Earnings call: Array Technologies surpasses revenue guidance in record year

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Array Technologies, Inc. (ARRY), a leader in solar tracking solutions, has announced a record-breaking financial performance for the fourth quarter and full year of 2023. The company reported an impressive order book exceeding $1.8 billion, with full-year revenue amounting to $1.58 billion, surpassing their own guidance.

The adjusted gross margin saw a significant increase to 27.3%, and the company more than doubled its adjusted EBITDA to $288 million. Array Technologies also expanded its supplier base, enhancing its domestic and international deliverable capacity.

Looking ahead, the company forecasts revenue for 2024 to be between $1.25 billion and $1.4 billion, with adjusted gross margins expected to expand further.

Key Takeaways

• Array Technologies achieved record full-year revenue of $1.58 billion, overcoming their own expectations.
• Adjusted gross margin improved dramatically to 27.3%, with adjusted EBITDA more than doubling to $288 million.
• The company expanded its deliverable capacity to 30 gigawatts in the US and nearly 50 gigawatts globally.
• A $50 million benefit from the 45x tax credit was earned in Q4.
• Revenue for 2024 is projected between $1.25 billion and $1.4 billion, with adjusted gross margin expected in the low 30% range.

Company Outlook

• Array Technologies forecasts a revenue range of $1.25 billion to $1.4 billion for 2024.
• The company anticipates adjusted gross margins to reach the low 30s.
• Adjusted EBITDA for 2024 is projected to be between $285 million and $315 million.
• Free cash flow is expected to be between $100 million and $150 million for 2024.

Bearish Highlights

• The company experienced flat revenue during the fourth quarter, primarily due to lower average selling prices influenced by decreased commodity costs.
• Adjusted gross margins were negatively impacted in the STI segment by one-time inventory adjustments.
• Revenue for the full year declined by 4% to $1.577 billion, mainly due to lower average selling prices.

Bullish Highlights

• Adjusted gross profit increased significantly from the previous year.
• Operating expenses decreased, contributing to a net income of $85.5 million for common shareholders, compared to a loss in the prior year.
• The company expects a strong second half of 2023, with consistent gross margins and increased market traction for its products.

Misses

• There were project delays due to various factors, including interest rates, financing challenges, tax equity transfer rules, and supply chain issues.
• The company temporarily lost some projects to competitors early in 2023 due to lower pricing and risky terms.

Q&A Highlights

• Array Technologies discussed the success of its OmniTrack product and plans to offer the H250 as a competitive option in the market.
• The company is actively working to gain clarity on structural fasteners and negotiate with suppliers to retain benefits from the 45x tax credit.
• Approximately half of the $300 million in delayed projects has been converted into orders.

Array Technologies has demonstrated resilience in a challenging market, achieving remarkable financial results and setting a positive outlook for the year ahead. The company's strategic expansions and product developments, alongside its focus on cost reduction and margin improvement, signal a robust performance trajectory for 2024.

InvestingPro Insights

Array Technologies, Inc. (ARRY) has showcased a strong financial performance as detailed in their recent earnings report. To provide additional context to the company's current valuation and future prospects, we can look at some key metrics and insights from InvestingPro.

InvestingPro Data:

• Array Technologies' Market Cap stands at $2.06 billion, reflecting its position in the market following the latest financial updates.

• The company has a P/E Ratio of 34.87, which adjusts to 33.14 when looking at the last twelve months as of Q3 2023. This metric indicates how investors are valuing the company's earnings.

• The Revenue Growth for the last twelve months as of Q3 2023 was 12.48%, a healthy sign of the company's ability to increase its sales over time.

InvestingPro Tips:

• Array Technologies is trading at a low P/E ratio relative to its near-term earnings growth, suggesting that the stock could be undervalued considering the expected increase in net income.

• The company is also trading at a high Price/Book multiple of 7.41, which might raise questions about the stock's valuation compared to its book value.

Investors interested in a deeper analysis should consider the additional 10 InvestingPro Tips available for Array Technologies, which include insights on profitability, debt levels, and dividend policies. These tips could provide valuable guidance for those looking to make informed decisions about their investments in ARRY.

To explore these insights in detail, visit InvestingPro at https://www.investing.com/pro/ARRY and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

Full transcript - Array Technologies Inc (ARRY) Q4 2023:

Operator: Greetings and welcome to Array Technologies' Fourth Quarter and Full Year 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Cody Mueller, Investor Relations at Array. Please go ahead.

Cody Mueller: Thank you and welcome to Array Technologies' fourth quarter 2023 financial conference call. On the call with me today are Kevin Hostetler, our CEO and Kurt Wood, our CFO. Today's call is being webcast from our Investor Relations site at ir.arraytechinc.co, including audio and slides. In addition, the press release detailing our quarterly results has been posted on the website. Today's discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP measures can be found on our website. We encourage you to visit our website at arraytechinc.com throughout the quarter with the most current information on the company including information on financial conferences that we may be attending. 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 the statements made today. We refer you to the documents we file with the SEC, including our most recent Form 10-K for a recent 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. I'll now turn the call over to Kevin.

