Array Technologies, Inc.ARRYNASDAQ
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Operator: Good afternoon. Welcome to Array Technologies Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] 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. I would like to welcome everyone to Array Technologies' fourth quarter and full year 2025 earnings conference call. I'm joined on this call by Kevin Hostetler, our CEO; Keith Jennings, our CFO; and Neil Manning, our President and COO. Today's call is being webcast via our Investor Relations site at ir.arraytechinc.com, where the related presentation and press release are also available. In addition, the press release and the presentation detailing our quarterly and full year results have been posted on the website. Today's discussion of financial results includes non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures can be found in the related presentation and on our website. We encourage you to visit our website at arraytechinc.com for the most current information on our company. 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 statements made on this call. We refer you to the periodic reports we file with the SEC for a 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, except as required by law. I'll now turn the call over to Kevin.
Kevin Hostetler: Thank you, Sarah. Good afternoon, everyone, and thank you for joining us. I'll begin by highlighting our key achievements from 2025 before transitioning to our strategic imperatives for 2026. Neil will provide additional detail on these objectives, and Keith will conclude with an in-depth review of our financial results and introduce our 2026 financial guidance. Then we'll open the line for your questions. I'll begin on Slide 4. 2025 marked a year of pivotal growth, commercial momentum and strategic execution for Array. We closed the year with nearly $1.3 billion in revenue, achieving an exceptional 40% year-over-year increase, supported by 35% tracker volume growth. This result underscores our team's unwavering dedication and resilience as we continue to outpace broader industry growth trends. Our profitability remains strong with adjusted gross margin, adjusted EBITDA and adjusted net income per share, all landing within our guidance range and adjusted net income delivering solid double-digit growth year-over-year. After the regulatory-related uncertainty throughout 2025, commercial activity built meaningfully as we exited the year, driving strong bookings momentum across our core markets and enhancing our visibility entering 2026. Importantly, we closed 2025 with a record $2.2 billion order book, reflecting both sustained customer demand and improved commercial execution across our portfolio. This performance was enabled by the commitment and discipline of our commercial teams as demonstrated by a 2x book-to-bill for both total Array and our recently acquired APA business. As committed last quarter, APA is now incorporated into our order book, contributing approximately $100 million. We remain highly confident in APA's growth trajectory, and APA, along with our recent new product introductions, now comprise close to half of our total order book value. Turning to Slide 5. I'd like to reflect on what has been a standout year for Array. Our progress and achievements are a direct testament to the strength, resilience and commitment of our employees. Together, we didn't just meet challenges, we transformed them into opportunities to engage, evolve and innovate, positioning Array for sustained growth. I'm especially proud of the successful completion of the APA acquisition, which brought over 200 talented new team members to our organization. Our teams are seamlessly integrating, and we are already unlocking meaningful value and expanding our share of wallet with customers. At APA, continuous innovation extends beyond engineered foundations to fixed tilt racking, where the business holds a market-leading position. The team has some exciting new fixed-tilt offerings slated to come out this year, and we look forward to sharing more details in the coming quarters. Complementing the progress made on our balance of system strategy, we continue to elevate the organization by investing in both our leadership team and our product portfolio, while at the same time, optimizing our capital structure. We strengthened our leadership bench by bringing in seasoned executives with deep industry knowledge and relationships, fresh perspectives and a proven execution capability, enhancing our ability to operate with discipline while accelerating growth. In parallel, driven by deep customer engagement, we broadened and upgraded our product portfolio to more effectively address the industry's most pressing challenges and better meet the evolving needs of our customers. Finally, by refinancing higher cost debt and proactively managing our debt maturity profile, we improved our financial flexibility to support our next phase of strategic growth. I'm now on Slide 6. Our results in 2025 demonstrate that the foundation we've built is working, anchored by a talented team, a stronger product portfolio, a more resilient supply chain and meaningful expansion through APA. Now our focus shifts to how we build on that momentum, capture emerging opportunities across the industry and create lasting impact. This brings us to our 2026 strategic imperatives. This year, we're sharpening execution around 3 imperatives that operate as an integrated framework: innovate our future, elevate our international business and advance our customer-first culture. Against the backdrop of organizational and portfolio advancement, our first strategic imperative for 2026 centers around innovation. At this stage in our company's evolution, innovation remains paramount. It is the core engine driving growth and bolstering our competitive positioning. We will continue to invest both organically and inorganically in differentiated technologies and solutions that enhance customer value and reinforce our role as a trusted technology partner. This does not just mean new product development, but also continually updating and improving our internal tools and processes. To this end, we've created a robust AI road map with plans to apply transformational technology in all areas of our business. I'm excited to share updates in the coming quarters of the enhancements we're making. Innovation is how we win, not only in product performance, but in customer experience, financial strength and with the deliberate and targeted market expansion. It's the unifying catalyst that connects every element of our strategy, which is why it stands first among our 2026 strategic imperatives. As we anchor our strategy in innovation, we are equally focused on our second imperative, elevating our international business. While recent macro conditions in key markets such as Brazil and Spain have presented challenges, the broader international landscape presents compelling opportunities for growth. Key international markets are maturing and demanding more feature-rich capabilities. This also brings further opportunity to refine and adjust our global supply chain for enhanced scale and efficiency and streamline research and development around a common leading platform. Our focus remains on disciplined execution, positioning the right products in the markets where our differentiation and value proposition resonates with our customers and where they are willing to pay for it. As we position our international business for enhanced performance, our third strategic imperative further strengthens our customer-first culture across the organization. At the end of the day, our growth depends on how we effectively satisfy our customers' needs. And to do this, we need to listen to, support, and partner with them. In 2025, we saw very clearly that when we focus on our customers' outcomes, strong business performance follows. We will continue to grow our order book and pipeline by engaging and thrilling our customers with our diverse offerings, quality level of service and our differentiated value proposition that delivers measurable impact to our customers' economics. Together, our 3 strategic imperatives for 2026 form a unified strategy that drives our market-leading performance, expands our opportunities and supports durable long-term value creation. With that, I'll now turn it over to Neil to provide a deeper look at our strategic imperatives and how we will evaluate our success. Neil?
