Array Technologies, Inc. Q4 FY2025 Earnings Call

Good afternoon. Welcome to Array Technologies Fourth Quarter and Full Year 2025 Earnings Conference Call. 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.

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.

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 roadmap 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?

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 one-time 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 in 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 a 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 roadmap 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.

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 the 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 fall-off 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 a $103 million non-cash goodwill impairment charge and a one-time 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 the 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.

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?

Our first question comes from Mark Strouse with JPMorgan.

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.

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 one-time 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 basis points, 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 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.

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.

Yes, it does. First of all, I want to express that we are very comfortable with the quality of our order book, which is at a record $2.2 billion and has a strong book-to-bill ratio of 2x for both Array and APA. This is a significant acceleration for us. One interesting detail regarding the order book is that in 2025, we received 4 gigawatts of orders from customers who have not previously worked with Array, indicating a clear gain in market share. To clarify any confusion from our last call, we have not changed how we define our order book. We require confirmation of a named project awarded to Array, a target start date, and an existing PPA before including it in the order book. We have some international orders awarded to Array, for which we have a named project and a target start date, but we are holding some back until we have more confidence in those markets. This is to minimize any debookings and volatility. Currently, 95% of our order book, under the new methodology, is domestic, signifying higher quality. Additionally, I mentioned that over 50% of our order book is now from what we call Tier 1 customers. To clarify, this means that they are directing the purchase, even if the purchase order comes from an EPC. So, over 50% of our order book is now directly from those Tier 1 customers. With the high percentage of domestic orders, new market share gains, a 2x book-to-bill ratio, and over 50% direct orders from Tier 1 customers, we are very pleased with the state of our order book as we move forward.

The next question comes from Julien Dumoulin-Smith with Jefferies.

Julien, you may be on mute. We don't hear you yet.

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.

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.

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.

The next question comes from the line of Joseph Osha with Guggenheim Securities.

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.

Yes. So look, the Treasury guidance released last week 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.

The next question comes from Brian Lee with Goldman Sachs.

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 Q2 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.

Let me address the seasonality issue. It's similar to what our competitors have reported, indicating a slowdown in Q4 and Q1. There are two main factors contributing to this, particularly for businesses focused on North America. First, there is a historical seasonal trend where the peak season for North American construction businesses occurs in Q2 and Q3, with projects wrapping up in Q4. Over the past few years, our STI business in Brazil had a different dynamic, benefiting from a construction season that peaks in Q4 and Q1 due to the opposite hemisphere. This helped offset our usual seasonal patterns. Without that counter-cyclical benefit, we see a dampening effect resulting in the seasonal trends in Q4 and Q1. The second, more significant factor this year was the industry-wide holdback that occurred last year as everyone awaited clarity on the OBBB, which led to a pause in contracting and orders. Once those issues were resolved, we and our competitors saw a surge in orders, but these orders require time for engineering and planning before construction can begin. This pattern reflects across our industry, where we expect to see growth in Q2, further growth in Q3, and continued acceleration in Q4. This cyclicality is not unique to Array; it’s a common experience due to last year's market delays. Regarding M&A, we are committed to enhancing our balance of system strategy in ways that benefit our customers. Our approach focuses on technical integration rather than simply commercial bundling. We believe that offering a mix of products that work well together provides a better value for our customers. This perspective aligns with the understanding of EPCs, who are adept at purchasing large-scale construction projects, and likely don't see a significant difference between sourcing from a few versus many vendors. Our M&A strategy emphasizes interoperability in product integration, enhancing our value proposition for customers. An example of this is the integration of the foundation with our tracker system, which promises to be an innovative product that simplifies our offering and maintains a competitive price point, thereby facilitating the adoption of engineered foundations. This approach illustrates how we are strategically thinking about M&A. If this doesn't completely address your concerns, I'm open to follow-up questions.

Our next question comes from Philip Shen with ROTH Capital.

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?

Phil, good evening. This is Keith. I think it's reasonable to expect that the Q1 margins will closely resemble Q4 due to the anticipated scaling up of revenues. We're projecting an average margin of 26% to 27% for the full year, which reflects our current performance. I hope that answers your question.

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?

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.

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.

The next question comes from Corinne Blanchard with Deutsche Bank.

Corinne has dropped out of the queue. The next question is from Maheep Mandloi with Mizuho.

Just in terms of like the large customers you have, could you just talk about their average sizes and how to think about this move from small to large developers? How does that benefit your order book going forward?