Kevin Hostetler: Thank you, Cody. Good afternoon, everyone. First turning to Slide three. I'll give some highlights from our fourth quarter and our full year results. We delivered a record year across almost every metric we track. We exited the year with an order book in excess of $1.8 billion on strong new bookings momentum in the fourth quarter. On a global basis, our book-to-bill ratio was 1.7 with Q4 bookings coming in at approximately $600 million. The sequential growth in bookings and resulting increase of our order book further highlights the improved pipeline we discussed last quarter and is a testament to our winning product and services portfolio, including energy optimization software and severe weather mitigation solutions that enable an attractive levelized cost of energy for our customers. I will speak more broadly about our order book and what we are seeing in the market in a few moments. Revenue for the full year came in at $1.58 billion, which was above the high-end of our latest guidance range. Full year adjusted gross margin was 27.3% inclusive of approximately $9.3 million, a 45x benefit recognized to the P&L in the fourth quarter. This represents a year-over-year increase of 1300 basis points and is a record for Array as a public company. Our performance here is largely demonstrating the structural changes we have successfully executed around how we price, how we procure materials, and how we design for value optimization in our new product introductions and existing products alike. With the 2023 proof point in hand coupled with the upside from the 45x manufacturing credits, we are confident in our ability to deliver annual adjusted gross margin percentage in the low 30s in 2024. Adjusted EBITDA more than doubled to $288 million, which was the highest year on record by over $100 million and marks the second consecutive year where this metric has more than doubled. On a full year basis, we generated $215 million of free cash flow, which was $100 million higher than the outlook we provided at the beginning of 2023. We strengthened the balance sheet throughout the year and ended with $250 million of cash on hand. And we now maintain a historically high level of liquidity at $424 million when factoring in our undrawn revolving credit capacity. This leaves us well-positioned to fund growth, while continuing to deleverage our balance sheets. Now please turn to Slide four, where we will discuss our capacity, domestic content and 45x. From an operational standpoint, we expanded our domestic and international supplier base, and now have more than 30 gigawatts of deliverable capacity in the U.S., and total capacity nearing 50 gigawatts across the globe. At the same time, with our intense focus on supply chain resiliency, we added additional sources of supply for several critical components throughout the year. We did this while simultaneously achieving both lower inventory levels and record on time delivery performance. Our strong execution and proactive build out of our domestic supply chain and manufacturing capabilities allows us to achieve domestic content levels in the mid 80% level and higher depending upon project configuration in high volume, not only on a one-off basis. This level of scale will be critical as the domestic content requirements become better understood and more relevant to our customers over time. As many of you are aware, in December, the IRS published additional guidance on the 45x manufacturing benefits that largely confirmed our previous understanding of the eligibility of arc torque tube. In late 2023 and early 2024, we successfully negotiated agreements with key suppliers around domestic content incentives associated with our torque tube. This resulted in us earning $50 million a 45x benefit in our financial statements in the fourth quarter, which included a catchup for certain volumes delivered earlier in 2023. Approximately $9 million was recorded as a benefit to our P&L, and the remainder was recorded on our balance sheet and will be recognized to the P&L throughout 2024. Unfortunately, the 45x guidance published in December did not further clarify what would be considered a structural fastener. We continue to expect there will be additional benefits we can monetize for a number of our components under the definition of structural fasteners, and we are actively working multiple initiatives to obtain clarity regarding specific eligibility. In parallel, we're continuing to negotiate the economic split with our supply base for parts we do not manufacture internally. It's our belief that the inclusion of these structural fastener components was the spirit behind the initial framework and the intent of the legislation. We will provide additional updates on future calls as more information becomes available. I'd like to now transition to our product software and service offerings. During 2023, we strengthened our product services and software portfolio with the launch of two new tracker platforms, the expansion of our SmarTrack software to provide automated Hail and Snow response and the rollout of our new service offerings. This is all on top of numerous other improvements that have driven down our installed cost and improved our customer experience. Turning to Slide five, as I mentioned earlier, I would like to provide additional color around current market dynamics and our orderbook. After gaining meaningful market share in 2021, and 2022, we chose not to pursue business in the first half of 2023 that would not generate a threshold level of financial return or would require us to assume elevated risk. As we entered the second half of 2023, we were seeing the fruits of our structural cost enhancements, and the implementation of more real-time processes around logistics and commodity costing come online, which allowed us to achieve lower price points, while still sustainably achieving our margin expansion goals. With our structural cost enhancements firmly in place, and the market moving away from the short-term high-risk pricing environment, we saw our pipeline triple and our win rate increase, which are both important leading indicators of bookings and order book momentum. This was evidenced by the $900 million of new orders cumulatively received in the second half of 2023 and a 1.7x book-to-bill ratio in the fourth quarter. As we look into our order book, we continue to see a consistent quality of customers as we have historically. The percentage of our executed contracts with Tier-1 customers has remained over 80% for the last two years. That being said, we're also seeing new customers enter our pipeline. Our order book stands at over $1.8 billion as of year-end, excluding any BCAs that don't have a named project and/or defined start date. The projects that we willingly walked away from in the first half of last year, coupled with the increase in project delays and push outs are disproportionately impacting the first half of 2024 revenues. As it resulted in our orderbook being more weighted towards the second half of '24, and into 2025, then historically would be the case at this point of the year. As it relates to project push-offs that we highlighted on our last call, we are still seeing several industry-wide factors that are impacting project start dates, particularly in the first half of 2024. The most common issues, we are hearing around permitting and interconnection, supply chain delays on long lead time, equipment, and timing of financing. It's also important to point out that while we are seeing these delays fairly well represented across all types of customers, utilities included, there are a handful of our customers who are not seeing an impact and projects are moving forward in a more normalized manner. Looking ahead, we are guiding full year 2024 revenue between $1.25 billion and $1.4 billion, representing a 16% decline at the midpoint versus 2023, on relatively flat volume. We expect ASPs will be down year-over-year, primarily due to declining commodity input costs. However, we will again see adjusted gross margin expand to the low 30% range and expect to see year-over-year growth in both absolute adjusted EBITDA dollars and as a percentage of revenue. Our revenues will be more backend loaded with just under 30% of our revenues expected to materialize in the first half of the year, reflecting the order book dynamics I spoke about earlier. Q1 will be a trough, with revenue in the range of $135 million to $145 million, followed by continued sequential growth for the remainder of the year, and overall year-over-year growth returning in the second half. Kurt will now provide additional color on 2023 results and our 2024 outlook. I'll then give some concluding remarks before opening the line for questions. Kurt?