Neil Manning: Thank you, Kevin. Let's turn to Slide 7. Our first strategic imperative, innovate our future is about ensuring Array stays ahead of where the solar industry is going. The demands on solar installations are rising, tougher terrain, more extreme weather, higher energy generation expectations and tighter cost structures, our innovation pipeline is designed to meet those realities head on. We start by continuing to strengthen our core tracker technology. DuraTrack is a renowned platform in the industry, and we're continuing to expand its capabilities while broadening its reach to become our standard offering globally. This year, we'll incorporate improvements like our next-generation industry-leading terrain following capabilities for OmniTrack and launch a new U.S. tracker version to further address unique market needs. These are tangible upgrades that will improve energy yield, reduce operational risk and simplify installation for our customers. Second, we're executing on our balance of system strategy. With the APA integration well underway, we're on track to launch our optimized tracker plus foundation integrated solution in the second half of 2026. This offering reduces engineering and installation complexity, simplifies customer procurement and reinforces Array as a broader solution partner. We continue to assess other balance of system market leaders as potential additions to the Array portfolio. The last component of this initiative is further commercializing software and services, areas where customers want more support, more insight and more automation. We're continuing to invest in our SmartTrack platform and beyond new deployments, we see a meaningful opportunity to retrofit SmartTrack across our extensive installed base. SmartTrack adoption is growing rapidly and with more opportunity in our order book than cumulatively deployed to date. We've proven the value of our technology and now our transition to a subscription-based model reflects our customers' desire for greater flexibility, continuous innovation and scalable deployment as we drive real project return on investment, all while generating recurring revenue for Array. Our innovation agenda powers all facets of our strategy. Executing on these investments today reinforces Array's strategic advantage for the years ahead. Turning to Slide 8. As innovation continues to drive our competitive advantage, our next imperative focuses on enhancing our presence and performance throughout global markets. One of the most important steps we're taking to elevate our international business is the introduction of our DuraTrack technology globally. This is driven by direct customer feedback. They need higher energy production, simpler installation and stronger resilience in some of the toughest terrain and weather conditions found across EMEA and Latin America. DuraTrack has delivered exactly that for years in the United States, faster installation time, consistently maximizing power density with far fewer parts in the field, no scheduled O&M and delivering among the lowest LCOE in the industry. And its patented wind-stow technology provides up to a 4% increase in energy yield compared to active snow systems in high wind environments. Bringing these capabilities to our international customers gives them a proven, feature-rich platform that protects our investment and enhances project economics. At the same time, phasing out older non-SmartTrack compatible configurations of the H250 tracker allows us to ultimately align around one global platform, consolidate our supply chain and focus our R&D and operations on the products that drive the greatest value for customers. We took a onetime inventory valuation charge in Q4 as part of this transition, and now we're moving forward with a more differentiated and scalable product platform. With this broader expansion, we plan to launch a new international offering later this year, featuring the strongest of H250's capabilities with DuraTrack's patented technologies, combining the best of the Array portfolio on a single global tracker platform. Our international expansion remains selective, prioritizing markets where our differentiated technology and value resonates. We've made focused investments to bring our technical sales approach internationally and are already seeing clear signs of traction across key regions with increasing engagement and commercial momentum in select markets throughout EMEA and Latin America. This early success reinforces our confidence in the long-term opportunity and validates our disciplined returns-focused approach to international expansion. Our growing international pipeline reinforces the strength of our partnerships, our technical performance and our relevance in global utility scale markets. Core multinational customers are pulling us to new markets and opportunities, and we stand ready to serve them. Elevating our international business isn't just about expanding into new geographies. It's about bringing the full strength of Array's technology, reliability and customer partnerships to the fastest-growing global markets that value it. By doing so, we diversify our revenue base, strengthen our competitive position and capture a critical path for continued growth. Turning to Slide 9. Advancing a customer-first culture means we are elevating how we show up for and with our customers commercially, technically and operationally. We've already made solid progress strengthening customer engagement as evidenced by our record order book and critical commercial wins in 2025. We closed the year with our highest quarterly new bookings since 2023 and a book-to-bill ratio of over 2x. This level of commercial momentum is driven by our global commercial efforts, reflects our targeted investments in the front end of our business and our deeper engagement with developers, IPPs and utilities and a growing level of trust and the reliability and performance of our products. The APA success story is only getting started. Now with the bankability of Array behind APA, they've seen a significant increase in utility scale project interest. APA's 2x book-to-bill ratio in the quarter is a result of their expanded pipeline and accelerating bookings. The strong momentum has continued into the new year. In 2025, our domestic Array business experienced greater than 20% growth in early-stage domestic project bids, providing further evidence of robust customer pipelines and a clear move towards engaging Array early on as a strategic partner. As we continue to prioritize engaging with high-quality customers, we are securing more multi-project awards while increasing our average project size, which we expect to grow at a significant double-digit rate from 2025 to 2026. Our strengthened commercial organization with high-impact industry veterans, coupled with formalized technical sales function articulating our differentiated value validated by third-party engineering studies is driving a tighter alignment between what the market needs and what our product road map is delivering. It shortens feedback loops and ensures we're solving the right problems at the right time. Advancing a customer-first culture informs how we sell, how we serve, how we innovate and ultimately, how we win. As we move through 2026, this imperative ensures that every part of our organization is aligned around delivering exceptional customer outcomes, and that alignment will continue to translate into strong commercial momentum and order book growth. With that, I'll now turn it over to Keith to provide more details on our results. Keith?
