And I think that’s going to continue. We both are investing a lot in new product development, both in terms of our product portfolio as well as our software portfolio. So, I think you’re going to continue to see that. And I think it’s going to continue to be largely a few players controlling the bulk of the domestic market as we go forward. And we’re certainly going to be at that table.
Brian Lee: Okay, makes sense. I’ll pass it on, guys. Thanks a lot. Appreciate it.
Operator: Thank you. The next question we have comes from Colin Rusch from Oppenheimer. Please go ahead.
Colin Rusch: Thanks so much, guys. You know, with the new products in hand, can you talk about the competitive environment outside the US and just how intense it is at this point and how much progress you’re making in terms of moving customers through the sales funnel?
Kevin Hostetler: Yes, I think that the difference outside of the US, again, none of the markets are monolithic. They’re all very different. And the experience we’re having in Brazil in terms of tremendous market share recovery and Australia is different than Europe. And the price points are radically different in each one of these regions. And I’d say the biggest focus for us is increasing our competitiveness by leveraging our global supply chain first. Second is taking our joint engineering organization and cost-reducing our product portfolio. As an example, as we rapidly launched the H250 for the US and, again, we’ll initiate deliveries of that in January of 24, we quickly had such demand for that product for both the EU and LatAm region for that improved product line.
And I don’t think we gave the data on the call, but we’ve got over 6 gigawatts in various stages of quotes of that already on a global basis. And there’s a significant amount of that that is outside the US. So that revised product platform is getting a lot of attention globally. And I think that’s probably one of the biggest efforts we’ll do to be more competitive internationally is the launching of that product on a global basis, the addition of the Array software on top of that product, and then leveraging the global supply chain to continue to cost-reduce and be more competitive on a price basis internationally. Those are the three levers that we’re pulling, and we feel really good about our traction that we have thus far.
Colin Rusch: Perfect. Thanks so much. And then just in terms of how you execute against that and the spend levels on the R&D line, how are you expecting that to trend? You’ve been able to get some pretty significant operating leverage to date. Is there something you’re going to need to spend in a meaningful way to deliver on? On all of those elements? Or are you going to be able to do that within a pretty reasonable budget similar to what you’ve been spending recently?
Kevin Hostetler: Yes, I think if you look at the uptick, I believe this year we were up circa 40% in terms of R&D as a percentage, and I think that’s a more respectable level than what we were historically. And I think the team’s going to deliver a phenomenal funnel of new product development for that spend. But I want to be absolutely clear on this. I think the use of our profit to generate more incremental new product development, I really believe in. And if the team continues to bring me great new product ideas that are vetted by both sales, product management, and the engineering organization, I’m going to continue to fund them, even if I have to increase that, right? Running an engineered products company, your new product development is one of the life bloods of your company.
And we’re going to continue to spend there, because I think the more we dive in and the more we open our eyes to what adjacencies we could get into with our products, we feel stronger and stronger about it. So we’re going to continue to emphasize new product development. We’ll be spending at least a similar amount next year, if not accelerated further.
Colin Rusch: Thanks so much, guys.
Operator: Thank you. Thank you. The next question we have comes from Joe Osha from Guggenheim Partners. Please go ahead.
Joe Osha: Hi. Thanks for taking my question. I hope you have some great plans. Just to return to the issue we’ve all been talking about, obviously, you’ve got developers going back and trying to open up and reopen PPAs — PUCs don’t always necessarily roll over. Sometimes they do things like, say, we’ll give you half of it, go find the rest elsewhere. So I am just wondering how you feel about the issue of potentially some of these developers coming back to you next year and saying, no, we didn’t get everything we wanted. We need you to reopen conversations on the contract and the price?
Kevin Hostetler: Yes, that’s a great point. So clearly, what you’re seeing is that as these developers over the last years have settled for a particular IRR and interest rates are rising, that IRR is no longer attractive when you could go put your money in a CD and get 5% today, right? So they’re raising their hurdle rates, and they have two choices there, right? It’s either go back and raise PPA, so they’re de facto raising revenues, or the flip side of that is they’ve got to go and reduce costs. So are we having conversations with developers on how we could redesign sites to take costs out of those sites for those developers? We absolutely are. That would be a natural occurrence for us at this stage. So we are having those dialogues.
I would say in some cases there are some pricing concessions on that, but again, thus far, we’ve been able to offset those with cost reductions. But certainly that’s a natural dynamic that we could see as we go into next year, absolutely.
Joe Osha: And thank you. And just to follow up, I mean, obviously this is happening, but the fact that rates are high is not a surprise for anybody. Is the fact that this seems to be hitting now just a function of people getting their ducks in a row for the end of the year, or what? It’s interesting to me that this appears to be occurring now when the rates environment has been with us for a while.
Kevin Hostetler: Yes, I agree. Absolutely. I 100% agree with you. The rate environment has been with us a while, so we’re a little bit caught off guard that this is happening more now, more recently. But we’ve had conversations with developers who are simply raising their internal rates of return expectations given this environment. And obviously, where a lot of our customers are counting on the IRA benefits to support that, coupled with falling module prices, and then also the domestic content adder is the big piece that I think a lot are counting on to further move forward on some of these projects. And I think that’s probably the incremental delay is that piece that we all expected.