Kurt Wood: Thanks, Kevin. I would like to start off by providing some additional details around the fourth quarter and full year 2023 results, and ask that you turn your attention to Slide seven. As Kevin mentioned, 2023 was a record year on many fronts, and we were able to deliver a highly profitable year despite the headwinds that came our way via project push-ups. In the fourth quarter, we delivered $342 million in revenue above the top end of the guidance range provided on our Q3 earnings call and now in approximately 15% from the prior year period. We shipped 3.3 gigawatts in the fourth quarter, which was roughly flat versus the prior year. At the heart of the year-over-year decline in revenue with lower ASP driven by a reduction in global commodity cost. As a reminder, when commodity costs move up or down, we generally pass the movement on to our customers. Putting the revenue by geography, the 342 million was comprised of $278 million and $64 million from the legacy Array and STI units respectively. We saw fourth quarter adjusted gross margins expand by 520 basis points on a year-over-year basis to 25.7%. inclusive of the $9.3 million of 45x benefit to cost of sales realized in the quarter. Our ability to expand margins are relatively flat volume and lower revenue is directly attributable to the structural changes Kevin highlighted earlier. Our Q4 adjusted gross margin was negatively impacted by approximately 250 basis points due to one-time entries in our STI segment related to inventory adjustments. Absent those anomalies, STIs adjusted Q4 '23 gross margin would have been in the mid-20s as expected. I'd now like to expand further on the 45x benefits. In the fourth quarter we recorded a $50 million benefit to our financials relating to torque tube, with 9.3 million included as a reduction to our cost of goods sold and 40.6 million treated as a gross up to the balance sheet in the form of an increased to both other assets and other current liabilities. The entire benefit relates to certain volumes delivered during 2023 but based on the structure of the contract with each vendor, and the timing when the contract was executed $41 million of the amount we are entitled to will not materialize on the P&L until 2024. As Kevin noted earlier, we expect to see additional benefits in future periods relating to our 2023 volumes, based on how eligibility for structural fasteners is determined. Operating expenses of $54 million were down approximately 11% from $60.5 million during the same period of the previous year. This decline was driven by an improvement in the amortization expense relating to certain intangible assets from the STI acquisition. The decrease was partially offset by a couple of one-time items that combined for nearly $5 million of expense in the period, including a reserve for value added tax or VAT, due to a ruling received from the European tax authority in the fourth quarter on the refundability of certain VAT items, and a reserve uncertain outstanding overdue receivables. Both of these adjustments were related to items that occurred prior to 2023. Net income attributable to common shareholders was $6 million, compared to a loss of $17.3 million during the same period in the prior year. And basic and diluted income per share was $0.04, compared to basic and diluted loss per share of $0.11 during the same period in 2022. Adjusted net income increased to $31.4 million, compared to adjusted net income of $15 million during the fourth quarter of 2024. And adjusted basic and diluted net income per share was $0.21, compared to adjusted basic and diluted net income per share of $0.10 during the prior year period. Finally, our free cash flow for the period was $88.6 million versus $93.5 million for the same period in the prior year. Kevin spoke to many of the full year metrics, so I'll just briefly cover these again on Slide eight. Full year revenue was $1.577 billion, representing a 4% revenue decline versus 2022. This decline was primarily attributable to a reduction in ASP resulting from the lower commodity pricing on relatively flat volume and the change in the Brazilian ICMS benefit treatment. As a reminder, we discussed on the last call how in prior years, the impact of the Brazil value added tax, or ICMS, was treated as an added to revenue and starting in 2023, it was transacted as a reduction to cost of sales. For 2023, this amounted to $23.2 million less revenue relative to the 2022 comparison. Adjusted gross profit increased to $430.1 million from 234.1 million in the prior year. Again, driven by the expansion of our baseline gross margin from the structural enhancements we made to our business and to a lesser effect, the 9.3 million a 45x benefit that was recorded in the fourth quarter. Operating expenses decreased to $201.4 million from 230.9 million in the prior year. The lower expenses were provided primarily related to $46.9 million decrease in intangible amortization expense related to the STI acquisition, partially offset by higher headcount related costs to drive process improvement, operational execution and product innovation. Net income attributable to common shareholders was $85.5 million, compared to a loss of $43.6 million in the prior year. And basic and diluted income per share was $0.57 and $0.56, compared to basic and diluted loss per share of $0.29 in the prior year. Adjusted EBITDA more than doubled to 288.1 million compared to 128.7 million in the prior period. Adjusted net income increased by approximately 3x to $171.3 million, compared to $57.3 million during the prior year and adjusted basic and diluted net income per share was $1.13 compared to $0.38 in the prior year. Finally, our free cash flow for the year was $215 million compared to $130.9 million in the prior year, excluding the $42.8 million legal settlement proceeds received in the third quarter of 2022. We more than doubled our free cash flow year-over-year and ended the year with approximately $250 million of cash on hand, and total liquidity of $424 million factoring in capacity in our undrawn revolver. Throughout the year, we paid down $87 million of our debt, including nearly $75 million of principle on our term loan, and we ended the year with a net leverage ratio of 1.6 excluding our preferred shares. Now I'd like to go to Slide nine where I will discuss our outlook for 2024. I want to begin by noting that we will be providing guidance as one consolidated Array segment going forward, rather than breaking out Array and STI. This change is reflective of how we are managing our business following the successful integration of STI and streamlining of recollective processes were helpful, we will continue to give regional and product commentary for additional color in our business performance throughout the year. Additionally, starting in 2024, we will be reporting all metrics on an all end basis inclusive of 45x benefits. 2023 was a transitional year and warranted a specific call out or the benefit given the number of uncertainties around its treatment. In future periods, we will call out any material differences in our assumptions, including those resulting around the inclusion of structural fasteners within the 45x benefit, to the extent they're all ready. We expect full year 2024 revenue to be within the range of $1.25 billion to $1.4 billion. As Kevin discussed earlier, there are a number of dynamics driving our outlook. Primarily, we are forecasting a reduction in ASP of low double-digit percent year-over-year, driven by lower input costs, our ability to lower price due to our lower cost structure, and the pass through of a portion of the 45x benefit to our customers as we strive to lower the overall cost of solar generation for the industry. From a linearity perspective, the year will be more weighted towards the second half. Q1 will be the trough with revenues at approximately $135 million to $145 million before we begin to see sequential growth in the second quarter, which then continues in earnest in the second half. To that end, we are expecting year-over-year revenue growth in the second half of the year, when compared to the second half of 2023. Inclusive of 45x benefits from our torque tube, we expect our adjusted gross margins to be in the low 30s for the year. As you would expect a quarterly basis this may fluctuate slightly based on product mix, project mix and fixed cost absorption. For adjusted SG&A, we expect approximately $33 million to $35 million a quarter, which is slightly down from a dollar standpoint compared to 2023. We expect adjusted EBITDA to be within the range of $285 million to $315 million. This guidance is driven by the improvement in profitability from a structural cost enhancement enhancements that drive efficiency and scale as well as the 45x benefits to our torque tube. At the midpoint, this represents a four percentage point increase in adjusted EBITDA and a 430 basis point improvement in adjusted EBITDA margin year-over-year, marking the third consecutive year on both dollar and percent of revenue expansion. For adjusted diluted earnings per share, we anticipate a range of $1 to $1.15, which represents a 5% year-over-year decline at the midpoint. This decrease is largely due to an effective tax rate increase related to a change in tax treatment of the ICMS benefit in Brazil. Previously, this benefit was tax exempt, but will now become subject to the federal Brazil taxation beginning in 2024. As such, we expect our effective tax rate for the year to be between 26% and 28%. We expect preferred dividends will be approximately 14 million on a quarterly basis of which approximately 6 million will be the cash or PIK portion and the remaining will be the amortization of the discount. We expect free cash flow to be between $100 million and $150 million in 2024 which is inclusive of our estimate of the cash received during the year from the 45x torque tube benefit. I would point out here that a large portion of the expected cash benefit will occur later than the P&L benefit due to the timing of the payments from the IRS. Embedded in our free cash flow forecast is a CapEx assumption of $25 million to $30 million. Now I'll turn the call back over to Kevin for closing remarks.