Keith Jennings: Thank you, Neil. Good evening, everyone. I will begin on Slide 11. In 2025, we took deliberate steps to align our capital structure with our operating strategy. After a very busy year in the capital markets, we are pleased with the resulting leverage, liquidity, debt maturity profile and the cash cost of our debt as we continue to execute. We ended the year with over $380 million of available liquidity and net debt leverage of 2.3x trailing 12-month adjusted EBITDA. On February 18, we upsized and extended our revolving credit facility to $370 million from $166 million, bringing our pro forma total available liquidity to nearly $600 million. This upsize not only rightsized our total available liquidity, but also strengthened and expanded our bank group with 3 new banking partners to help support our strategic imperatives and global commercial operations. With this stronger capital structure, we are well positioned to continue pursuing organic and inorganic opportunities in support of driving long-term shareholder value. Moving to Slide 12 and 13 for financial highlights for the full year 2025. We delivered strong financial results, exceeding the high end of our revenue guidance. Revenue in the fourth quarter was $226 million, including $33 million of revenue from APA. For the full year 2025, revenue was $1.3 billion, representing an impressive 40% growth over 2024. Of this, APA contributed $50 million. Sequentially and year-over-year, ASPs were higher in both our legacy Array and STI segments, aligned with the forecasted effect of rising commodity prices experienced throughout 2025. Our impressive revenue growth was supported by tracker volume increasing 35%, underscoring our market share gains throughout the year. For full year 2025, adjusted gross profit increased 11% year-over-year to $347 million, representing an adjusted gross margin of 27%. When compared to the prior year, adjusted gross margins declined primarily due to the falloff of prior year 45X amortization benefit recognized in 2024 that contributed approximately 550 basis points and tariff impacts combined with ASP pressure added an incremental drag of approximately 80 basis points on the year. As expected, APA had a slight dilutive impact on overall adjusted gross margin in 2025 and delivered an adjusted EBITDA margin a few hundred basis points ahead of the core business. Reflecting the significant front-end investments we made throughout the year, adjusted SG&A was $163 million, 12.7% of revenue, an improvement from 15.4% of revenue a year ago and moving toward our near-term target of 10% of revenue. Adjusted EBITDA was $188 million with an adjusted EBITDA margin of 15%. This represents 8% earnings growth when compared to adjusted EBITDA of $174 million and adjusted EBITDA margin of 19% in 2024. As with adjusted gross margin, the adjusted EBITDA margin change was driven by the incremental prior year 45X amortization recognized in 2024. GAAP net loss attributable to common shareholders was $112 million, driven primarily by $103 million non-cash goodwill impairment charge and a onetime inventory valuation charge of $30 million, both associated with the 2022 STI acquisition. This compared to a net loss of $296 million in 2024, which included a $236 million non-cash goodwill impairment charge and a $92 million non-cash long-lived intangible asset write-down also associated with the STI acquisition. Diluted loss per share was $0.73 compared to the diluted loss per share of $1.95 in the prior year. Adjusted net income was $103 million, 13% growth above the $91 million in 2024. Adjusted diluted net income per share was $0.67, growing 12% when compared to $0.60 in the prior year. For the full year, free cash flow was $80 million, which was lower than 2024, primarily due to timing of working capital and 45X rebates. Turning to Slide 14 for our full year 2026 guidance. We entered 2026 in a position of strength, supported by greater order book visibility, a broader product portfolio to support our customers, accelerated contracting momentum, improved capital access and flexibility. We expect revenue within the range of $1.4 billion to $1.5 billion with adjusted gross margin between 26% and 27%. Excluding the impact of prior year 45X amortization falloff, margins are roughly flat at the midpoint year-over-year, reinforcing our commitment to disciplined execution and cost management in an inflationary environment. Given the impact on contract signings from the regulatory uncertainty in 2025, revenue activity is trending toward an approximate 40-60 split between the first and second half of the year. Adjusted G&A is expected to continue to gain leverage at approximately 12% of revenue. This brings our expected adjusted EBITDA to a range of $200 million to $230 million with an adjusted diluted earnings per share between $0.65 and $0.75. Free cash flow conversion as a percentage of adjusted EBITDA is anticipated to be similar to 2025. In the first quarter of 2026, we expect revenue of approximately $200 million and as a result, adjusted EBITDA to be down slightly from Q4 2025. Looking ahead, we see multiple drivers of momentum across our global markets. Hardware, software, and services are all poised to grow. We will continue to opportunistically refine our capital structure to bolster liquidity, enhance strategic flexibility and fuel disciplined investments. Backed by our record $2.2 billion order book and powerful new capabilities, we are ready to capitalize on future opportunities, deliver industry-leading market growth and sustainable value creation for our shareholders. Thank you for your time today. Now back to Kevin for closing remarks.
