mid-thirties with structural fasteners included as we roll. So that’s kind of the approach we’re taking specifically on clamps. As we’ve talked about earlier, we, while under the definition of a longitudinal purlin, our clamps classify under that, as evidenced by both third-party accounting review and third-party engineering review.

So currently we’re taking that $0.87 per kilogram on those clamps. And what you’ll see is the rolling in of that as we negotiate that savings, the split of that credit rather with other vendors, and also begin taking it for those that we manufacture in our own facility. So all that to be said is we really feel good about the margins with and without 45X. We’ve been holding true to the margin performance without structural fasteners, and now we’re guiding to a higher margin level of performance inclusive of structural fasteners.

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

Christine Cho: Hello, thank you for taking my question. I wanted to ask on your backlog. It looks like it was reduced by $300 million, give or take, from the commodity price updates, the project scope changes in FX impacts. I thought you lock in most of your raw materials and your ASP at the time of booking. So can you just remind us why ASPs would be moving around tied to commodity prices? And then, was any of it related to 45X credits? And can you give us a general sense of how much of your backlog is Brazil?

Kevin Hostetler: Well, we’ll start with the last. We don’t really break out backlog by regions typically, but let me give you some color on the change in backlog. So first of all, to be clear, in every quarter we experience ins and outs in the order book due to pricing changes, scope changes. These are just normal events within a large scale project business. And in most quarters, the puts and takes largely offset each other. And we don’t, on these calls, have to get into any explanation of those. But simply put, in some quarters, and certainly this one is one where the magnitude is greater than in other orders. Given that our order book is elongated. And what you saw here is really three factors. The first, well, I should say four — the first is rounding, right?

And it’s really about $200 million. You’re solving for not $300 million. And about 44 of that is simply some rounding between the 2.1 and the 2.0. So what you’re really looking at here is three factors below the rounding. And the first is obviously repricing of certain orders in the order book due to commodity changes and this isn’t broad based. This is largely related to a large customer, one of our largest customers, who places their orders well in advance, meaning we’re looking at six quarters worth of orders with that individual customer. And with that customer, we put those orders on the book and they’re priced, given that current pricing, not six quarters forward. And I’ll remind you that from Q1 and Q2 of last year to Q3 and Q4 of this year, steel is down about 35%.

So that’s the magnitude that we’re having to correct the steel component price again, those orders with this large customer. Now, what we’ve done with this customer in particular said, look, we don’t expect steel to come back anytime soon. So we’ve proactively gone forward into those orders and repriced those as well. So that’s why you see that particular magnitude. The second contributing factor is really about project scope changes. They happen all the time here. We had two I would say significant project scope changes. One, where a large customer decided to change the configuration of a project, so that they could utilize Safe Harbor inventory, which reduced our portion of the project it will all be in a rate project, but a lot of it will be satisfied with Safe Harbor inventory we’re holding for that customer.

The second was, again, a very large project where the customer had initially asked us to provide foundations. I think many of you know, we don’t particularly love to provide foundations because it’s a buyout product and we’re not able to mark them up, it’s dilutive to us and the customer has since decided to go ahead and source those directly. And in that case, we’re actually not upset because our margins increase when we don’t provide foundations. The last and smaller of the three components was really related to the FX impact of the Brazilian backlog. And I think one of the things I’ll note to be clear, on a megawatt of trackers basis, the order book did not decline. It in fact, increased. So again, what you’re seeing there is it’s purely related to some of the repricing and descoping of non-core elements.

That makes sense?

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

Jordan Levy: Afternoon, all and thanks for taking my question. Just taking a look at the EBITDA guide, I think, Kevin, you mentioned offsetting some of the impact of the top line reduction through better gross margins. But if I’m just looking at the numbers, I think the new guide implies around a 200 basis point decrease in EBITDA margin. So I don’t know if I’m thinking about that the right way or if there’s some offset from operating leverage or something like that, but maybe just help me walk through.

Kurt Wood: Yes, that’s exactly what you’re seeing. The offset on the operating leverage with the volume decline. Absolutely. That’s it.

Jordan Levy: Got it. Thank you.

Operator: The next question we have is from Brian Lee of Goldman Sachs.

Tyler Bisset: Please go ahead. Hey, guys, this is Tyler Bisset on for Brian. Thank you for taking our questions. You guys have over 50 gigawatts of capacity globally, but are installing a much lower quantity. So how are you guys managing utilization rates? And are you thinking of rationalizing your manufacturing base at all?