Kevin Hostetler: Thank you, Kurt. I want to again highlight our record 2023 financial performance. The structural enhancements we made to our cost structure, and the strong top-line momentum we are seeing for the second half of 2024 and into 2025. We made a lot of progress as a business over the last few quarters and are confident that this will lead to sustainable and profitable growth as we continue our journey. I'm very proud of what our team accomplished in 2023. And I want to take a moment to thank our hardworking employees for all of their dedicated efforts. We will now open the call up for questions. Operator?

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Mark Strouse with JP Morgan.

Mark Strouse: I wanted to start with the 2024 outlook and the revenue decline. I fully appreciate kind of the first half of '23, the being more selective on higher margin projects that created a bit of a hole that you needed to fill. Just trying to compare what we're hearing today to what we heard on the 3Q call though, as far as the project delays or there continued delays in those projects that you were seeing back then or there incremental delays, just anything you can do to kind of help me compartmentalize what's happening here. Thank you.

Kevin Hostetler: Thanks for your question, Mark. This is Kevin. Yes, relative to the project delays, what we've seen is the continuing delays and push outs of projects for many of the same issues that we talked about earlier on the call. So I'll highlight them again, but certainly some related to interest rates and financing, and some confusion around the Tax Equity transfer rules. There's still lack of clarity around the IRA. And we still as I'm engaging our customers, still hearing of orders sitting on the sidelines waiting for better clarity around the overall domestic content added to the ITC. What we're hearing more of now than we have previously are really about supply chain issues. And that's really related to shortages of long lead time items of switches transformers, and the one that keeps coming up as being very acute is on high voltage breakers. And these are placing interconnection queues at risk and we're hearing about that throughout now. That is not ubiquitous, there are certain customers and utilities that were able to safe harbor, lots of electrical equipment. And we're finding that those are the ones that seemingly are moving forward with projects now unabated, those that have a huge supply of those electrical components in particular, that fit their design criteria. And last, permitting delays, long queues accentuated by the dramatic increase in solar and solar plus battery. So in many municipalities, we're getting used to doing solar projects, the addition of the battery storage to sites, and we're seeing that increasing as a percentage is creating again, confusion and permitting delays. Really the same set they're continuing on. And what we're seeing in the order book and how it translates to the order book is that customers are beginning to bake those delays into their order book. And that's when we talked about in our prepared remarks, of a higher proportion of orders that are coming now where they're getting themselves a couple of extra quarters for that work to begin as they solve some of these issues.

Mark Strouse: Okay. And then, Kurt, a couple of quick questions on the 45x here. Are you able to today, are you planning in 2024 to provide kind of what the gross margin is excluding 45x just so we can get a sense of kind of what your structural margin improvements that you've been talking about or and then second, the low 30 is outlook for 24. Does that include the 41 million of catch up from 2023?

Kurt Wood: Great questions. We're still sticking to our structural margin in the mid 20s percent range. We think that we saw that in the fourth quarter as well, if you take out the one-time items there that we were saddled with. And then, yes, the low 30s does take into account the 40%. And you got to remember where, it takes into a couple of things, our margin takes into our cost enhancements that we've done that allow us to lower the price and still maintain our margin profile that we want. It takes into account the 45x credits that we're talking about here. And it takes into account certain passthrough of the 45x, that will pass along to the customers, a new deal that we signed going forward. So it's got all that in. What it doesn't have in there, is any additional contracts that we may sign. And in our prepared remarks, we talked about structural fasteners and what might be included in there. So that would be upside of those materialize, as well as any other deals that we negotiate with our vendors going forward. And we don't want to give specific because obviously, that puts us at a disadvantage when we're negotiating some of these things.

Mark Strouse: Okay, I'll take the rest offline. Thank you.

Operator: Our next question comes from the line of Christine Cho with Barclays.

Juan Gutierrez: Yes. Hey, guys, this is Juan for Christine. Just one quick one from me. What sort of bookings are waiting on the sidelines? You showed this chart where your high probability pipeline tripled since 4Q '22. So I'm wondering what actually needs to happen for this to be converted?

Kevin Hostetler: Yes. It's a great question. So what we typically see momentum in our business is, you go from overall pipeline meeting pipeline that's down in that 25% range to when it becomes over 50%, it becomes the high probability pipeline, that so we're waiting on, in some cases, an EPC to be named. In other cases, it's still competitive, even at 50%, there may be a portion of that, that we're still competing with one of our peer companies to get that business. But what we measure is that trend of high probability pipeline, then once it goes from 50 to 75, that's when it begins to convert to verbal orders. So that's really the trend. So what we look at that trend is the overall what's coming into the funnel, what's getting through the stage gates in the funnel, in terms of quality of that order, and our position to win that order. That's where it gets into the high probability. So that's really an indication of the momentum we're seeing in the business of a tripling of that high probability pipeline is very significant to us.

Operator: Our next question comes from the line of Julien Dumoulin-Smith with Bank of America.

Unidentified Analyst: [Cameron Walker John] [ph] from BofA for Julien. Quick one for me. And so they kind of tie together just asking about the tandem. First, on the backlog, can you speak a little bit, I appreciate the commentary around some of the customer delays and things of that nature, interconnection permitting things like that. Are you seeing any project churn in the backlog, any projects coming out of backlog as a result of some of these delays? Whether those projects are, perhaps being sold to others? Or what have you, at the customer level? And then at the same time, just U.S. International dynamics in 4Q, and how those kind of play out in 2024?