Kevin Hostetler: Thank you, Keith. Looking ahead to 2026, our focus is clear: continue innovating, deepen our global reach and elevate the customer experience across every touch point. The foundation we are building positions us to capture the opportunities ahead and deliver durable long-term value for our customers, employees and shareholders. Thank you all for your ongoing support and confidence in Array. With that, we'll open the line for questions. Operator?
Operator: [Operator Instructions] Our first question comes from Mark Strouse with JPMorgan.
Mark W. Strouse: Keith, thanks for all the color on the gross margin puts and takes. Just curious, when you're looking beyond 2026 in your backlog or how you're thinking about underwriting new [ business ], can you just talk about kind of how we should think about gross margins over the medium term? And then just quickly on APA. I think you guys were saying with that deal that it was kind of immediately accretive to EBITDA, but dilutive on the gross margin line. Can you talk about the impact of APA in your 2026 guide? Does that turn accretive at some point this year? And then I have a quick follow-up.
Keith Jennings: Thank you, Mark. Good questions. So first, let's talk about our outlook for gross margins across the horizon. A few things to bear in mind. As we entered 2026, our core margins remain intact. Any volatility that we've shown over 2025 and 2026 have all been driven by primarily accounting and onetime charges. And also the amortization of 45X for prior year performances played some part in that volatility. So if you look at 2026 and you remove the prior year 45X amortization, we're down roughly 50 bps, which is -- which takes us to the midpoint of our guide. When you look across the medium term and outlook, we expect our gross margins to maintain at these core levels. So we are in a fairly competitive environment price-wise. We are in an environment of rising commodity costs. We are in an environment of changing dynamics as we try to expand into certain strategic markets internationally that have lower price points. So we are confident that our gross margins across the horizon can hold. When moving to your second question on APA. APA when we closed was, yes, in 2025, slightly dilutive on the gross margin level, but accretive immediately on the EBITDA level because of their low commercial costs or I should say, very, very streamlined commercial costs. When we look at 2026, we expect APA to be in line or slightly better than our core gross margins because we've now been able to file for 45X. 45X in the APA context when you're modeling, we need to remember that it only applies to the structural fasteners, so the A-Frame that is used in utility scale only. And so I recognize that some of the models out there have 45X across the entire APA platform, it does not apply that way. When we think about overall 2026, APA is now also more accretive at the EBITDA level because they continue to be streamlined in their operating costs
Mark W. Strouse: Okay. And then a quick follow-up for Kevin. The past 2 or 3 quarters, you've talked about kind of the mix of your backlog that's coming from Tier 1 customers increasing. At least directionally, if you can't give us an exact number, can you just give us an update on that? Does that continue to trend higher? Is it flatlining? Any color would be great.
Kevin Hostetler: Yes, it does. So first of all, let me just begin saying we're really comfortable with the quality of our order book at this point, record order book of $2.2 billion and the real positive book-to-bill on both Array and APA both being at 2x book-to-bill. So very, very significant for us and that acceleration. A couple of tidbits I'd give you relative to the order book. For me, one of the more interesting tidbits would be, for example, in 2025, we received 4 gigawatts of orders from customers that historically were not customers of Array, meaning they were customers of our competitors, or new customers in the space. So clear market share gain from just those 4 gigawatts already. I think relative to our order book the one other comment is, on our last call there was some confusion of whether our increasing order book even in that quarter was due to a changing definition. I want to take this opportunity with everyone on the call to reiterate that we have not made any changes to our order book and how we define that order book. And I'll reiterate that every chance I get that: one, we have to have a confirmation of a named project awarded to Array; Number two, we have to have a target start date; And number three, we look for there to be an existing PPA in place prior to putting that into our order book. Now what we have talked about with some of our international orders that have been awarded to Array, so meaning we have a named project, we have a target start date, we've been notified that we've won the project. We're still holding some on the sideline until we're more confident in international markets that they will proceed as planned. And we're doing that as we've talked historically to reduce any debookings and associated volatility. As we noted in our presentation now, 95% of the order book with that new methodology is now domestic, so much higher quality. In terms of -- we've also made in my prepared remarks that over 50% of our order book is now direct to what we call those Tier 1 customers. And to be clear, when I say direct, meaning that's the one directing the purchase, even if we get a purchase order from an EPC, we're saying that over 50% of the order book is being now directed by those Tier 1s. And that could be a Tier 1 developer who is -- who has given the award to Array, but we're executing that award through their chosen EPC, but over 50% of our order book is now direct to those Tier 1s. So between the high percentage of domestic order book, the new market share takeaway, the 2x book-to-bill, the over 50% direct to what we call Tier 1, we're really pleased with the shape of the order book as we move forward here.
Operator: The next question comes from Julien Dumoulin-Smith with Jefferies.
Kevin Hostetler: Julien, you may be on mute. We don't hear you yet.
Julien Dumoulin-Smith: Sorry, you are right. I was double muted. I apologize about that. Look, let me kick this off here. First and foremost, you talked about nice momentum on backlog. Can you give us a little bit of a sense of market share momentum with key clients? Could we potentially see some multi-gigawatt orders here? How much of that is already reflected in what you all are disclosing here? And then separately and adjacently, how do you think about the commercial strategy abroad, right? You've got this reinvigorated effort internationally. How should we expect to see this and realize this in as much as disclosures in the coming quarter? And again, I get that you've offered some caveats about some of the legacy geographies. What would you expect in terms of formal disclosures or announcements with key partners? I'll leave it there.