Kevin Hostetler: So what you imagine is because you don’t know in future years the geographic mix of where. So not only domestically, where you’re going to need to build, but also internationally, you need to have far more megawatts of capacity then you plan to ship that given year. So, for example, knowing that logistics is about 10% of our bill of material, having 30 gigawatts domestically allows you to supply any region that may have an increase in work with localized content. So that should help you understand why we need to always overdrive on the overall megawatts of capacity we have versus the annual delivery. It’s really about being able to satisfy your customers geographically with local steel, which again, is the lowest landed cost. So that’s the critical part of that.

Operator: Next question we have is from Philip Shen of ROTH Capital Partners. Please go ahead.

Philip Shen: Hey, guys, thanks for taking my questions. I’d like to see if you can give us a little bit more color on the margins on the current backlog. So the guidance implies about $540 million of revenues in the back half of this year at the low to mid-30s gross margins. And so that $540 million consumes about a quarter of your backlog. Is it reasonable to model consistent gross margins on the remaining three quarters of the backlog or should we assume some kind of – some kind of ASP headwind as you’ve been reducing price to touch? Thanks .

Kevin Hostetler: Yes, I guess the quick answer is yes, it’s fair. What we’re signaling is those low to mid-30s margins continuing, and that’s indicative of what’s currently in our backlog.

Philip Shen: Great. Thanks, Kevin.

Kevin Hostetler: Again, I will say you will have quarter-to-quarter variance as you have some larger orders that you may have taken at a lower SAP, so it won’t be a flat line number. But I think we’re pretty comfortable in our commentary of low to mid-30s margins as we go forward.

Operator: The next question we have is from Jon Windham of UBS. Please go ahead.

Jon Windham: Great. Hey, thanks for taking the questions. I just love to get your thoughts a little bit about what you’re doing sort of internally to manage the process of a scaling back in volume shipped, just in terms of scaling back work hours, keeping production up and storing in an inventory. Just touch me a little bit how the management of the internally is going on with dealing with delays? Thanks so much for the questions.

Kevin Hostetler: Yes, I think that’s a great question. First, I’ll remind you that 80% of what arrives at our customers we don’t touch, a lot of our internal processes relative to engineering design quoting and what have you. Again, as we continue to have strong incoming order rates, strong win rates, that we don’t really need to flex down at all, that’s really positive. And our overall pipeline continues to remain very strong and robust. So what we’re really focused on is ensuring that two things. The first is that we reduce the cycle time. What we’ve talked about on these calls many quarters is our in depth process at the end of every quarter, looking at every order in our order book and working on that with our customers.

And what we saw this quarter in particular, when we did that exercise beginning kind of middle of June and forward, over that coming four weeks, we saw a lot of customers changing and pushing out. And that for us we were mindful of, okay, in uncertain times, you have to increase the amount of times you’re looking at the dials, right? Which means we’re moving that process to monthly until we get through this period of uncertainty in customers and pushing out. So we’re just going to shrink that. The second thing we’re ensuring we do is, we have a very robust process here internally, that we’re looking between sales and operations almost on a weekly, every other week basis. We’re ensuring that those communications are happening and that the changes in demand week to week are being passed straight through the operations so that we ensure that we don’t negatively impact working capital and inventory.

And what you continue to see in our balance sheet is really, really strong management of inventory. We’re minimizing. And when we typically go out and work with our vendors on those capacity commitments and what we would call take or pay agreements, we minimize those. And we’ve done that for a couple of years, such that our vendors are offering much more flexibility and volumes with us without penalties. So all that’s coming to play in a time like this. And I think this is all kudos to Neil and the operation team who have put these things in place over the last two years to really have much better performance, even in a difficult time.

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

Kashy Harrison: Good evening and thank you for taking my question. So Kevin, in the prepared remarks, you said 80% of the backlog is expected to come online prior to year end 2025. Have you taken a look at what proportion of that backlog you would say is fully de-risk from a bottleneck perspective, that is not winning on interconnects or financing or high voltage equipment, et cetera, and then part and parcel with that. Just given the longer cycle times that you’re currently seeing the market today, can you just give us a rule of thumb on the lag between bookings and shipments? For example, if you booked in 3Q of this, like next quarter, when would you expect that to ship? Thank you.

Kevin Hostetler: I think I’ll come at that answer a couple of different ways. Kashy. So first, when we think about the lag and the average delays, I was doing some research yesterday on industry databases and looking at the average delays that we’re seeing within those databases. And if I think about the top 50 projects that are active in the U.S. utility scale solar projects, they’re right now delayed from their original start date on average. So I think it was, bear with me as I reflect on the numbers I looked at yesterday. So 19% of the projects were saying, look, we’re still on track as of now to hit our original date. I’m sorry 19% out of the top 50. The rest were delayed, on average, five to seven months. And that gives you a sense of the type of delays we’re seeing when we do sit there and do our review of all the projects.