Kevin Hostetler: I'll certainly take the first one, I'll let Kurt talk about the specific Q4 bookings. So look, we have only, when we put a project into our backlog, we're pretty sure that that product -- project rather is going to go forward. It may be delayed. But they we've only we modeled this out actually, in the last few months, we've only ever had two projects pull out of backlog and get cancelled, certainly, that's domestically. Internationally as you do some of the smaller projects, and the Brazilian forgiveness stays a little bit different to that. But I'll broadly speak to our North American backlog, and that's only two projects ever. We are in fact seeing some projects get sold. Some developers are coming in and taking advantage of the fact that others are having supply issues. And they're coming in and refinancing and moving those. And in some cases, we're benefiting from that in terms of, some of the developers doing that work or for lack of a better word, friends of Array, and we're picking up some additional orders and they're converting it from other suppliers to Array as they do that business. So far, we've not seen any meaningful cancellations at all. And in fact, we're benefiting from some of the secondary market, emerging from these projects getting bought and sold prior to completion.

Kurt Wood: And for the second part of your question on the U.S. and international dynamics, you'll see when we've posted our K out in the next day or so that we've got about in Q4 75% U.S., 25 percentage of our revenue was domestic or was international. As we look into the first half of the year, as we talked about the first softness in the first half, obviously, that's hard to overcome. So we do expect overall, a decline in U.S. volumes year-over-year, first half will be down, second half will be up, as we talked about, and then we'll see a little bit more meaningful growth on our international locations, including Spain and Brazil.

Operator: Our next question comes from the line of Brian Lee with Goldman Sachs.

Brian Lee: Hey, guys, good afternoon. Thanks for taking the questions. I've had a couple, I apologize, I jumped on late. So if you did cover these apologize in advance. On the gross margin guidance, last year, you were talking about mid to high 20s, ex-IRA? Are you expecting the same level in 2024 ex-IRA? Are you actually targeting gross margin expansion into the 30s ex-IRA, maybe just give us some of the breakdown of the overall margin guidance and what's embedded in there for kind of core margin versus what IRAs adding this year?

Kurt Wood: On that one specifically, I say you got to break it up to U.S., we definitely expect to be in the -- higher than what we said on the call, which was consolidated 25%. So kind of mid to high 20s for the U.S. And then obviously, mid 20s, for the international units combined, that's where you get free, any 45x or IRA benefit. And then on a consolidated basis, the low 30% range for gross margin is an all-in number inclusive of the benefits from any new incentive program that's out there.

Brian Lee: Okay. Fair enough. That's helpful. And then I know, it sounds like there's already been a decent number of questions, and you're providing some thought process around why the revenue guidance on paper looks like it's softer than what the backlog you ended the year with. What kind of entails. So maybe just taking even a further step by, you talked about a flat volume view for the year, it seems like peers are growing faster. And some of the utility scale forecasts for the U.S. are all up double digits 10%, 15% this year. So maybe just kind of walk through for you specifically, what's different, is it a customer mix, is it share, just kind of trying to understand and reconcile the build to the flat volume view for you this year. And after last year, where you already had some push outs and just expectations for 2023. So just trying to reconcile a bit here.

Kevin Hostetler: Yes. I think that's a great question. I'd love to answer that question. We have seen a lot of notes recently about market share changes and shifts. And let me start by reminding everyone that this is fundamentally a large project business, where a few projects can have an outsize impact on either the shorter-term windows of share, which is why really, in a general practice, we don't overly focus on quarter-over-quarter market share statistics. I'll remind you in my prepared remarks, I tried to remind you that not too long ago, we were discussing the dramatic market share gains Array secured in both 2021 and 2022. So that being said, let me talk about a few items I think about relative to the market share change. First, we've discussed previously, and in our prepared remarks that there was a period of time in early '23 where our primary objective, and my role here was to help demonstrate a margin recovery for the business and build a backlog of high-quality for the business. We've talked about this before that in doing so, we brought in less projects into our pipeline to actively pursue in the first half of 2023. We temporarily ceded a portion of projects to our competitors, based on what we saw was dramatically lower pricing and terms that we felt were just simply too risky for our business. These projects are now being delivered in the first half of '24. We see that and in retrospect, we have yielded a bit more on some of these orders and still here are committed mid 20s margin, perhaps we could have. But the reality is, our focus was on improving our pricing to our customers without sacrificing margins to do this. And we were so focused on methodically attacking our cost structure. We focus really on increasing our global strategic sourcing. We really did a deep dive review of our internal engineering and design standards. And we invested in the last two years, nearly $11 million in improved IT systems and cybersecurity systems that would inherently improve our visibility to our bill of materials, our cost structure, our logistics operations, for every project that we do. In engaging with our customers, it was really important to our customers that the cost reductions that we were able to provide them were structural in nature. And therefore they could count on these into the future as they realign and do business with Array. And to be clear, we're not out there trying to buy business. And that's evidenced by our committed 2024 expanding gross margins. I'm confident that if you go out and pull the marketplace today, you'll find the structural cost reductions are becoming very apparent to our customers. And they're making a difference in our win rates on projects, we're actually seeing win rates substantially increase from that pipeline and follow we talked about earlier. Since completing the first two planned initiatives for cost reduction, we've seen a marked improvement in the high probability of pipeline that we noted in the presentation. And it's nearly three times larger than at the end of Q2. And that's what drove the really strong Q4 bookings on the back of this. Earlier this month, we completed our third structural cost reduction initiative. This one was all about emphasizing automation, and optimization of some of our engineering calculations that were all about reducing our customers' cost through optimizing the foundations they would be required to, to purchase and put into the ground. So again, that's not when that reduces our cost. But we're focusing beyond our cost into our customers' costs and identify ways that we can reduce their costs. The second thing is, we continue to see project timing be negatively impacted by the factors we talked about. And one of the first questions that we got to ask, the supply chain issues permitting, interconnect delays, IRA clarity, timing of financing all of the above. And then, last, I would just note that we saw strong bookings in the fourth quarter. But one of the things we are seeing, as I indicated just a minute ago is, we're seeing projects get rewarded for longer time periods than we have historically. Our customers are now building in a couple of quarters of buffer. And what they're doing is locking in capacity with us. I think this is really our customers desire to buy more time to clear some of the project timing challenges. But obviously, this limits our ability to fill in more near-term revenue than we would have historically. Like others in our industry, we keep a portfolio of lots of projects. And historically we've been able, we would be able to work with our customers to push and pull projects in, when one we push out further. Simply stated right now that option is less given that the kind of cycles that we're seeing in our stated backlog. I think that to just put a topping on this. I don't see any real dislocation, or any indication of a longer trend, there's not been a killer app or any major new product that diminishes the strength of our products, and services and software portfolio. There is a short-term dislocation based on what we previously discussed. I can tell you in the last three months, I've been in front of over 20 of our largest customers. And we continue to receive great feedback from our customers on our current product, software, service offerings, as well as high marks for many of the operational and business improvements we've been making over the last two years. And most recently, I can tell you, I'm receiving very positive feedback on our increasingly competitive pricing position. So that's where we were driving that early, Q1 results. And that's why we're very confident calling it the trough. We're seeing that that backlog and pipeline momentum. And we're certainly going to lean into that as we build the back half of our year here.