Kevin Hostetler: Yes. So let me take the first part. So a few additional hints on our order book. So we are now engaging in more multi-project deals, not all of those obviously reflected in the order book to date, but we are now looking at kind of multipacks of deals, 3, 4 and 5 deals at a time with a lot of our core partners as we move forward. So that's working really well for us. The second thing is the average size of a project is getting larger as well. So we expect both the size and quantity of deals to go up significantly this year, and that's what we're really seeing in our order book. I'll let Neil talk about the international and what we're specifically driving there in this regard.
Neil Manning: Sure. So just to jump in. So we're optimistic overall internationally, but it's also really important to note that we're being intentionally selective. And so we look at that from the prism that the U.S. is the dominant profit center for solar tracking globally. So when we look at where we diversify in international markets, we're looking from that lens. So where we have the ability to differentiate based on train capability for weather and extreme weather events, along with installation and overall performance, we're being really targeted in countries where customers are willing to pay for that capability and not just get into a bake-off on price. So as we diversify, as the Spain and Brazil markets reset themselves, we're making some really good progress in Eastern Europe and also in Latin America based on the investments that we've made in, sales resources over the last several quarters. We've had some key wins with repeat customers, so customers from our legacy home markets that have brought us into new countries, and we have awarded projects and contracts now that we're executing against. So you're going to continue to see that, Julien, over the next quarters as we continue to talk about that and see that. And our early-stage pipeline outside of Spain and Brazil is also increasing quite well as well. So I think that you'll see this continue to flow through, and we're pleased with the progress so far, and we'll continue to see that in the coming quarters.
Operator: The next question comes from the line of Joseph Osha with Guggenheim Securities.
Joseph Osha: One of the things that has been turning up, and I heard this a lot at in the solar is that, yes, this year looks like it's going to be okay building legacy 45 and 48 projects. But there is some uncertainty out there in terms of the ability to secure financing, in particular, tax equity financing surrounding some of the remaining uncertainty on FEOC. So I'm wondering if you can comment on that at all and whether that's materializing in your conversations with your customers.
Kevin Hostetler: Yes. So look, the Treasury guidance released last week, I mean, it clarifies a major source of the uncertainty, which was really the level at which we have to focus our supply chain and certify for material assistance. And that's really a product component supply, so not every nut and bolt. And that's one helpful. But there's still some uncertainties for the industry around ownership structure the Treasury needs to address in the forthcoming year. So we don't have full clarity to say that. So what's happening for us, the second part of your question relative to FEOC is, customers are proactively hedging and focusing on predominant U.S. supply or in some cases, we're seeing customers add some language to their contracts that allow them to shift late in the game to 100% U.S. content at predetermined price points. And that's how they're hedging and giving themselves great flexibility to avoid the FEOC. The fact that our customer base is getting larger and larger and more capitalized, so some of the larger developers, IPPs and utilities that are best capitalized, we are not yet seeing issues with financing projects for those customers. At least it's not coming up to my level that we're facing that. We review that on pipeline calls every other week, and we're still not seeing that show up as an issue in our business. So we'll continue to monitor it and report if we do. But as of now, we're not having that issue with our Tier 1 customers.
Operator: The next question comes from Brian Lee with Goldman Sachs.
Brian Lee: Maybe just on the seasonality here. You experienced some into year-end. And then also here, given some indication that Q1 seasonality. Maybe can you speak to what's driving some of that? And then how much visibility you have on the implied pickup into 2Q in the second half? Maybe how much backlog of the $2.2 billion is expected to ship here over the next few months? And is there a book-and-bill business here implied in the guide? Or is everything covered by backlog? And then maybe I'll just squeeze in a second question around just big picture thoughts around M&A going forward as part of the capital allocation strategy. I think there's been more news of some of your peers in the tracker space diversifying into other parts of the stack. So wondering where you fit in terms of looking at those opportunities and maybe providing more holistic solutions.
Kevin Hostetler: Yes. So I think let me address the seasonality. I think it's consistent with what you're seeing from our peer companies that have already reported in terms of a deceleration in Q4 and Q1. You have 2 things that drive us that are -- for those businesses that are largely North American. And the first issue is that you do have a historical seasonality, the build season for North American-focused businesses is really Q2 and Q3. That's the construction business that then gets finished in Q4. Now for the last couple of years, when our STI business was running and gunning in Brazil, in particular. If you remember, we did well over $200 million annually in Brazil. You have the countercyclicality that we benefited from. So their construction season was Q4 and Q1, obviously, on the other side of the equator. And that was very helpful in mitigating Array's historical seasonality that we had from the North America construction. So without that, that has a dampening effect and creates that seasonality in Q4 and Q1. The second and likely the larger contributing factor this year was the holdback that we saw last year leading into the OBBB. So as you recall, the industry paused waiting for that to get figured out, which means they paused contracting, they paused orders. And then once that was figured out, as you all see in our results and our peer companies', you saw an acceleration of orders but then they have to go through the engineering, planning, development, construction process. And that's why you see the shape of the year. And it's consistent between us and our peers that have already reported. You'll see an acceleration in Q2, then a further acceleration in Q3 and a further acceleration in Q4. So that's really the nature of the cyclicality. There's nothing unique to Array in that cyclicality. Yes, that's really what you're seeing and experience playing out with that delay and pause in the market that we all experienced last year. Relative to M&A, look, we're going to continue our focus on building out our balance of system strategy, and we're going to do that in a way that we think definitely benefits our customers. I guess, if I could describe kind of our approach to it is, when we think of this building out of the balance of system strategy, there's kind of 2 approaches you can take. And one would be a pure commercial integration, and I kind of liken that to say, do you want fries with that shake? And that for us is weak over time. It gets disintermediated. Maybe you want the shake today and not the fries, but you're not -- you still want it at the bundled price. And it kind of flies in the face of a lot of our customers that are EPCs with the fact that the P in EPC stands for procurement. These are organizations that understand how to buy large-scale construction projects. As such, I don't think EPCs really care if they're buying from 3 vendors or 6 vendors. That's not meaningful. Our approach on M&A is going to be a little bit different in that we're really focused around technical integration in which we can bring products in, increase the value proposition through interoperable engineering with Array that makes compelling value proposition for our customers. So we're just approaching it a little bit differently than others and ensuring that anything we're looking at in our balance of system has to have a technical interoperability opportunity. And what you're seeing that play out is APA. So the APA integration of the foundation with tracker will be a phenomenal new product for us this year. So it not only does it eliminate a number of components, but allows us to have an engineered foundation at incredibly close to a standard foundation price point. And we think that will help accelerate adoption of engineered foundations in our portfolio. So that's a great example of how we're thinking about M&A in our business. So hopefully, I'm answering your question. If not, we'll take a follow-up if we're missing something.
