Array Technologies, Inc. (ARRY) Q1 2026 Earnings Report, Transcript and Summary

Greetings, and welcome to Array Technologies First Quarter and FY 2026 Earnings Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce Sarah Sheppard, Array's Head of Investor Relations. Thank you, and you may proceed, Sarah.

Thank you. I would like to welcome everyone to Array Technologies First Quarter 2026 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 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 achievement. 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. Our performance this quarter reinforces that demand across our core and differentiated products remains strong, and our adjusted gross margin is durable and execution-driven. I'll begin by highlighting some key achievements from the first quarter, followed by a discussion of how our 2026 performance is trending and an update on our strategic priorities. I'll then pass it to Neil and Keith for an update on our product and operational initiatives and a walk-through of our financial performance. Let's begin on Slide 4 with a brief discussion of our financial highlights for the quarter. Q1 was a strong start to the year for Array. We delivered $223 million in revenue and achieved significant profitability improvements with adjusted gross margins reaching 30.7%, a significant improvement versus the prior quarter and adjusted EBITDA came in at $29 million, an $18 million improvement sequentially. These numbers include onetime benefits of a little over 300 basis points. Volumes increased approximately 15% quarter-over-quarter, with revenue stable due to lower ASPs driven by project mix. Importantly, that volume growth, combined with improved execution drove meaningful margin expansion sequentially, reinforcing that our profitability improvement in the quarter is execution-driven, not price dependent. I'm pleased to report we achieved another record order book this quarter of $2.4 billion, marking the second consecutive quarter with a roughly 2x book-to-bill ratio. We now have a 12-month trailing book-to-bill ratio of 1.3x. I'll now turn to Slide 5 to discuss our business highlights for the quarter. On the commercial front, our momentum continues to build. As noted, our new record order book of $2.4 billion represents growing traction across our new product introductions. We also began multiple deployments of SkyLink, reinforcing our ability to deliver on our innovative product road map. Internationally, we executed contracts in 3 expansion countries across EMEA and Latin America during the quarter, demonstrating the broadening reach of our global platform as we extend our industry-leading platforms internationally. Taken together, these updates reflect our execution-driven culture, investing in innovation, scaling new products and expanding our geographic footprint, all while growing a high-quality order book, positioning us well for the future. At APA, we officially opened our new 30,000 square foot headquarters, bringing together our functional teams under one roof to drive closer collaboration and faster innovation cycles. Our campus now includes a dedicated research, testing and training center for new product development, anchored by a 5-acre solar site where we can validate new product innovations in real-world conditions. This expanded facility also houses APA's Foundations Center of Excellence, which is central to delivering differentiated customer value through integrated offerings and strengthening the technical interoperability between APA Foundations and Array Tracker solutions. Moving to Slide 6. I'll revisit our strategic priorities for 2026 introduced on our last call. Q1 execution delivered tangible progress across all 3 pillars. First, innovation. We're introducing our highly anticipated DuraTrack D2S tracker internationally, and the APA integration is progressing very well, broadening our product portfolio and tracker foundation interoperability. We're planning to host members of the investor community at APA around the first anniversary of our acquisition, where we will showcase our vision for APA within the Array portfolio. We look forward to sharing more details on this event in the coming weeks. Second, international expansion. We executed OmniTrack and DuraTrack contracts in Turkey, Peru and Colombia, building real geographic diversification on a proven unified product platform. We believe the execution of our international strategy will only strengthen with our introduction of the D2S. Third, customer-first culture. Our record order book and 2x book-to-bill reflects strong customer confidence. Our technical sales efforts are lifting win rates through deeper engagement as we provide our customers with technical data supporting our elevated performance in real-world conditions. As many of you are reading in recent industry reports, Array is showing up. Our priorities continue to work in concert. Innovation feeds our international expansion and both are supported by the deep customer relationships we've built and continue to reinforce. We're executing with discipline and the results this quarter validate our strategy. With that, I'll turn it over to Neil to discuss some of the proof points of our success against our priorities in greater detail.