We are asking customers a series of questions that includes, are you confident that you’ll have your long lead time electrical equipment done? Do you have your financing locked up? If it is at risk, when do you expect to have it locked up? So there’s a series of these questions that we’re doing to put it into our schedule. So if a customer says, hey, look, I’m ready to go in Q1 but it’s no, no, no to those questions. We won’t project that to go into Q1 to be clear. Right? We’re going to doubt that that’s really going to happen on time and not project it into our Q1. So that is a process that we go through. And those additional questions we’ve been doing for several quarters now and in our mind getting smarter. And I think that’s part of what we’re able to get in terms of the deeper dive on these projects.

This time was saying, look, some of these customers are not realistic with start dates and we need to push them out. And that’s part of what we witnessed here in this quarter.

Operator: The next question we have is from Joe Osha of Guggenheim partners. Please go ahead.

Joseph Osha: Thank you. Just thinking about the outlook in the next year, I’m not going to ask for guidance, but would it be fair to assume that you’re going to run the business to try and recapture some of this operating leverage that you’re giving up in the back half of this year? Thank you.

Kevin Hostetler: Yes. I mean, clearly we’re at a size of business that we don’t need to scale up internally a whole lot, as evidenced by if you just go back a couple of years and what we’ve changed in the business relative to headcount is scaling down the construction side, mostly in our international locations, so that the headcount we are remaining with, and I think at the end of the quarter was maybe just a [indiscernible] over 1000 employees. Again, you’re talking about internal processes that we’ve been spending a lot of money automating such that we will have great operational gearing as we move forward and add additional volume. So we feel really good about that without having to scale up a whole lot of headcount to achieve that. Feel really good about the operational viewing of the business.

Operator: The next question we have is from Colin Rusch of Oppenheimer. Please go ahead.

Andre Adams: Hi there. This is Andre Adams on for Colin. I was just hoping you could speak to the impact of pricing on pricing the domestic content adders and when you would expect to start realizing some of those benefits.

Kevin Hostetler: So when we look at the best of content, we spend a lot of time talking with our suppliers and customers about, where their needs are as it relates to getting to their percentage of credit. So, for example, if a customer has 100% domestic panels, they’ll primarily need to work to only as part of that, and then any then further mix of panels require a higher percentage of domestic content. Now, we’ll work with our customers on what that needs. And for certain components. There’s really no ad other components. There may be an incremental cost as it relates to getting the domestic version of that particular component, and we’ll work with our customers on what their sensitivities are and how that pencils into the overall project.

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

Vikram Bagri: Good afternoon, everyone. Kevin, you touched on high wind rates that you’re witnessing recently. Can you put the current win rate into perspective, maybe compare it to historical win rate? And then related to that, given the higher win rate, shouldn’t you exceed the bookings in 2022 this year, given the size of the market? And then finally, are you seeing increased quoting, but slower bookings due to delays that you talked about, the project delays and so forth? So, you know, maybe we see higher pace of bookings at some point when the delays are resolved. Thank you.

Kevin Hostetler: Yes. Okay. So the first question I think I heard was really about win rate. And while we won’t give a numerical answer for that, we’re quite satisfied that the win rates that we saw creeping up in the Q4 of last year stayed high through Q1, have stayed consistently high through Q2. And I’ll tell you that that win rate percentage is what I would characterize as much higher than our historical market share rate. So we feel really good about our continued win rate on the orders we’re getting. The second thing is that our pipeline still remains incredibly robust, and roughly, I think on a year-over-year, quarter-over-quarter basis, we’re still at roughly three times the pipeline that we saw at this time. End of Q2, for example, 2023.

So the amount of business out there that’s coming into the funnel remains very, very strong. Our win rate remains very, very strong, and we feel really good about the programs we’re winning and the margins we’re winning. Those programs at, I think that answers your question.

Operator: The next question we have is from Michael Blum of Wells Fargo. Please go ahead.

Michael Blum: Thanks. Good afternoon everyone. You know you cited ADCVD and the new domestic content guidance as causing some of the near term slowdown for customers. I’m wondering if you’re seeing any change in customer behavior deferral of projects due to the upcoming election. Do you think that’s playing any role in customer’s decision tree?

Kevin Hostetler: Well, I can tell you that when we did our pareto of every pushout, so when we have a pushout, we request an explanation from the customer. Obviously we categorize that we do a pareto. We look at that pareto in terms of number of projects, megawatts, dollars every which way you can imagine. And the point being is that, yes, the interconnection and some of the finance things that continue on are still in that top three. The first time, when was this quarter where ADCVD also showed up in that top three? It was three, to be clear, but it showed up in the top three. And that was the first time that broke into the top three of our pareto as issues creating pushouts and delays. There were none that specifically identified a project pushing due to concerns with the elections.

