Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Array Technologies Inc (ARRY, Financial) achieved $256 million in revenue for Q2 2024, slightly above the high end of their guidance range.
- The company reported an adjusted gross margin of 35%, reflecting a 540 basis points improvement compared to the prior year.
- Array Technologies Inc (ARRY) delivered $55.4 million of adjusted EBITDA, representing 21.7% of revenue.
- The company ended the quarter with a strong cash balance of $282 million.
- Array Technologies Inc (ARRY) launched SkyLink, a new tracker system that enhances flexibility and reduces project costs, receiving positive feedback from customers.
Negative Points
- Array Technologies Inc (ARRY) reduced its full-year 2024 revenue guidance due to customer project timing challenges and other industry factors.
- The company experienced a reduction in its backlog by approximately $200 million due to commodity price updates, project scope changes, and FX impacts.
- Array Technologies Inc (ARRY) reported a decline in operating expenses, but adjusted EBITDA was significantly lower compared to the same period in the prior year.
- The company is facing short-term challenges in the solar industry, including project delays due to AD/CVD petitions and domestic content guidance uncertainties.
- Array Technologies Inc (ARRY) noted macroeconomic delays in Brazil, impacting the economic cases for power purchase agreements and causing project delays.
Q & A Highlights
Q: Can you explain the inclusion of structural fasteners in the 45X guide and the expected impact on margins?
A: Neil Manning, President & COO, explained that Array Technologies has identified several components qualifying under structural fasteners. The company has undergone a thorough validation process with third-party reviews to ensure compliance with 45X definitions. The inclusion of these components is expected to enhance margins, with guidance now reflecting low to mid-30s gross margins inclusive of structural fasteners.
Q: Why was there a $300 million reduction in backlog, and how does it relate to commodity prices and 45X credits?
A: Kevin Hostetler, CEO, clarified that the reduction was due to normal project adjustments, including commodity price changes and project scope modifications. A significant portion was related to repricing orders with a large customer due to a 35% decline in steel prices. The backlog reduction was not related to 45X credits, and the megawatt capacity in the order book actually increased.
Q: How is Array Technologies managing utilization rates given the lower installation quantities compared to capacity?
A: Kevin Hostetler explained that the company maintains excess capacity to accommodate geographic demand fluctuations and ensure localized content supply. This strategy allows Array to respond flexibly to customer needs and optimize logistics costs.
Q: What is the impact of domestic content adders on pricing, and when will benefits be realized?
A: Kevin Hostetler noted that the impact varies depending on customer needs and the mix of domestic versus foreign panels. Some components may incur additional costs for domestic versions, but Array works with customers to optimize project economics. Benefits are expected as domestic content rules are finalized.
Q: Are project delays due to domestic content rules and AD/CVD impacting the backlog?
A: Kevin Hostetler stated that delays are primarily due to customers optimizing domestic panel usage and awaiting final rule clarifications. The AD/CVD-related delays are due to potential panel changes, which require redesigns beyond Array's scope. These issues are seen as transitory and not long-term impediments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