Operator: Our next question comes from Philip Shen with ROTH Capital.
Philip Shen: Great job with the bookings. You gave a good sense of the quarterly revenue cadence. Can you help us with the quarterly gross margin cadence? Should we expect lower margins on the lower revenues in Q1? And then should we expect that to ramp sequentially as we get through the year?
Keith Jennings: Phil, good evening. This is Keith. Yes, I think it is safe to say that the Q1 margins will look much like Q4 because of the level of the revenues that should scale up. So we're guiding to a 26% to 27% on the full year -- that's the full year average. We think that, that is where we are currently operating. And hopefully, that answers the question.
Philip Shen: Okay. And then as it relates to bookings and backlog, Kevin gave a lot of great color there. You're doing well with a lot of Tier 1 customers. I was wondering if you can talk through the bookings in Q1 and Q2. What strength are you seeing now? And do you expect the strong kind of 2 to 1 kind of book-to-bill to continue. You can't keep that forever, but how much longer can we see that continue as we get through these quarters?
Keith Jennings: I don't think we want to get into forecasting bookings. We've not done that historically, Phil, but I appreciate the question. I could say that we feel good about our underlying momentum in terms of the size of our pipeline increasing, the number of opportunities we're getting, the timing of those opportunities. So we're getting brought into bigger deals earlier than we have been historically so that we're kind of getting in and getting specified and doing some of the engineering work earlier that helps us with the win rate. So all those things, I think, are positive trends. But I'm not yet going to go out on a limb and predict bookings in Q1 and Q2. Let's just say that the momentum that we've seen in the last couple of quarters so far has been continuing for us. We're hopeful that, that continues. over the next couple of quarters and through the rest of the year, frankly.
Kevin Hostetler: And I should say that momentum comment is valid for not only the legacy Array, but the momentum we're getting on APA is quite significant.
Operator: The next question comes from Corinne Blanchard with Deutsche Bank. It looks like Corinne has dropped out of the queue. The next question is from Maheep Mandloi with Mizuho.
Maheep Mandloi: Just in terms of like the large customers you have, could you just talk about like their average sizes and how to think about this move from small to large developers? How does that benefit your order book going forward?
Kevin Hostetler: Yes. Maheep, one of the things we did, as you recall, almost -- well, it's almost 2 years ago now, but back in 2024 was that we looked and kind of did the survey of what we call quality of customer. And I personally went out and interviewed some of our customers that we weren't doing as much business with that actually didn't tend to push out, didn't delay. And what we found was that there was this group of developers and certainly even a group of EPCs that were stronger than others because of their -- they were well capitalized. They had plenty of equipment, meaning that they weren't delayed for lack of transformers, those kind of things that we ran into a lot over the last switchgear, transformers. So what we did was we kind of identified that quality of customers, and we put that quality of customer into our bid strategy, meaning we wanted to win more orders with higher-quality customers that demonstrated they didn't have pushouts and delays. They had the equipment. They stayed on track. They had good PPAs in place. And that was kind of how we transformed. So when we call that Tier 1 customers, that's a lot of what makes up our definition, if you will, of Tier 1 customers, which meant we wanted to do more direct to utilities that control their own destiny, control their own interconnect. We wanted to do more with those Tier 1 developers that were the best capitalized developers out there. And that's what you're seeing in kind of when we talk about the quality of our order book continually improving, you saw a great amount of market share takeaway in orders in 2024 of that kind of targeted group and then again in '25. So our -- what we called at the time, our low share of wallet Tier 1 customers that we wanted to win more of, that's really coming through in our order book at this point. So we're pretty pleased with it.
Operator: The next question comes from Colin Rusch with Oppenheimer.
Colin Rusch: The opportunity to accelerate deployment times in the field, either from footings perspective or from a module attachment perspective, it seems like there's -- that's maybe the 2 areas where there may be some competitive opportunities for you guys?
Kevin Hostetler: Yes. We haven't seen -- so look, the challenge with us is the amount of labor required to accelerate and pull projects in artificially. We often are talking to customers about pulling into maybe a quarter. But in terms of pulling stuff that would be 3 and 4 quarters out earlier, we don't typically see this because, again, the size of our projects and the amount of labor you'd have to reschedule and get local to that new site tends to be pretty difficult. And frankly, the largest EPCs and the ones we're focused on are pretty well booked out because those are the same group of EPCs that those top-tier developers are utilizing. So I don't see a whole lot of what I would call artificial demand acceleration or pull forward into the year at this point. I think this year is fairly well baked. There may be spots in small projects and maybe more opportunity on the APA side in the DG channel and C&I channel. Sure. There's a lot of opportunity, I think there, but not so much on the utility scale.