Brian Lee: Appreciate all that color. And then, maybe just last one, if I could squeeze in taking all that into account. I mean, I don't want to put words in your mouth, Kevin, but it sounds like first half of the year, maybe you're because of all the circumstances you just outlined, you're growing the market but then back half the year back to like being in line with market growth trends, if that's the way to read it.

Kevin Hostetler: I think it would be maybe even better in the back half and then how you've left and if we just simply look at the win rate percentages. I think we feel really good about the direction of our business at this point.

Operator: Our next question comes from the line of Maheep Mandloi with Mizuho.

David Benjamin: Hi. This is David Benjamin on for Maheep. I was just wondering if you guys expect to see the same sort of gross margin breakdown in the first half versus the second half, despite the delta in revenues.

Kevin Hostetler: It'll be roughly, to say, obviously, slightly lower probably in the first half, given the lower scale, but not on a material basis, we expect it to be fairly constant. However, I would no doubt that as your project mix and everything else, you get moved quarter-to-quarter, you saw that in 2023 and past years, but we should be relatively consistent, slightly better in the second half than the first half.

David Benjamin: Thanks very much. And is there also any of that due to work? Can you talk a little bit about like ASP, between international business and U.S., you mentioned cost downs, are you applying those to customers, both domestically or internationally?

Kevin Hostetler: One of the great things about the product base that we have is that applied universally, obviously, there's some new geographic differences you have to do for compliance. But generally, the cost savings we do will pass on to customers, or will be in our product to help the margin and/or ASP there. And each margin has a slightly different dynamic, we approach it on a portfolio basis, as you can imagine, as receding new markets, you might go in with a little bit more aggressive pricing, and you will have more established products. But as long as you're looking at portfolio basis, you're generally covered and that's how we do it. Try not to give too much color on a region by region specific just for a competitive and customer related info. We don't want to give that secret sauce out, so to speak.

Kurt Wood: But the one thing I will note is that on the international there's obviously not a pass through of the 45x benefits, clearly.

Operator: Our next question comes from the line of Donovan Schafer with Northland Capital Markets.

Donovan Schafer: Hey guys. So I want to ask about the H250 tracker. I know I think when you initially -- you really focusing on the U.S. actually at the moment. So when you initially launched, you kind of had a push-pull design I think like a lot of the other two-row tracker companies do. I know you switched to I think we saw Replus. You have the kind of more elevated two-row link to rotary because that was kind of required for the U.S. So has that like -- if we can get an update on the roll out there and what was the backlog, the large increase in backlog they had in this quarter, if you could give us the mix of H250 versus the DuraTrack or OmniTrack or if you could just give us some, whether it's more quantitative or cause it has risen to a level of materiality and moving a needle and is that part of what drove that increase? Anything that helps us understand the nexus of that with the conversations about prices, ASPs and such.

Kevin Hostetler: So what's really been happening, Donovan, that the whole point of us launching the H250 was to have a tracker at a lower price point to be able to compete with those super capex sensitive customers, and there's a handful of them, right, that are out there. And what we found that's really building is that as we've reduced our price on the core DuraTrack, that is putting a lot of pressure on those competitors to have those price sensitive. And our win rate against those products using DuraTrack has really gone way up. So what we're seeing is customers are preferring the DuraTrack at the lower price point far better than saying, hey, let's go and chase the H250 up against this other competitive platform, right? So that's what we're seeing. We still have a large backlog of quotes. On the H250, we're still pursuing that. And we think that's really important because as those competitors, and some have publicly even noted that they're getting pricing pressure to reduce their price, that's where the H250 will come into play. But what we've seen thus far is a big uptick in the sale of DuraTrack versus those competitors that we targeted the H250 at. And while you're on it, let me address OmniTrack as well. We have began getting orders, real orders for OmniTrack. And as we've said all along, we expect that to kind of be at that 10% to 15% of the overall share domestically versus DuraTrack. And I think that's really beginning to play out in kind of that volume range, if you will. So the orders in hand, I think we're already nearly just over half of our anticipated volume for this year already. So that's beginning to translate pretty good for us at this point. And what's more important is that's translating to our customers in that it's a very small price premium to the customers and that's really related to the fact that you may need a couple more foundation or posts to utilize that, but it's far more offset by the amount of grading savings to our customers. So net-net, that OmniTrack is providing the customer several percentage points of improvement in a project even relative to DuraTrack. So we're seeing that traction and I think that traction is going to accelerate as more of the EPCs work with civil engineering companies and learn how to design in that product as we go forward.

Operator: Our next question comes from the line of Joseph Osha with Guggenheim Partners.

Joseph Osha: When you discussed some of the push-outs and timing issues that you've seen, one of the issues that didn't come up is cost of capital in terms of the things your developers are struggling with. I'm wondering if in the course of your conversations, that is something that has come up as a factor in it. If you don't mind also, I do want to quickly follow up on the previous question. Is it your intention still to take H250 and drive it into the lower ASP segment of the market or is, am I hearing a more fundamental shift in your strategy vis-à-vis that and to attract? Thank you.

Kevin Hostetler: So let me, I'll take the latter first if you don't mind. No, we still intend to have the H250 as a lower value product to be able to compete with others that may drop their price in order to maintain their market share in that segment. But again, what we're truly seeing now is much more as we move our value line closer, that trade-off between us and one of those lower price competitors becomes somewhat negligible with our advantages and installation costs when you add those in and that's what we're seeing. So we're seeing people start that project and say, look this is a much better, much more competitive price. I'm going to go ahead and start the project with the DuraTrack. The H250 is ready to go. Obviously, we have lots of quotes in there for that, and internationally it's really, really quoting off the charts at this point. We feel great about that. So what we're really focused on is having that ready to be a response so that we don't have to further decline the DuraTrack price, that we can do that with the H250. So the original thesis is still solid. It's not playing out nearly to the degree we thought. What we're seeing is the DuraTrack take over much more on that. I'm sorry, can you repeat your first part of the question? Oh, the push outs, so relative, in talking to a lot of our customers and developers, there were several that talked, I can only put it in a phrase that was used to me is, why go forward and finance a project today when I know it's 50 basis points cheaper if I wait for the back half? And I look, I don't claim to be an expert in project financing, and I would think there's ways around that in the finance community, but that was a phrase, conveyed to me by a couple of developers over the last three months. I don't know honestly to what degree that's impacting things.

