Array Technologies – September 01, 2022

Solar energy made up less than 5% of the United States’ electricity generation in 2021, however, this number is expected to grow exponentially in the coming decades, with estimates projecting that solar generation will make up 20% by 2050. Emerging players and advanced capabilities have made solar technology much more accessible in recent years with companies constantly improving the efficiency of systems where solar’s intermittency has proven to be a consistent obstacle. Overcast skies and limited sunshine reduce the amount of energy a panel can generate, however thanks to technology like solar tracking from Array Technologies, solar panel usage continues to accelerate, with 1 in every 2,400 households now installing solar technology annually.

As one of the world’s largest manufacturers of ground-mounting systems used in solar energy projects, Array’s utility-scale tracker technology is engineered to withstand the harshest conditions on the planet. Its high-quality solar trackers and sophisticated software maximize energy production and are helping to accelerate the adoption of cost-effective and sustainable energy.

The company’s principal product is an integrated system of steel supports, electric motors, gearboxes, and electronic controllers that move solar panels throughout the day to maintain an optimal orientation to the sun. This significantly increases their energy production and delivers a lower Levelized Cost of Energy (LCOE) than projects that use “fixed tilt” mounting systems, which do not move.

Furthermore, Array trackers use a patented design that allows one motor to drive multiple rows of solar panels through articulated driveline joints. To avoid infringing on Array’s patent, its competitors must use designs that are inherently less efficient and reliable.

In addition to market-leading hardware, Array also provides engineering services and project management to customize each client’s special requirements for optimized installation, commissioning, and support.

As the global market for solar expands, so too has Array, with projects and offices in a growing number of countries. Over its 30-year history, the company has scaled from its manufacturing base in the U.S. to become a global provider of reliable and time-proven solutions.

Array has been manufacturing solar products in Albuquerque, New Mexico since 1989 after Ron Carlo developed the first solar tracker for Wattsun Corporation. Carlo subsequently purchased Wattsun and formed Array Technologies in 1992. In the years following, the company began shipping trackers to projects across Europe and Australasia, including the largest solar projects ever delivered in the U.S., thanks to the terrain flexibility of its fixed-tilt solution which maximizes land occupancy.

Array has been the source of cutting-edge tech used in several remarkable achievements including a Helium Balloon Tracker built for Steve Fossett’s first around-the-world attempt, as well as the Canadian government’s efforts to track data in the Arctic Circle.

By 2012 the company surpassed a 1 gigawatt (GW) shipment milestone, which soon accelerated even further hitting 10GW in 2017 after expanding globally and opening offices in Sydney, Abu Dhabi, Mexico City, and Madrid.

Array Technologies started trading on the Nasdaq Global Market in October 2020 after raising more than $1 billion.

With an acquisition of STI Norland in January 2022, Array expanded its global footprint even further in the Brazilian market and strengthened its position in Europe. The acquisition also provided opportunities in new markets including the Middle East and Africa.

Kevin Hostetler recently joined Array as chief executive officer in April, bringing over 18 years of global industrial business leadership experience having transformed multiple engineered products and services companies throughout his career. Prior to Array, Hostetler served as CEO at Rotork, a FTSE 250 company, where he led the company’s Growth Acceleration Program which drove improved margins, along with capital and commercial efficiencies. He has also held several other executive roles with companies including FDH Infrastructure Services, Wind Point Partners, IDEX Corporation, and Ingersoll Rand, providing a notable background in engineering, industrial technology, and business acumen.

Hostetler is joined by Ken Stacherski and Thierry Marin-Martinod who serve as chief operations and chief technology officers respectively. Between them, they also bring decades of experience in diverse technology and industrial backgrounds from companies including Honeywell, Ford Motor Company, TE Connectivity, and Deutsch.

Array has now supplied more than 22 gigawatts to commercial solar projects around the globe, selling its products largely to engineering, procurement, and construction firms that build solar energy projects, along with other large solar developers, independent power producers, and utilities.

Large-scale solar energy projects are typically laid out in successive “rows” that form an “array”, which may contain more than 100 solar panels in each row. With Array’s single-axis tracker system, motors and gears cause each row of solar panels to rotate and continually align with the sun throughout the day. The patented system which uses one electric motor to drive the rotation of multiple rows, only requires a single bolt clamp to attach solar panels, and also automatically stows in high wind conditions.