Yes. Maheep, nearly two years ago, we assessed what we refer to as customer quality. I personally interviewed some of our customers with whom we weren't conducting significant business but who generally didn't experience delays. We discovered a group of developers and EPCs that were more robust due to their strong capitalization and sufficient equipment, which meant they weren't held back by issues like transformer shortages that we encountered frequently in the past. We identified these quality customers and incorporated them into our bidding strategy, aiming to secure more orders from those who demonstrated reliability and had the necessary equipment to stay on schedule with well-structured PPAs. This is essentially how we have defined our Tier 1 customers, focusing on utilities that manage their own operation and interconnections, as well as the best-capitalized developers. This approach has led to noticeable improvements in the quality of our order book, with significant market share gains in 2024 and continuing into 2025. Our focus on previously low share of wallet Tier 1 customers is now reflected in our order book, and we are quite pleased with the results.

The next question comes from Colin Rusch with Oppenheimer.

The opportunity to speed up deployment times in the field, either from the perspective of footings or module attachment, seems to be the two areas where there may be some competitive advantages for you.

Yes. The challenge we face is the significant amount of labor needed to accelerate and pull projects in artificially. We frequently discuss with customers the possibility of moving schedules into maybe a quarter sooner. However, we typically don’t see projects that are three or four quarters out being pulled ahead because the nature of our projects and the labor required to reschedule and relocate to a new site is quite complex. Additionally, the largest EPCs, which we are focusing on, are generally well booked since they work with the same top-tier developers. Thus, I don’t anticipate much in the way of artificial demand acceleration or shifts in timing this year. Overall, this year appears fairly set. There may be opportunities in smaller projects and potentially more on the APA side within the DG and C&I channels, but utility-scale projects are likely to remain stable.

Yes. I'll discuss this later. I think my question was more about actually reducing the time frames in the field once you're deploying, rather than pushing projects forward.

Are you saying construction time frame?

Exactly.

Yes, we've been concentrating on a variety of products that can achieve this very quickly. We can certainly provide you with more details about our efforts to reduce installation time for our customers. Overall, we are quite pleased with the progress we've made in this area.

The next question comes from the line of Dylan Nassano with Wolfe Research.

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?

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.

Corinne Blanchard has rejoined the line with Deutsche Bank for a question.

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?

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 start 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.

To elaborate on the international aspect, we have demonstrated that our strategy is effective. When we invest in the front end of our business by adding new sales resources with industry expertise and relationships, particularly by integrating technical capabilities with our sales team, we are experiencing significantly more traction and success compared to the past. We have applied this approach internationally, where Neil and the team have been following the successful pattern. Over the past year, we've made several key additions in Latin America and have brought in new sales leadership for the entire region. Similarly, we've introduced new sales leadership in Europe, featuring industry experts in both regions who possess valuable relationships and are focused on expanding the team. We have also incorporated technical selling resources and appointed direct country managers in regions where we see potential for success, as customers recognize and are willing to pay for our unique offerings rather than just competing on price. Currently, the recovery rate internationally is likely about a year behind that of the domestic market. We can already see the positive effects of the domestic recovery by 2025, and we expect to see significant progress in our international businesses by 2026.

The next question comes from Ameet Thakkar with BMO Capital.

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 changing 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?

Thank you, Ameet. That's a great question. Looking back at 2024 and 2025, we were experiencing rapid collections with 45X, which affected the conversion ratio. As we moved into 2025, we were focused on growth. When revenues increase by 40%, account receivables tend to grow at the same rate. Additionally, we expanded our capital expenditures by constructing a modern facility in Albuquerque, aimed at enhancing our production capabilities and managing more of the 45X internally. In terms of our business, we converted approximately 43% of our EBITDA into free cash flow in 2025, and we expect to maintain that ratio. With an anticipated 15% expansion in EBITDA, we expect our free cash flow to increase by a similar percentage. We are confident in our ability to continue generating free cash flow, which will provide us with flexibility for either deleveraging or making prudent investments.

The next question comes from the line of Chris Dendrinos with RBC Capital.

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?

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.

I believe Neil is being somewhat modest about the team's accomplishments. Taking Australia as an example, our successful establishment of a domestic supply chain and our ability to secure orders there, primarily due to our swift integration of the supply chain, has resulted in a notable win rate in the region. We're quite pleased with this outcome. We've managed to replicate this success in several other countries, where we've been approached about increasing domestic content. We’ve developed an effective approach for engaging these projects. In every instance that comes to mind, we've met our timelines for enhancing domestic content in these regions, which has improved our win rates as new restrictions on order allocations emerge in various developing markets. We’ve established a solid process for this, and the team has performed exceptionally well. In the past 18 months, I've identified three specific regions where we've successfully formed teams and won contracts primarily due to our capacity to source components locally. This is excellent work.

The next question comes from Ben Kallo with Baird.

I want to revisit the market share gains. Can you elaborate on where you are seeing these gains originate? You don't need to mention specific companies, but why do you believe you are gaining share? Additionally, there was a mention of customers who haven't used your services before. Are these customers increasing their volume and bringing on another partner, or are they maintaining the same volume and you are actually taking share from them, rather than just increasing your overall share?

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.

Our last question comes from Vikram Bagri with Citibank.

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?

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.

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.