Colin Rusch: Yes. I'll take it offline. I think my question was more about actually shortening the time frames in the field once you're deploying -- not pulling projects forward.
Kevin Hostetler: Are you saying construction time frame?
Colin Rusch: Exactly.
Kevin Hostetler: Yes. We've got a lot of products that we've been -- yes, we've been focusing on a lot of products that do that very quickly. And we can certainly offline give you a bunch of sense of what we've been doing to reduce installation time for our customers. We feel pretty well satisfied with the work we've been doing there.
Operator: The next question comes from the line of Dylan Nassano with Wolfe Research.
Dylan Nassano: I appreciate the earlier color on gross margins, and I just wanted to focus in on the EBITDA level a little bit. I mean it looks like historically, you've kind of trended closer to the high teens kind of EBITDA margin and mid-teens kind of suggested here in the guide. So just any more color on kind of a possible path back to those historical levels and hitting that as a run rate if you were to kind of stay at these gross margins that you're guiding to?
Keith Jennings: Dylan, this is Keith. Great question. First, I think as I said earlier, I think we're in a very competitive environment. So I think our gross margins are probably going to be in the level where we are now. To your question of how does that drop through to improve our EBITDA margins, I think it's going to come from 2 places. One, scale as we continue to grow, then we're going to get some SG&A leverage. Right now, you can see us coming down over the time horizon from 2024, I think where we were closer to 15% to last year, we were closer to 13%. This year, we are forecasting to be at 12%, and we have a near-term target to leverage up to somewhere around 10%. The other component that we have to remember is that APA is a strong acquisition for us. It improves the opportunity for us to speak to our customers about a broad array of how we work and develop and bundle things. As those commercial synergies come online in 2027 going forward, we should see more EBITDA margin expansion as that business grows. And so right now, we're still forecasting to be at the 15%, but we think that there with leverage and scale that we should get back to the high mid-teens.
Operator: Corinne Blanchard has rejoined the line with Deutsche Bank for a question.
Corinne Blanchard: Sorry about that. I don't know what happened. I was there. I was talking. I mean most of my questions have been taken now, but maybe 2 parts and sorry if I missed it. But the first one, can you talk about the OpEx margin maybe throughout '26 and maybe expectation for the medium term, '27 and '28? And then the second question would be like your view on the U.S. versus international mix and how we should think about it for the rest of the year?
Keith Jennings: So great question, much like the earlier question. We are not slowing our commercial investments in our SG&A. We have seen the benefits of that in terms of how it has improved the customer mix, quality, the size of orders that we're winning, the engagement with customers as we integrate APA and increase our ability to converse about the relevant development of sites and what's under the panel. And so what we have been focusing on is the leverage that, that brings, right? So if you look 2 years ago at our OpEx, it was running at a rate of about 15% of revenues. We have increased our spend, but we've also grown and leveraged ourselves now where that is approaching 12% of revenues. We have a near-term target to operate this business at about 10% of revenues, and we think that's in sight with scale and leverage and growth. And so we continue to expand the front end and change our application engineering team and also how we engage with the higher-quality customers. We think there's a fair bit of EBITDA margin expansion to be had when the commercial synergies from APA starts to kick in, in 2027. Right now, what we're seeing with APA is the gross margin synergies between 45X and procurement synergies. And so we are fairly confident that we are on the right path to back to high mid-teens EBITDA margins.
Kevin Hostetler: I think to answer a little bit more on the international side as well. Look, we've proven the formula works. When we invest in the front end of our business, when we add new sales resources that bring in industry knowledge, relationships, we -- and in particular, when we add that technical capability in with that sales organization, we're seeing really a lot more traction and success than we had historically. So we've taken that same approach. And what Neil and the team have been doing internationally was taking that same pattern that has worked. And over the last 12 months, we've added a handful of resources in other countries in Latin America. We've added -- and also new sales leadership of the entire region. We've added new sales leadership in Europe, again, industry experts in both cases with relationships and then building out the team. We've added technical selling resources in each region as well as additional country -- direct country managers in those regions that we think we have an opportunity to win and where customers are willing to value our differentiation and frankly, pay for it. So we're not just bidding on price. So I would say the international is probably -- the international rate of recovery is about a year behind the domestic. You're seeing the results of that domestic recovery already in 2025. I think we'll begin seeing much more of that acceleration in 2026 for our international businesses.
Operator: The next question comes from Ameet Thakkar with BMO Capital.
Ameet Thakkar: Just one quick one for me. If we look back at your historical kind of free cash flow to EBITDA conversion ratios in 2023 and 2024, they were, I think, kind of between 70% and 80% and obviously a lot lower in 2025, same kind of levels expected in 2026. And can you just kind of walk us through kind of like is it kind of shifting more of your manufacturing to the U.S., selling more in the U.S. and changed some of your kind of payment terms or working capital needs relative to what it was before or any other kind of drivers for that?
Keith Jennings: Thank you, Ameet. Great question. If you go back to 2025 and 2024, some of the things that we were experiencing were the quick collections of 45X. As in prior year, 45X was impacting the conversion ratio. And also, as you get into 2025, what we were going through is growth. When you grow your revenues by 40%, you're also going to grow your account receivables by that much as well. We also saw an expansion of our CapEx as we built a state-of-the-art facility in Albuquerque to bring the factory of the future into our setup and capture more of the 45X in-house. So those are the 2 things. I think that if you think about our business, and we converted roughly 43% of our EBITDA to free cash flow in 2025. We are forecasting to hold the same ratio. So if we are forecasting roughly 15% EBITDA expansion, then we should be growing free cash flow by just about the same percentage. So we're fairly confident that we'll be generating -- continue to generate free cash flow to add to our flexibility and our choices of deleveraging or continuing to invest diligently.
