Array Technologies, Inc.

Hello, and welcome to Array Technologies' fourth quarter and full year 2021 earnings column. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero and the telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Cody Mueller, Investor Relations at Array. Please go ahead.

Good evening. And thank you for joining us on today's conference call to discuss Array Technologies' fourth quarter 2021 results. Slides for today's presentation are available on the investor relations section of our website, arraytechinc.com. During this conference call, management will make forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect because of other factors discussed in today's earnings press release, the comments made during the conference call, or in our latest reports and filings with the Securities and Exchange Commission, which can be found on our website, arraytechinc.com. We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the company's fourth quarter press release for definitional information and reconciliations of historical non-GAAP measures to the comparable GAAP financial measures. With that, let me turn the call over to Jim Fusaro, Array Technologies CEO.

Thanks, Cody, and good evening, everyone. Thank you for joining our fourth quarter earnings call. In addition to Cody, I'm joined by Nipal Patel, our Chief Financial Officer, Erica Brinker, our Chief Commercial Officer and Head of ESG, and Brad Forth, our Chairman. I'll start off today by providing an update on a few key aspects of our business and what we have done as a company to build a strong foundation in a challenging operating environment. Then I'll turn it over to Nipal to cover our fourth quarter and full year financials, as well as a more detailed discussion on our 2022 outlook. Erica will then provide some additional color on ESG efforts to date and our plans for the future. Brad will then wrap it up with comments on the CEO announcement today. Turning to page five of the presentation, I first want to spend a little bit of time talking about three key industry-wide challenges that are present and how Array has looked for opportunities not only to mitigate risk, but how to use them to further strengthen ourselves in the market. First, in 2021, there was a rapid and significant rise in commodity and logistics costs, which put margins under an incredible amount of pressure for many in our industry. Historically, this industry was used to cost coming down the curve, not the other way around. This abrupt change upended the way the industry thought about risk and necessitated a rapid and meaningful change to the way companies up and down the value chain thought about pricing. While we are still working through some of the short and medium-term impacts of these cost increases, back in the second quarter of 2021, we took a proactive approach with our customers and suppliers to find a way to keep projects moving forward in this volatile environment. We asked our customers what was important to them and how they perceived risk going forward. And two key themes emerged. The first being there was a need to take as much volatility out of the pricing as possible. In order to secure financing, pricing on trackers couldn't be a constantly moving target based on commodity price changes. And the second, material availability was a critical must-have. There was too much risk to the construction of a site if the customer could not count on the tracker being delivered as scheduled. We listened to what those must haves were and developed and implemented our LOI process. We were able to offer our customers a fixed tracker price and confidence in material availability. We were able to shift to this process because of the longstanding relationships we have with our suppliers and confidence they had in the growth of our business. The ability for us to understand the customer needs and quickly change our business processes allowed us to go on the offensive. We began winning more business and adding more customers who wanted to do business with Array. In addition to rising costs, there was a widespread tightening of global supply chains and logistics availability. This dynamic has not only led to increased lead times, but also has created broader challenges in getting the right parts to the right place on time. Even with an already large and geographically diverse supply chain, we faced the challenges and certainly felt the pain of having to constantly rework supply chain plans to ensure we could meet customer build schedules. However, because growing our supply chain was deeply ingrained in our nature, it allowed us to make meaningful additions quickly. In fact, last year we added 20 new suppliers, and with the acquisition of STI, we have expanded our supply base by over 40%. From there, we went a step further, entering into long-term MSAs with key suppliers to ensure competitive pricing and availability of supply. This focus allowed us to expand our global capacity over the last 12 months by 25 percent and only increasing our domestic lead times by two weeks, which we believe is the shortest increase amongst our competitors. Being able to deliver quickly and have confidence in the availability of supply have emerged as two key differentiators for us. And finally, the U.S. regulatory environment has created a significant amount of uncertainty around the availability of modules. Both the ongoing WRO enforcement and the recent ADCD inquiry have created a potential headwind for the entire industry. While we do not procure any modules ourselves, the availability of them impacts our customers and their bill schedules. So, we've been addressing this issue on two fronts. The first, We are actively engaged with Washington, D.C., both through trade groups and directly through our local representatives. This outreach is key to educate the administration and Congress that in order to meet its longer-term climate goals, there has to be a period of module stability. Second, we remain in constant contact with our customers to understand both the certainty of their module supply, but also to proactively work with them on site redesign efforts for module swap-outs. It's also important to note that with the acquisition of STI, we have diversified our portfolio so we have less concentration in the U.S., which also helps to reduce our exposure. When I look back at the difficult operating conditions that have existed for our industry over the last year or so, I am proud of the position we're in today. We've been nimble, we've remained focused on the customer, and we've adapted in ways that have built a strong foundation for which to grow. Moving to slide six. you will see a key element of that foundational strength. Our executed contracts and awarded orders, which we refer to as the order book, over the last 12 months has more than doubled, from $7.5 million to over $1.4 billion. This is our legacy array business, not including STI. The majority of this increase has come by way of increased volume, with roughly 20% coming by way of price increases. When we add STI, Array is currently sitting at over $1.8 billion, which is a 163% increase from a year ago. Also note, because of the STI acquisition, a quarter of our order book is now represented by projects outside the U.S. There's a lot of momentum going into 2022. Turning to slide seven, if we break down our order book, to just what is scheduled to deliver in 2022, you can see that we have $1.75 billion. That, based on current delivery schedules, would have shipments expected to ship during 2022. At a forecasted revenue midpoint of $1.6 billion, this would mean we need only to convert just over 90% of this order book to reach our number. And that does not factor in any projects that we will book and ship within the year. Compare that to our actual order book conversion in 2021, which is shown on the left, where we finished the year at 130% of the order book scheduled to be delivered in 2021. And you can see that we have assumed that project delays will continue to be an issue we need to contend with. However, and even we'll discuss this more later, even with that level of delay expected, our implied growth of our revenue at the midpoint of our guidance is over 85% when you include STI and 40% on an organic basis. Finally, today we announced that April 18th will be my last day as CEO. It has been such an honor and privilege to lead this company over the last four years. As I look back at all of the team has accomplished, I could not be more proud. We've had a number of significant achievements, our IPO, acquiring STI, and hitting a billion-dollar order book last quarter for the first time, only to set another record this quarter. But what I will remember most from my time here is how much everyone rallied together when there were challenges. There is a grid to Array that I believe is built into its DNA, which has served the company so well, really since the company was founded. Over the last few years, we've transformed into a global renewable energy leader with an incredible platform to grow even bigger. The pieces are in place, and I look forward to seeing the great things this company will do in the future. So I would I'd like to not only thank my management team, but the entire organization for their support over the last several years. It has been quite a ride. With that, I'd like to turn it over to Nipo.