However, I do think on some of the order book momentum, I think there’s some holdup waiting to see. Waiting to see what potential impacts of the election may have on the longer term renewable energy industry. Our internal view is, as evidenced by some of the news that came out today and the number of congressmen that signed on, republican congressmen that signed on to a letter requesting that the IRA not be defunded and that information came out overnight significant. Just the fact that over 75% of the benefits from the IRA today are being experienced by republican controlled districts is an incredibly significant statistic. And these are about new jobs, factory openings, high paying solar industry jobs. So we feel that there’s some stickiness to the IRA and certainly to the elements of the IRA related to what we care about within the subset of solar and within manufacturing credits and onshoring of manufacturing in the U.S. So we feel of all the things that may be negatively impacted under the IRA, we feel that our areas of concern are probably maybe better than some of the others out there.

So to answer your question, no specific mention in the pareto of those things for election. I think generally speaking, some of the industry may be slowing down incoming orders, just trying to figure out what the potential impacts. And I think there was a period of time post the debate where that got very acute and people were more concerned, and I think that’s maybe ebbed somewhat here over the last two weeks.

Operator: The next question we have is from Dylan Nassano of Wolfe Research. Please go ahead.

Dylan Nassano: Yes, hi. Thanks for taking my question. I was just hoping if you could provide a little bit more color on the expected timing of the delays, specifically, even within maybe the pipeline and the backlog, are you seeing things maybe even slip further from 2025 to even 2026?

Kevin Hostetler: Not at this point. What we’ve seen in these pushouts, in particular this, I think the disproportionate amount of them have gone into the first half of next year. And obviously but look, we have to be really careful because we’re trying to be mindful of this batch of pushouts. And while we’ve seen it slow down over the last couple of weeks, we don’t know if it were to reaccelerate kind of towards the end of the year. So we’re being very mindful as of today. We’re given that statistic that we feel really strongly about, that 80% of the backlog is due to shift between the end of Q2 and the end of 2025 at this point, and we feel that’s pretty solid.

Operator: The next question we have is from Maheep Mandloi of Mizuho. Please go ahead.

Maheep Mandloi: Hey, thanks for taking the question. It’s Maheep Mandloi from Mizuho two partnering questions. First is, looking at the queue, it looks like the STI gross margins were pretty low, somewhere around 13%. So it looks like you making around north of 40% in the U.S. Is that reflective of how you kind of see the split and margins for Q3 and the backlog? And the second part would be push out, you’re seeing seems more structured, like talking to the other companies in this industry as well. So does that call for any cost cuts or as we kind of readjust to this new environment or new normal of slower volumes in the market? Thanks.

Kevin Hostetler: Sure. So on the first part, the STI gross margins that you’ve seen year-to-date are more of a function of us having to shift our source of supply from Asia to local sources simply due to some increased transit times. Obviously, we’ve all talked about the challenges of getting materials through the Red Sea that were more acute in Q1 in the beginning of Q2. We believe that’s transitory and that our margins will recover a bit in STI in the back half as we’ve begun receiving those shipments from Asia now on a more timely manner. And will rely less on local, more expensive sources. We did that in order to satisfy our customer’s delivery dates primarily in Europe and Latin America. Again, we think that episode is somewhat behind us and we should see improvement in STI gross margins going into the back part of the year.

And then obviously as related to cost cutting initiatives, anytime you have a change in business to this degree, you’re going to be mindful of pulling back expenses in the business, reduction of new hires, reallocation of resources within the company, all of that, that’s within management’s control. We’ve been enacting for some time, and we feel really good about our ability. The one thing you can look at, our numbers routinely. Understand that we know how to execute really well on that which is within our control. And we’re doing everything you would expect us to be doing in that manner right now and have been for some time.

Operator: The next question we have is from Donovan Schafer of Northland Capital Markets. Please go ahead.

Donovan Schafer: Hey guys, thanks for taking the questions and I apologize if any of this has been asked and answered already. I was a little late in joining the call. So for the SkyLink tracker, I want to ask if you can really zero in on the specific attributes that make this more attractive or attractive in certain situations versus the other models that you have available. I think it says it connects up to eight rows, whereas DuraTrack actually can go up to like 30 or 32. And then the appeal, if this has appeal in certain markets versus others or specific applications, just more specifics there would be helpful.

