Release Date: May 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Array Technologies Inc (ARRY, Financial) reported a strong first quarter with a 97% increase in revenue year-over-year, reaching $302 million.
- The company achieved a 143% increase in volume growth over the prior year, marking the second largest quarter of volume shipped since Q2 of 2023.
- Array Technologies Inc (ARRY) maintained a robust order book valued at $2 billion, with an 18% increase in contracting compared to the previous quarter.
- The company has strengthened its management team with the addition of several solar industry veterans, enhancing leadership both domestically and internationally.
- Array Technologies Inc (ARRY) is seeing strong traction with its new product offerings, such as OmniTrack and SkyLink, which accounted for 15% of revenue in Q1 and 30% of new bookings.
Negative Points
- The company is facing near-term policy-related headwinds, including ongoing tariff negotiations and potential shifts in the Inflation Reduction Act.
- First quarter adjusted gross margin was compressed to 26.5% due to impacts from legacy volume commitment agreements and large international lower margin projects.
- Array Technologies Inc (ARRY) anticipates potential project delays due to current market uncertainties, including tariffs and commodity price increases.
- The devaluation of the Brazilian real and newly introduced tariffs on solar components have significantly slowed market growth in Brazil.
- The company is experiencing moderate commodity-related ASP declines in its legacy operations and slightly higher ASP declines internationally.
Q & A Highlights
Q: Can you provide more color on the growing interest in Volume Commitment Agreements (VCAs) and any potential new metrics to show increased visibility?
A: Kevin Hostetler, CEO: We are in active discussions with several customers about longer-term commitments. We will announce VCAs as they are finalized but do not plan to provide new metrics. We aim to maintain the integrity of our order book and its translation to revenues.
Q: Did you provide any guidance for Q2, and is the low-margin legacy VCA deal from last quarter wrapped up?
A: H. Keith Jennings, CFO: We have not given specific Q2 guidance but maintain that the first half will be about 55% of the revenue split. The legacy low-price VCA impact on margins is behind us for 2025.
Q: Are there any shifts in order sizes or lead times, and are projects being accelerated or delayed?
A: Kevin Hostetler, CEO: Our lead times remain industry-leading at 14 weeks. We have not seen a significant influx of safe harbor or early pull-ins for 2025, but discussions continue. Domestic business faces challenges due to customers' difficulty in pricing PPAs amid uncertainty.
Q: What are the areas of focus for product innovation, and how do they provide a competitive advantage?
A: Neil Manning, COO: We focus on extreme weather capabilities and ease of installation. Our SkyLink platform minimizes trenching, and our OmniTrack product, launched less than two years ago, now accounts for 30% of revenues, indicating rapid adoption.
Q: How are you planning to use cash, and are there plans to deleverage term loans?
A: H. Keith Jennings, CFO: We have amended and extended our revolving credit facility and are exploring options, including addressing converts trading at a discount and managing the term loan. We are also considering strategic opportunities for inorganic growth.
Q: Are there differences in project schedules between EPCs and developers?
A: H. Keith Jennings, CFO: Both EPCs and developers are aligned on their 2025 outlook. Near-term project factors like PPAs and equipment timelines are consistent across both groups.
Q: Is the domestic bookings environment uncertainty driven by the IRA or tariffs?
A: Kevin Hostetler, CEO: It's both. Customers struggle to understand full project costs due to tariff impacts on components like inverters and modules, and uncertainty around IRA changes. We are ready to respond quickly when clarity is achieved.
Q: What is the impact of steel pricing on your business, and how does it affect gross margins?
A: Kevin Hostetler, CEO: Steel prices are up 25% to 28% year-to-date, leading to ASP increases. This will reflect in higher ASPs for projects booked now, impacting P&L in future quarters.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