The system has significant advantages for customers over other manufacturers as it requires fewer motors per megawatt, creating site design flexibility, enabling higher power density, and also making installation easier than competing products. While SmarTrack Software uses site-specific historical weather and energy production data, in combination with machine learning algorithms, to identify the optimal position for the solar array in real time to increase its energy production.

Array customers also benefit from engineering expertise to design and deliver the optimal solution for each unique project, which also includes installation training services and dedicated project management to provide comprehensive technical support.

Field service engineers are located in the geographies where Array is active, where they support customers with not only the commissioning of large projects, but also the introduction of new technologies and features.

Array’s products reflect a steadfast focus on innovation and its product roadmap is rooted in maintaining and delivering this value to customers via differentiated products and services, whilst also facilitating the creation of new markets. It continually devotes resources to research and development intending to develop new products and services that enhance system performance, improve product reliability, reduce product cost, and simplify installation.

Array has introduced three generations of trackers and each new version has delivered significant cost and performance improvements over the prior iteration. The company is currently developing the fourth generation of its DuraTrack technology which will focus on improvements to performance, reliability, and cost of ownership. It is also planning to introduce improvements and additional functionality to its SmarTrack software, including unique positioning algorithms designed to maximize energy production from arrays that use bi-facial panels. The upgrades will include pre-positioning instructions based on weather forecasts and enhanced site-specific machine learning capabilities, as well as cybersecurity enhancements.

Core to Array’s sales and marketing strategy is to educate all influencers and stakeholders involved in building, owning, and maintaining a solar energy project on the merits of Array’s products generally and their low lifetime cost of ownership specifically. To make DuraTrack the preferred tracker system globally, the company informs customers and these influencers through a combination of direct sales efforts, commissioning independent studies, hosting training seminars, and sponsoring industry conferences and events.

Looking at the current state of the industry in the U.S., Array has noted that it is highly encouraged by the recent executive order issued by President Joe Biden in support of domestic clean energy. As a result, the company is now forecasting that approximately $240 million of projects it had previously identified as at risk are now expected to move forward. While the majority of these projects will not get delivered in 2022 due to lead times, the demand is now importantly solidified.

Additionally, the passing of the Inflation Reduction Act, the climate and tax package that could unlock $370 billion in funding for the clean-energy industry, provides meaningful clarity on the long-term incentive structure for the solar industry, including investments that aim to tackle climate change. This clarity allows participants to confidently make decisions on future investments therein accelerating the adoption of solar energy.

The secular trends toward solar adoption along with Array’s expanding footprint are being reflected in its financial performance. In its latest reported results, the company had a blowout quarter as revenue grew by 116% to $424.9 million, compared to $196.5 million for the prior-year period thanks to the STI Norland acquisition which contributed revenue of $72.7 million. While organic growth in the legacy business also surged 79%, up $155.7 million, driven by both an increase in the total number of megawatts shipped and an increase in the average selling price.

In addition to top-line growth, Array also delivered a gross margin of 11.1%, for its third consecutive quarter of improvement, as the company targets restoring historical margins with a mix of new, higher-priced contracts.

While operating expenses also increased significantly to $54.2 million primarily due to an $18.3 million amortization expense related to the STI acquisition, adjusted net income came in at $14.2 million, up from $3.0 million in the prior comparative period.

Looking ahead, total revenue for 2022 is expected to be in the range of $1.3 billion to $1.5 billion, in line with consensus estimates, representing over 70% growth over FY21. While earnings per share estimates are forecasted to increase by over 331% to $0.30 per share, up from $0.07 in 2021.

Trackers are highly specialized products specific to the solar industry, and the unique expertise required to design them along with customers’ reluctance to try unproven products has confined the number of firms that produce them to a relatively small number. Array’s principal competitors include NEXTracker Inc., PV Hardware, and Artech Solar. It also competes indirectly with manufacturers of fixed tilt mounting systems, including UNIRAC Inc., and RBI Solar Inc.

Furthermore, based on product performance and features, total cost of ownership, reliability and duration of product warranty, sales and distribution capabilities, and training and customer support, Array believes it has a highly completive and differentiated offering.

Throughout its history, Array has exclusively focused on designing and manufacturing solar tracking equipment. This focus has helped ensure its customers benefit from the highest return on investment and the lowest LCOE, while leading the industry in reliability, durability, and quality.

Additionally, with its recent expansion tracking exceptionally and significantly boosting already impressive organic growth, coupled with regulatory changes providing significant support for the industry, Array appears to be at an inflection point for creating compelling shareholder value.