Thank you, Kevin. Starting on Slide 7, I'd like to introduce our first major new product of the year, the DuraTrack D2S, our new dual-row tracker designed for international markets. The D2S combines the differentiated features and innovations of our flagship DuraTrack technology platform with the 2-row architecture of our legacy STI H250 to create one single flexible solution. It's built for high reliability, enhanced performance and durability in projects that benefit from a 2-row configuration, which is a preferred format across many international markets. Let me walk you through the key differentiators. First, D2S features our patented passive wind stow technology. The third-party study by D&V confirmed that this exclusive to Array capability can boost power production by up to 4% by minimizing wind-related energy losses from unnecessary snowing. It's a very meaningful yield advantage for our customers, which dramatically enhances their economics. Second, we've incorporated OmniTrack terrain flexibility into the platform, giving a critical terrain adaptability. This means D2S can be deployed on sites with challenging topography where competitors struggle, opening up a wider range of project opportunities for our developers. Third, the system includes optimal backtracking, diffuse and inhaled snow alert response through SmartTrack compatibility, ensuring intelligent road-to-road coordination that optimizes energy output across an entire solar array. Importantly, it's powered by an integrated TV panel with dependable battery backup. There's a resilient, self-sustaining power supply, reducing balance of system cost and improving reliability in remote installations. From concept through design and launch to installation, the D2S platform was built with a keen focus on driving improved economics for our customers. We're already seeing strong customer reception for D2S. Our first commercial installation in Spain is up and running, and the early feedback has been outstanding. Our customer is eager to deploy D2S as soon as it was presented. The Jewel row configuration with passive wind stow technology is exactly what international markets have been demanding. D2S is a great example of how we're innovating our future, taking our core technology strengths in passive wind stow, great adaptability and smart controls and packaging them into a purpose-built solution that directly addresses what international customers need. We expect the D2S to be a significant differentiator as we diversify our international business. D2S will formally launch and be available for quoting at Intersolar Munich in June. Turning to Slide 8. Momentum strengthened in Q1 across regions, and we're seeing the results of a more disciplined, standardized approach in how we go-to-market globally. In North America, we've highlighted the strength of the U.S. business, including the momentum APA is building. APA's enhanced bankability is expanding opportunities in both utility scale tracker projects and large-scale fixed tilt projects often tied to growing data center development in support of AI-driven demand. We're increasingly seeing 100-megawatt-plus opportunities for APA. In several cases, the dialogue has shifted from megawatts to gigawatts. That momentum showed up in Q1 with a record level of foundation testing activity, an early indicator of future demand. In EMEA, we're driving a focus on global accounts and the disciplined diversification model. Notably, we contracted a meaningful OmniTrack deal in Turkey where OmniTrack is solving difficult terrain challenges. Our emphasis is on engaged partnership alignments enabled by standardized platforms to deliver repeatable results, not one-off wins. In Latin America, we've expanded our pipeline beyond Brazil, driven by our OmniTrack and DuraTrack technology value propositions. We executed contracts in both Peru and Colombia, which reinforces our momentum in the Ian growth markets. We continue to prioritize projects where our technical engagement supports LCOE-driven value. We're being selective and returns focused. In Asia Pacific, we continue to advance large-scale projects with strong local partners. Australia remains a key market, our execution capability and customer relationships are enabling share capture and our track record of deploying local domestic content projects there continues to be a differentiator. In short, the common thread across all 3 regions is that we're moving toward a standardized model centered on our differentiated flagship technology. The progress in Q1 demonstrates that this approach is working and positions us well to scale internationally over time. Turning to commercial execution. This quarter marked a step-up in how we go-to-market and more importantly, how consistently we execute. Across regions and customer segments, we are seeing the benefits of a more disciplined technology-led selling approach. We are anchoring conversations around LCOE-driven value, not lowest price outcomes, and we're engaging earlier and more deeply from a technical advantage on complex projects. That's improving both win quality and execution confidence. Differentiated offerings like D2S, OmniTrack and APA foundations are playing a critical role here. They allow us to compete on performance, reliability and life cycle value, broadening our addressable opportunity while supporting pricing discipline. These execution improvements are clearly reflected in the order book. We exited the quarter with a $2.4 billion record order book, approximately 50% with Tier 1 customers and over 95% domestic, speaking to the quality and resilience of demand we're capturing. We're also seeing strong momentum for new products, which now represent over half the order book, a clear validation of our innovation road map and customer adoption. Importantly, about 80% of the backlog is expected to convert over the next 6 quarters, providing strong visibility and predictability as we move through the year and into 2027. This is not a 1-quarter outcome. Over the past 4 quarters, we've achieved a 1.3x book-to-bill ratio. The combination of standardized global platforms, title commercial coordination and disciplined risk screening is creating a more repeatable execution model. This positions us well to convert backlog efficiently, protect margins and scale profitably as demand continues to normalize and grow. To summarize, we're building a commercial force that is more consistent, more selective and more returns focused that we believe fosters our durable performance in 2026 and beyond. With that, I'll turn it over to Keith to discuss this quarter's financials in more detail.