Operator: The next question comes from the line of Chris Dendrinos with RBC Capital.
Christopher Dendrinos: I wanted to dive back into the international strategy here. And I mean, maybe can you expand a little bit more on the supply chain strategy there? And are you positioned to go after, I guess, a broader set of markets here? Does there ultimately need to be some incremental investment to, I guess, call it, optimize the supply chain to be cost competitive?
Neil Manning: Yes, Chris, it's Neil. I'll take that one. So on the international side, there's a couple of things in play that we've done and some things that you'll see in the coming quarters and into next year. So over the last, I would say, 8 quarters, we've built out a center of excellence in Asia to consolidate supply chain and purchasing for both our U.S. and for international footprints so that we can consolidate spend between Spain and Brazil and for areas that are domestic content required partially for the U.S. So that's in place. That's up and running and performing quite nicely. The other thing that you saw with our release today is that we're also moving to consolidate our international and introduce the DuraTrack platform into both the EMEA and Latin America regions. So that's going to give us scale and additional ability to drive efficiencies on a global basis on a global platform as we move forward. So at that point, then, you're also going to see a new product introduced later this year, which brings the best capabilities of both the H250 and DuraTrack platform together, which will then again bring supply chain and build material efficiencies on a global basis. So we're really looking forward to that.
Kevin Hostetler: I mean I'll -- I know Neil is being a bit modest on the amount of work that the team has done. And I'll say, when I think about a couple of countries, Australia is a great example. Our ability to domesticate a supply chain and win orders in Australia, specifically because of our quick ability to fully domesticate supply chain in Australia has led to an outsized win rate in that region. So we feel really good about that. We've been able to replicate that in multiple other countries that as we began getting into, the countries came and said we want a higher proportion of domestic content. And we've kind of have the formula down of how we engage, what the project team looks like to do that. And in every case I could think of in my head, we've been able to hit our time lines to increase domestic content in these other regions, which has then allowed us to have a higher win rate as they put these new controls or limits on awards of orders in some of these emerging markets. So I think we've got a really good formula for that at this point, and the team has been executing really well. I can think of 3 particular regions in the last 18 months that we've been able to form teams and win specifically as a result of our ability to domesticate componentry, so really good work.
Operator: The next question comes from Ben Kallo with Baird.
Ben Kallo: I want to go back to the market share gains. Could you talk more about where you're seeing those gains come from? You don't have to name companies specifically, but -- and why you think that you guys are gaining share? And then I know there was a reference to customers that haven't used you before. Is this something where it's a customer that's also growing volume and so they're adding another partner or same volume and you're taking actual share from them, not just increasing your share overall, if that makes sense.
Kevin Hostetler: Yes. So let me just start. If you just peel up the domestic business and start there, and you look at our volume growth last year of 35%, there's nobody that says this industry grew 35% last year. And anyone who does, is confused. So when you just look at the domestic ATI volume growth, we've taken back market share. We see that. We see that in our internal win rate. And our internal forward-looking win rate, that means the wins and losses that we see internally on bids continues to be better than what we're seeing when you're looking at the rearview mirror of revenues, right? So we continue to see strong traction and momentum in a positive forward basis. Relative to that 4 gigawatts we talked about, in some cases, that was market share takeaway where they were currently doing business with others, and we've been able to go in and win a fair share of that business from a technical selling basis. And in other cases, it was companies that were migrating up into utility scale who already had familiarity with Array at DG level, for example, but have not done utility scale and are going with Array on their larger program. So there's a blend of both. But suffice to say, if you just look at our volume growth, just look at our orders growth and trajectory, you'll see that we are once again significantly rebounding in market share.
Operator: Our last question comes from Vikram Bagri with Citibank.
Unknown Analyst: It's [ Ted ] on for [ Vik ]. I wanted to ask about wallet share. You mentioned further the share of the wallet. Where does the integrated tracker and foundation solution get you to in terms of wallet share, either on a percentage or dollar per watt basis? And then do you have a goal in mind for where you want that wallet share to ultimately be once you factor in the organic and inorganic growth?
Kevin Hostetler: We can't give you the latter answer without you figuring out what pieces of inorganic that we have most interest in to be clear. So we're going to shy away from that. I would say, look, we've talked about the APA throughout the acquisition. And what you're doing is solving for foundations. So if you think about the $1 a watt or $1.08 a watt, whatever number you want to use, and the tracker being roughly $0.10 of that, the foundations range somewhere on the low end of $0.025, but typically up to almost $0.04 a watt. So that's what we pick up with APA. And as we do that integrated offering with APA, we pick that up at really nice margins. So that's our first focus was to be able to integrate a foundation with a tracker to increase that share of wallet. We are keenly focused at other areas of that, that we think provide the best opportunity for interoperability. Again, that's our laser focus on our platform expansion, the balance of system strategy we're deploying is ensuring that those items we buy, there is true technical integration capability that will not only save our customers' money as we technically integrate but allow outsized margin opportunity for Array. That's our focus.
Operator: Ladies and gentlemen, this now concludes our question-and-answer session and does conclude today's conference as well. Please disconnect your lines, and have a wonderful day.