Operator: Our next question comes from the line of Colin Rusch with Oppenheimer.

Colin Rusch: You've offered a lot of details, so I appreciate that. But I'm just curious, embedded in the guidance for this year, can you talk about the product mix and how that's trending? You were just alluding to it, but I'm just curious what the assumptions are underlying that in terms of, some of the newer products versus older products and kind of larger versus smaller systems.

Kevin Hostetler: Yes. I don't think we give that level of detail, to be honest. I would only say that the product mix as anticipated, vis-à-vis the OmniTrack is on track, and the comment I'll make about the DuraTrack winning more against certain competitors versus the H250 in the near term.

Colin Rusch: Okay. And then just in R&D spending, is there an expected change in terms of how much you're going to spend on the OpEx side, looking at new products now that it feels like you've got a pretty full portfolio here? Should we see that moderate a little bit?

Kevin Hostetler: No, you're actually going to see that accelerate. We feel really good about the changes we've made to our engineering organization over the last two years, and it's my commitment to the engineering organization that if they continue to bring forward really viable products with great margin enhancements, and this includes new software, this includes new additional services. The amount of work we're doing on, say, accessories and clamping solutions and things like that, and value-added engineering efforts is very substantial at this point. So we're going to continue to accelerate and spend, and I think we're getting a phenomenal return out of that. And again, we talked earlier last year on a call, relative to the amount of patents, I think we're now up to nearly 120 patents that have been granted in the last two years, which again is more than the previous 18 years combined. So you're just going to continue to see us build that mode around our business with technology and patents and continue to build that out as we go forward.

Operator: Our next question comes from the line of Kashy Harrison with Piper Sandler.

Kashy Harrison: So my first set are on the U.S. pipeline growth and conversion. You talked about a 3x growth in the U.S. pipeline between 2Q 2023 and 4Q 2023. And I just want to clarify, are you saying that the growth is mainly due to cost reductions in DuraTrack, or is it H250, or is it OmniTrack? And then you said your win rate has gone up recently. Is that compared to early 2023, 2022, 2021? And then, finally, how should we think about pipeline conversion into orders, the timeline?

Kevin Hostetler: Yes. Great questions, Kashy. So when I think about win rate, what I'm comparing it to is our baseline win rate is, think about it as our historical domestic market share. So think of it that way. So if our win rate was just simply equal to our historic market share, obviously the underlying assumption is that we're seeing most projects that are out there in the market, which is not entirely true, but largely accurate, I would say. So what we try to do is, we look at that win rate accelerating above that, and that tells us that there's market share takeaway happening, above that historical market share rate. And that's what we're beginning to see now. We've seen that consistently for several months. So we feel really good about the fact that our reduced pricing in the market from those structural activities is really holding. And again, and I said, as I've gone out and met with many of our customers, they're really focused on, I have one large EPC come to see me here in Chandler, and the entire part of the meeting was, please tell me that this is structural in nature and you're not trying to buy business because at these prices I can lock in a lot of work going forward. And that was a great conversation. We walked that customer through in detail the amount of work we're doing to reduce the costs for them and it was very satisfying meeting on both our sides. So I can tell you that. So again, relative to the pipeline, that pipeline is made up of a strong mix of OmniTrack, DuraTrack and H250. That's all I can say on that. It's all of the above is sitting in that pipeline at this point.

Operator: Our next question comes from the line of Andrew Percoco with Morgan Stanley.

Andrew Percoco: Maybe just as a follow-up to some of the margin questions earlier, you're kind of alluding to some declining ASPs this year, some of that's being offset by lower commodity prices, lower manufacturing costs potentially. But I was just curious, how much additional room do you have left to lower the cost of your product from here? If you were to take a 12 to 24-month view and pricing continues to come down, whether that's competition driven or otherwise, how much cost per watt if you want to use that measure, how much left or how much further can you drive down that metric versus where you are today?

Kurt Wood: I would say a couple of things, this is Kurt. One, the R&D spend that Kevin spoke about earlier isn't only for new product introductions. We're constantly designing for how we can reduce costs out of our program as well. And also, obviously, getting smarter in the supply chain side around how we price logistics in and redesign clamps and other things like that to optimize. And then, obviously, there's each EPC or developer does things a little bit differently, so we work with them, if they have volume with us to make sure we're optimizing, to make sure, you know, not just our product, but the residual balance of system costs that overall [LCLE] [ph] is taking into effect as well. Because there could be some instances where our price is a little bit higher because we're driving value on the backend where they reduce costs there. So I think we continue to have room. You know, we will continue to design costs out. H250 is another example. It is a lower cost product of the DuraTrack. We have the ability to use that product if the price points get down to that level and still maintain our margin. So we will continue to focus on that. I will say our operations team has done a phenomenal job in executing the cost reduction goals that we had in 2023 and is a big reason of why we're sitting in the mid-20s margin without any 45X or other benefits included in there at the time. So I think there's still headway and every company will do that. You have to match that. And I think you're seeing that across the industry and we're committed to lowering the cost of solar energy globally.

Operator: Our next question comes from the line of Derek Soderberg with Cantor Fitzgerald.

Derek Soderberg: Just one for me. I was curious if you could just talk a bit more about non-tracker revenue opportunities. Any plans or introductions this year? Did non-tracker play into the gross margin guidance? If so, to what degree? Just any call-outs on the product development side there how we should think about non-tracker revenue trends in '24? Thanks.

Kurt Wood: I'll start, Kevin, and maybe you can add on if you have it. I think, look, we've made some good progress on there. Again, I'll talk about the structural enhancements, starting with Q4. If you take the 45X, which was 9.3 million, and we said we had 8.5 million of one-time charges, so they net each other out, that gives us 520 basis points year-over-year. About 3 quarters of that was coming from structural cost enhancements that Kevin talked about, and the remaining 25% was coming from these non-tracker revenue sources that we have. We expect that to continue to grow in the year, probably not a very material amount above what you're seeing here, but there lies a potential tailwind we have going out, we're promoting it, but it is factored into our guidance.