Thank you, Neil. Slides 11 and 12 summarize our first quarter financial performance and the primary drivers behind the sequential changes we're seeing in the business. We had a strong start to the year. Revenue was $223 million, and we delivered meaningful sequential profit improvement, driven primarily by geographic mix, incremental 45x from supply partners onshoring and our productivity initiatives. While our quarterly revenue cadence continues to be influenced by seasonality and customer project timing, the underlying demand and pipeline activity remained very healthy. Adjusted gross profit was $69 million, up 24% quarter-over-quarter and adjusted gross margin was 30.7%, up 620 basis points from Q4. Our margin performance was driven by a heavier domestic mix and cost-out initiatives with onetime items contributing a little over 300 basis points in the quarter. These onetime items were primarily driven by a 2023 to '24 tariff recovery and an incremental 45x benefit resulting from our continuing efforts to onshore additional components. As we look forward, we expect margins to be influenced by normal variability in project sequencing, international versus domestic mix plus commodity and logistics input costs. Adjusted SG&A was $41 million, an improvement of 9% sequentially and in line with our expectations. Adjusted EBITDA was $29 million, up 157% sequentially, and our adjusted EBITDA margin was 12.9%, up from 5% in the fourth quarter. The improvement was driven primarily by the gross margin flow-through, along with continued discipline on operating costs. GAAP net loss to common shareholders was $14 million, a substantial improvement over the fourth quarter, which included a onetime $103 million and $30 million goodwill and inventory valuation charges, respectively. Diluted loss per share was $0.09, while adjusted earnings per share was $0.06 compared to a loss of $0.01 in the fourth quarter. Before turning to the balance sheet, I want to briefly touch on cash generation. As expected, free cash flow performance in the first quarter is a result of normal seasonal working capital dynamics, including inventory positioning for our business acceleration in the coming quarters. We continue to expect working capital to cycle upwards in the first half and become a source of cash as we move through the second half of the year, consistent with our historical pattern and aligned with adjusted EBITDA performance. Additionally, we invested $7.5 million in capital expenditures, primarily towards completing the build-out of our new manufacturing capabilities. We maintain our guidance of 2026 being a cash-generative fiscal year, and we believe our strong balance sheet has us well positioned. In the first quarter, we continued to improve our financial flexibility. As we previously discussed, we upsized and extended our revolving credit facility, which meaningfully expanded our total available liquidity. We ended the quarter with approximately $550 million of total available liquidity, including $200 million of cash and a fully undrawn $370 million revolver, net of letters of credit. Net debt leverage was 2.7x trailing 12-month adjusted EBITDA, well within our targeted range and providing ample flexibility as we execute through the year. Turning to our overall outlook on Slide 13. We had strong first quarter execution and demand indicators remain healthy across our core markets. Commercial engagement is strong, and our backlog and pipeline continue to support our 2026 framework and our view into 2027. Consistent with that view, we are reaffirming our full-year 2026 guidance across all key metrics, reflecting continued confidence in demand, backlog assurance and our execution capabilities. Our adjusted gross margin outlook of 26% to 27% for the year is unchanged. Excluding the onetime benefits in Q1, our underlying margin profile remains stable even as we manage through some current macro impacts. Looking beyond this fiscal year, we see multiple structural levers for margin expansion. These include increased penetration of differentiated products and software, including DuraTrack D2S, OmniTrack, APA Foundations and SmartTrack. International scale benefits as our execution model firms, integrated systems value from cross-selling trackers, foundations and smart controls and continued productivity gains, including efficiencies from our new Albuquerque facility. To summarize, we expect to protect margins today through focused execution, while innovation and diversification are positioning us for margin expansion over time. As we look at the year's cadence, it's important to note a modest shift in expected first and second half split. Based on our latest assessment of our customers' project sequencing and/or delivery preferences, we expect revenue in the second quarter in the range of $300 million to $320 million. Q2 adjusted gross margin is expected to be at the higher end of our full-year guidance range with second half margins largely influenced by mix with a ramp in international volume. We continue to manage the business for the long term with a responsible eye on the fiscal year, prioritizing disciplined execution, backlog conversion, margin protection and operational flexibility as projects move through permitting, interconnection and customer-focused delivery milestones. With that, I'll now turn it back to Kevin for closing remarks.

