Christine Cho: I just wanted to — I appreciate the color about the longer lead times for international projects. But would it be fair to say that a big chunk of the international bookings we’re seeing this quarter? And I just also wanted to confirm that the bulk of that is actually solar. And then would it be correct to think that similar to the US, the customers start off using some of the components both for upgrading and going to systems?
Brandon Moss: I guess, one piece at a time here. I would say that yes, the international bookings that we are seeing are solar projects. I don’t think that they specifically came in this quarter. I think it’s been probably a build over the last couple quarters. We’ve got a big focus on growing our international business since I’ve joined. We continue to refine our strategy. We’re adding resources to help build that strategy and it’ll be a big focus for investment for us going into 2024. So pleased with the direction of the international business. And again, I think it’s going to be a great spot for growth for us in the future. I think I hit all the — have I answered all or did you have one more [Multiple Speakers] the component piece.
Look, I think, great opportunity for Shoals, whether it’d be domestic or international to bring somebody into our solution. We typically look at our components business as components and don’t call them solutions. But as you know virtually everything that we make here at Shoals is an engineered to order product. It is a specific product for a specific site or customer. And so for us to get somebody in the door and working with us on components business and then our sales people and marketing folks do what they’re supposed to do and convert them to a BLA system is exactly how it’s supposed to work. So I would see us approaching the international market just as we have the domestic market.
Christine Cho: And then my follow-up, I’m sorry if I missed this in the prepared remarks. But could you talk about like what specifically drove the revenue being narrowed towards the lower end of the range? Are your customers seeing delays? And then also systems, like over the past several quarters was a larger percentage of total revenue, it was pretty strong, but I saw that it kind of declined this quarter. So just curious as to what drove that.
Dominic Bardos: So first of all, I’m very pleased that we’re able to peg the revenue range at the beginning of the year and come in right and refine that as you noted. So that’s really we’re really pleased to be able to do that. I think there’s a couple things. We talked about the capacity that actually slowed down our Q3. So I wouldn’t characterize the Q4 issue as why we narrowed it where we did. I think internally we probably would’ve liked to have had a little bit more. We have the capacity to do more revenue. We’ve narrowed the range based on the visibility of what we have. There’s nothing abnormal about project give and take within a quarter moving from period-to-period. Sometimes the mix is a little bit different. I think if you look in our Q, you’ll see that, or in the — yes, it’s in the queue.
You see our components business was a slightly higher percentage this time. And so there’s just a little bit of a difference in product mix. But we called the revenue shot at the beginning of the year and we’re very pleased to come in that range.
Operator: And your next question comes from Vikram Bagri from Citi.
Unidentified Analyst: It’s Ted on Vik. I wanted to touch on 4Q gross margin implied by the guide, it still looks pretty healthy. And I’m just curious, is there anything to call out in terms of product mix or on the project side there? And I’m just trying to think about how to square that with the new 40% to 45% gross margin target that you laid out. Just curious if you can kind of give us directionally any indication on where we should expect gross margins to be?
Brandon Moss: So one of the things, we did raise — we’ve always said that we had a 40% kind of target for gross margin, and we’ve actually we believe that 40% to 45% is still very attainable. There were some investments that we’d still anticipate making in the gross margin area as we look to our capacity, looking to the facilities, how can we drive even greater efficiencies down the road. Product mix, as I just mentioned, some of the inroads that we’re making with some EPCs does happen to be in the component space as we’ve talked about. And so the mix this time is actually a lower percentage of system solutions as opposed to what we’ve had in the past couple of quarters. So in the guide, you see a kind of a general pullback, I would say, from the record high gross margin that we’ve been achieving.
But there’s only so much margin that we can take. Being a public company, we are constantly looking over the shoulder at competition and making sure that we’re providing that competitive value for our customers. So I think over time bringing that gross margin back down into the 40% to 45% range is desirable for all parties and that’s going to be our longer term target.
Unidentified Analyst: And I have just one follow up. On the capital allocation side, you paid down the revolver this quarter. Just curious if you have any thoughts around potential paid on of the term loan? I think the prepayment penalty expires this year. So just curious in your thoughts there.
Dominic Bardos: Yes, the prepayment expires this month. The penalty does go away. We are exploring alternatives for that all the time. Even if we look at just playing interest rate arbitrage, the revolver does carry a smaller or I would say lesser interest rate charge than the term loan does. So we are looking at that. We’re talking to lenders all the time, and until we announce we won’t. But yes. I appreciate the question.
Operator: [Operator Instructions] Your next question comes from Donovan Schafer from Northland Capital Markets.
Donovan Schafer: I want to talk about the international market. So it looks like you guys shared some good details there, and it’s nice to see that is kind of part of the backlog. I am curious, talking to developers and EGCs, it seems like there’s still like maybe a bias or a tendency in a lot of international markets to stick with to stick with trenching cables underground in a way that would limit some of the value adds in the BLA. And so my question is, is that true in your experience? And then is it just a matter of kind of education to overcome that so that you can convince and show them, they can run something like that above ground? Or is it like a regulatory or code driven thing where it would take a while or you’d have to push from a regulatory angle or something like that?
Brandon Moss: Look, part of what we’re working right now is to find that international strategy, and find specific markets where our value proposition probably most resonates. In some situations that may be areas that are more open to above ground applications than trenching. And as you mentioned in other scenarios, I think it is an education process. Shoals had to teach the domestic industry a better way to handle electrical balancing systems and there is probably some areas where we are going to have to do that internationally. So big focus on that for us right now, specifically understanding what markets make most sense for us to play in and really where to put some chips on the table. So more to come on the international piece, just know it’s a big area of focus for us at the moment.