Kevin Hostetler: And just adding some color to what those entail, there's kind of three major buckets we've been focusing on. The one is accredited training programs. In order to qualify for the ITC and domestic content provisions, you have to be able to demonstrate you're using accredited training programs. And there's really a lack of them out there in the industry. So as our customers, as those EPCs are hiring labor to handle future acceleration, they need to be able to have that labor set for accredited training. So we've taken the time to create many training modules and get them fully accredited. And that's already up and running at this point. And again, as I'm in front of customers, even as recent as two weeks ago, they're thrilled that there's another resource where they can send people for this accredited training. That second area was in, for lack of a better word, [process-tizing] [ph] our services, if you will, and taking some of the things that we do in terms of commissioning, golden row inspection, health assessment inspection services, site optimization services, all of those things that we do from time to time and productizing them so that they're highly repeatable and that we actually generate revenue for them. And again, that's really good high value revenue for us. And then, the last is, really comes down to project management and looking at where we can in-source engineering services that maybe some of our customers are doing from time-to-time. And for example, the civil engineering terrain analysis that would be required to use Omni, bringing some of those services in-house and being able to provide that value added for our customers. So we're really excited about that. We're really excited about the team we've built around our services offerings, and we do expect that to continue to grow.

Operator: Our next question comes from the line of Dylan Nassano with Wolfe Research.

Dylan Nassano: Sorry if this was already covered, but I just wanted to go back to the 300 million that you guys talked about last quarter as being on the sidelines. I guess what I'm trying to understand is what is the churn? Was any of that included in this quarter's bookings? And just generally, what is the churn in those kind of delayed projects? Thanks.

Kevin Hostetler: So what we saw is about half of that came into the order book at this point. These are projects that they could just no longer delay. They need to get the orders to us -- for us to begin working with our supply chain. So we did see about half of that 300 million that were on the sidelines specifically related to IRA clarity come in. I think the rest will just roll in project-by-project normal course of business. We won't really call it out with any specificity as we go forward. But half of that is already converted now.

Operator: Our next question comes from the line of Philip Shen with ROTH Capital Partners.

Philip Shen: Can you quantify how much of the 45X you might pass along to customers? When the IRA first came out, you guys quantified the torque tube credit being roughly $1.06 a watt. The torque tube guy might get maybe a third or a quarter. Do you think you pass along as much as a quarter or a third to customers, and you guys keep maybe a third or half of it? And did you pass any along in the 45X? Sorry, did you pass some of the 45X credit with the recent $600 million in bookings in Q4? Or if not, when do you expect to start to pass some of the 45X credit along to customers? Thanks.

Kevin Hostetler: So, Phil, our margin guidance assumes that there will be a portion. So what we've been clear in our messaging is that that low 30s margin is net of the retained portion of our 45X credit. We have not entered into any specific contracts requiring us to do that as of yet. But our view, when we've been working with our customers and certainly our large partners, we've committed to them that there would be a level of sharing of that credit as we go forward. So we're not about to negotiate that over an open conference call, but our expectation and what's baked into our guidance is an expectation that there'll be a portion of that that we're going to share with our customers.

Operator: And our next question comes from the line of Vikram Bagri with Citi.

Vikram Bagri: I think in the prepared comments you'd mentioned that you're evaluating multiple avenues to gain clarity on structural fasteners. Can you talk about what avenues you're evaluating and anticipated timing of clarity? The common period for 45X clarification expired mid-Feb, but I believe you did not see clarity through that process. And on the same topic, the $40 million of 2023 IRA credit realized -- earned in '23 to be realized in 2024, is that a one-time boost to this year's EBITDA, or we may see a similar amount of IRA credit from '24 to '25. I'm just trying to understand what is the right EBITDA excluding any one-time boost or one-time items that I should use for '24. Is this $40 million shift from '23 to '24, is it one time or we'll see '24 also -- at the end of '24, a similar amount shifting from '24 to '25? Thank you.

Kurt Wood: Now I'll take the second part first, Kevin, and then you can go on to the first part. On the second part regarding the one-time nature, we think it's, one, you didn't have all of the 45X negotiated at -- including the structural factors that we know will be included going in. There's parts that are a little bit more vague that we're waiting for clarity on. So I think at least from what we know now, you're probably safe that you'll have an equal amount pushed to the following year. That amount will provide a little bit more clarity as we go throughout the year and we provide 2025 guidance. But from what we know now, that's what I tell you at that point. And I think what we're focusing on is the structural margin in the mid 20% range on the core.

Kevin Hostetler: And I'll address your comments on structural fasteners. So specifically, some of the things we're doing. So first of all, I'm really thrilled that at the end of the year we increased our government affairs team and hired a new SVP of External Policy and Government Affairs and Jessica's really having a great impact working with us and being able to navigate some of these challenges around Washington, D.C. So setting that aside, we are active in working with providing additional clarity to the IRS in terms of additional variations of definitions around structural fasteners for one. We're certainly active in a broader political push to ensure that the structural fastener elements as is are further supported. And I think for us there's kind of two categories we're focused on. The first are the amount of parts that we are already today very confident they qualify for credits based on the current guidelines as written. And our focus there isn't about changing the definition, it's really about negotiating with our parts suppliers, in terms of the split, much like we did at the end of the year into early this year with our torque tube suppliers. We're in those same negotiations with our suppliers in hopes of retaining a disproportionate amount of that benefit as well. So once we do that, once we have clarity, we've committed to come back to the market and give you guys an idea of what the size of that bread box really is. The second is a little bit more nebulous. It's a bunch of parts that may qualify and the efforts we're doing there is we've hired some third-party engineering companies to go and evaluate those parts and the definitions and give us rendered opinions on whether or not part A or B or C would actually qualify under that definition. But again, we'll then take that on board once we get the rest of that body of analytics done. And as a management team, we'll decide whether or not we feel confident enough to take some additional elements of structural fasteners. So there's a lot of work going on around that. Again, we'll maintain our commitment to come back to you when we have full clarity and disclose that. But what I will say is that's, again, upside to the guidance we've currently provided.

Operator: Thank you. We have reached the end of our question-and-answer session. And with that, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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