Thank you, Keith. To wrap up, we're proud of the way the team has executed in the first quarter, delivering results above our expectations, driving another 2x book-to-bill quarter and reaching a record $2.4 billion order book. These are important indicators of both overall industry demand and our recovering position within our industry. We are further pleased with the continued improving visibility in our business. While the macro and regulatory backdrop remains fluid, we're executing with discipline, converting our backlog, protecting our margins and investing in differentiated products that support long-term value creation. In Q2, we expect to reach an important milestone surpassing 100 gigawatts of trackers deployed globally. We're incredibly proud of our accomplished track record of excellence, and we're excited for the next 100 gigawatts. Thank you for your time today and for your continued interest in Array. With that, we'll open the line for questions.

[Operator Instructions]. The first question comes from Julien Dumoulin-Smith from Jefferies.

Kevin, nicely done. I got to hand it to you guys on that market share commentary at the end there. Really kudos on the recovery here. Maybe just to that end, actually, while we're talking about it, can you talk a little bit about what you're doing on the gross margin side on the -- you just did hedging the background, energy commodity, shipping, logistics, just kudos on holding the line on margins here. Just talk about the hedging strategy, mitigation offsets and just altogether, how you're seeing this year come together. Again, obviously, probably some legacy contracts here on '26. I've got a quick follow-up.

Yes. Thanks, Julien. Look, we're really proud of how the quarter shaped up. I can only say that 2 weeks ago, I celebrated my fourth year anniversary and every year for the first 4 years, we've experienced a black swan event. As one of my colleagues reminded me that when you have a black swan event every year, it's no longer a black swan, right? When we came out with the margin guide, we took that into account and ensured that we can withstand some level of shock to the system, for lack of a better word, throughout the year. Certainly, 48 hours after our last earnings call, we began a war in Iran, and now we're subsequently dealing with elevated logistics costs. We're pretty proud of our ability to be able to absorb those elevated logistics costs and not have to change a guide 1 quarter after we just gave it. I think we took a very prudent approach. We have lots of puts and takes in our business, but you have rising commodities, rising logistics offset with a lot of heavy work we've been doing in the business, driving productivity gains as well as the new product success, right? We've been giving the market that chart of showing just the continual increase in new product development as a percentage of our backlog, and it's just got some incredible momentum here. The fact that we're over 50% new products in the backlog as products launched in the last 2 years, those are the ones we've highlighted over and over again is a great proof point of our ability to drive higher margin in the outer years. We're quite excited about where we sit today.