Kevin Hostetler: Sure. [Indiscernible] I’ll jump in and take that one. So in SkyLink, we’re really excited because what it allows us to do is take the attributes that made door track and Array trackers so successful, allows us to get really targeted in certain areas of the market where we think we can make a real difference. And the eight link row allows us to get really optimized for smaller parcels and configurations. So when you think about all the deployments that have been done to date, most of the nice square rectangular quotient, stamp size sites have already been taken, so to speak. So now we’re at more irregular, both from topography and from kind of a shape perspective around getting highly tailored, optimized design configurations into those locations at the best cost available.

So this configuration with eight link rose allows us to get much more finely tuned there. Another couple of things that make it really attractive from a weather potential standpoint is with the node trenching and wireless connectivity along with PV power, so getting power from off the grid. In cases of storms, we can operate for storage either for snow or severe weather without grid power, which allows us to be particularly optimized in areas where storms are a big concern and particularly effective then in cold weather when you have extremely cold temperatures. Those trackers on the market that require batteries, and we don’t, but those trackers on the market require batteries have trouble operating at extremely low temperatures. The array product line that is not using batteries can be effective at those extremely low temperatures based on a configuration.

So combination of those factors make us really excited that SkyLink will be a great addition to the DuraTrack and OmniTrack platforms. And we’ve already gotten a lot of great feedback from our customer forum this last week, and we’re already getting a lot of inbound requests. So thanks for your question.

Kurt Wood: One comment I’ll make on that is, I know that obviously many of us read the notes that Phil Shen puts out from Roth and one of his recent notes, it was one of the voice of customer commentaries. So I sat in my office reading the commentary that customers were looking for a way to solve the trenching issue on these, knowing that we were about six days away from launching the solution to the trenching issue. So for me personally, it was good to see that voice of customer, it matched up with what we had been working on internally with our customers, and very, very pleased to say we’ve solved this. And the reaction we had last week is we had 40 customers here for our second customer experience. Form was very, very strong. I think there was some excitement of solving yet another tranche, if you will, of the overall tracker market.

Operator: The next question we have is from Moses Sutton of BNP Paribas. Please go ahead.

Moses Sutton: Thanks for squeezing me in. What’s the reasoning developers are giving you for delaying projects on the domestic content rule? So sort of thinking through the logic, I would think they wouldn’t be redesigning the project, and redoing refinancing when it’s near shovel ready. Maybe it would be for further out projects maybe. Are they just waiting for domestic sale? What’s the thought there? And then, similarly for the ADCVD, how do you think about all the panel imports that came into date? Are some of these customers not getting their imports? How do you think about that?

Kevin Hostetler: So on the first part, the domestic content, the delay is really in terms of maximizing the amount of purely domestically manufactured panels they need. So suffice to say, if you’re using a domestically made panel, the only component you need to get over that 40% threshold for year one would be the [indiscernible] to 9% as currently allocated in table one. Now the expectations is several of those elements, or percentages as presented in table one will change between the draft table and the final table yet to be issued. There is expectation that several of those percentages change. As such, you’re trying to maximize how many domestic panels versus can you blend the site with some domestic and some foreign panels?

So that maximization is what holds you up a little bit right there. And this isn’t, I don’t think these projects are going to be held up for a long time. This is short term, that’s transitory. That gets solved as the new rules get finalized in end of Q3 and into Q4. So we expect that to be very transitory and just moving on. And as we mentioned in our prepared remarks, what that’s done is it’s created many more of our customers coming to us now saying, hey look, I maybe previously weren’t really focused on this, but with the ease of use of that table and the lower amount of paperwork, I would like to consider this as a domestic content order going forward. So that’s certainly picking up an interest given that ease of the table. And then your second question related to ADCVD look, that’s simply a delay.

What we’re seeing, to be clear, if one of our customers decides to change panels because of panel availability or threat of tariffs, because the levels of tariffs have not been fully defined from our perspective, that’s not a delay to us as a manufacturer, that’s a very long delay. There are other elements within the overall value stream that have to get redesigned beyond us. We can do that redesign in a matter of days and redesign a site for a different panel in a matter of hours or certainly within a couple of days. For a customer, there are lots of other elements that have to then be redesigned. In terms of the [indiscernible] some of the foundations may change, other things that we don’t currently supply that would elongate that time period for them to be ready with a panel change.

And that’s part of what we’re seeing in the market, our flexibility of our clamp solution. We could redesign that quickly provide different clamps and a different layout design literally in a matter of two to three days. But the other elements that have to be redesigned in that site could take much longer.

Operator: Ladies and gentlemen, we have reached the end of the question-and-answer session and with that we conclude today’s conference. Thank you for joining us. You may now disconnect your lines.