Then maybe if I can follow this up on there's a lot of talk in the market about this tax equity issue, and it seems more of a resi issue than utility scale issue, but with that said, how are you seeing, if any, project push from maybe '27 FIDs? Any shift in your time lines, anticipated project in services, anything like that, that you're looking across your book of business? I'm just curious, even if on the horizon here, do you see anything on '27, '28?

Look, we really haven't seen any shifts derived from that. Obviously, in the near term, our current near-term guide is predicated on pretty well-financed projects already. To your point, you'd only be looking in the outer years, and we just haven't seen an impact or haven't seen any material changes to our schedule as of yet. I think part of the proof points we've been explicit in is giving, again, that conversion rate that we did in our script that we expect about 80% of the order book to deliver over the next 6 quarters. Clearly, that's not a promise on any single project timing, but it's an important signal that our backlog is increasingly aligned to the near-term delivery windows versus being kind of long-dated and opaque. We feel pretty good about that.

The next question comes from Philip Shen from ROTH Capital Partners.

First one is on diversification. We've written a fair amount that a lot of customers out there, developers, IPPs are looking to diversify their tracker sources, even some with meaningful exposure to one of your peers. I was wondering if you could share some color on what you're seeing, those conversations you're having with customers and what the opportunity might be for even accelerating bookings beyond what you've shown in this quarter here?

Yes. I think, first, I want to make sure we get a couple of really good proof points out into the market. I think one of the great proof points of our momentum, you'll note that we've had over $900 million in new orders over the last 2 quarters. That's quite significant for a business our size. I should also note that while we're really proud of having a record order book for Array, we would have a record order book for Array even if we excluded the APA bookings at this point. Again, it's organic and inorganic traction that we have going on in our business. I think that the single biggest change, you know we've been on a journey commercially now for probably about 18 months. where we've been rebuilding the commercial team, strengthening it and bringing to bear a whole new way of selling, which is highly technical, having engineers sell to the engineers of our customers and bringing proof points and third-party engineering data to bear that shows that in many cases, we simply generate more energy than some of the competitors out in the marketplace. When we can demonstrate mathematically using real-world conditions, not lab conditions, that we could generate 2%, 3%, 4% more energy, that's really, really meaningful to a couple of the constituencies we now sell directly to. That's really meaningful to utilities and developer asset owners in particular. We've always done well with EPCs because of our ease of installation. Now rather than have a -- get into a price war down at the EPC level, we're trying to get specified much more by the asset owners ultimately. They're really recognizing some of the technical differences and benefits that we provide. We see really good traction, and you're seeing that in our win rate and our order book.

Then back to margins for a bit. I think, Keith, you talked about Q2 being at the higher end of the range for the year and then Q3 and Q4 maybe being lower, but still maybe within that 26% to 27% range. I just want to make sure we have that right cadence. Then you talked about expansion levers for beyond this year. I was wondering if you might be able to talk about or quantify where '27, I know we're a little bit early, but where '27 ultimately could go. Are we talking about 100 basis points? Or is there some potential for something more meeting?

Look, I'll let Keith talk more of the proof points in the margin this year and the flow, but I'll just jump in and caution that we're not ready to guide '27 margin yet. We've certainly provided the market with several initiatives that are very tangible that drive margin improvement in outer years, and we're going to continue to execute on those. We're not this early going to guide. Look, in particular, we're still in a very dynamic marketplace, right? We're going to be very cautious and not guide '27 just yet.

Thank you for your questions, Phil. Look, when we think about Q1 gross margins, you have to separate it into 2 components. There's the one-timers of roughly 300 basis points that came from the tariff protest that we filed for 2023, 2024 tax years and also what can be best characterized as a prior year 45x adjustment. Then the second component is the core. The core margins of around 27% reflects outsized proportion of having a strong ATI versus STI quarter in Q1. As we look forward to the rest of the year, we are still very confident that despite all the different things happening out there, logistic costs, inflation pressures on transportation, freight, other things, whether driven by macro or otherwise, we are forecasting that our productivity and cost-out initiatives will balance that out. At the same time, as the international business comes back in the second half, that will play on the margin mix at the consolidated level.

The next question comes from Joseph Osha from Guggenheim Partners.

You all have said in the past as a result of what's been happening in Brazil that you were not actually putting those bookings into the backlog number. I'm wondering if that's still the case? If so, what the story might be there?

No, it's a great question, Joe. First, I'd like to remind everyone on the call that we've made no changes to our definition of order book. I think there may have been some confusion here during our last quarter's call because I did see some write-ups, frankly, get this wrong. The only difference is how we're treating some of the international orders, to your point, Joe, where we're taking a more conservative approach and holding them out of our order book until such time as we feel sure of the actual project timing. Yes, so in that respect, is the record order book still a conservative view of our order book? Yes, it is. We are still holding some of those wins on the sideline until we're more sure that these projects are actually going to move forward in the time line we expect. The reason being is that, look, we experienced this last year, whenever you would have a debooking in Brazil, which we had a few, it would mask the underlying great momentum we had domestically on the commercial recovery. We decided just to hold them site and not have to have dialogue in our earnings calls about this gross to net bookings and the momentum. We'll continue that practice of holding some of those on the sidelines, and we're not going to quantify that yet. We're going to continue that practice of holding them on the sidelines until we're much sure of the actual project timing.

You anticipated the question, I was going to ask for a number and you don't want to give it. Might you be able to weigh in on some timing? Is there a point at which some of this backlog might find its way into the order book?

I think it will begin in the second half of this year, Joe, as we start getting sure of some of the timing of projects moving forward. internationally. You'll see a little bit more of that leaking in, in the second half of the year. Look, I think it's important to say not only the headline records, the second consecutive record order book we've had over the last 2 quarters, right? We're pairing it with several quality indicators that improves our convertibility, namely, look, we've got a higher domestic mix, greater than 95% of that order book is domestic, meaningful higher-quality Tier 1 representation, a lot more being sold direct to the utilities and to Tier 1 developers and a growing mix of our recently launched higher-value differentiated products, right? That's really meaningful here. The improving quality of our order book translates for us into clearer execution visibility as we move throughout the year. Again, we gave the conversion of the 80% of the order book to deliver in the next 6 quarters, and we feel really good about the shape of our order book and the quality there in. We're getting there without changing the definition of what we consider in our order book, to be clear.

The next question comes from Ben Kallo from Baird.

Congrats on the quarter. I wanted to talk -- stick on Joe's topic of the international business. Just maybe match that with -- when you talk about share gains, are you talking about share gains against trackers or against trackers and fixed tilt maybe is one. Then when you talk about international, you spoke about, I think, more of a value-based approach to selling or at least customers appreciating the value that you bring. Typically, international carry lower margin. Is that still the same with this change in thinking about the total value you create? Or are you getting better pricing there, I guess, is the question?

Sure. Let me start with just an explanation of the order book and the proportion of APA, right? First, the look, APA, as you recall, last quarter, we noted that APA was roughly about $100 million of our order book. We actually saw a 50% increase this quarter. Directionally, they're about $150 million of the order book that we just talked about. I think it's important to provide some context here. APA is a shorter cycle business than Array. You'll recall, they had a full-year 2025 revenues of $130 million. Sitting on an order book already in a short-cycle business of $150 million is really demonstrating that they are taking market share in fixed tilt, their traditional legacy portion that made up a disproportionate amount of their business. They're getting larger programs. The average size of orders they're now participating in since being part of Array is up significantly. As Neil said, we're talking about programs and discussion points rather than megawatts in terms of gigawatts at this point. The thesis is playing out very, very effectively for us. It supports the strong double-digit revenue growth we've already called out for APA in 2026. Domestically, for the legacy Array business, it is obviously tracker penetration that's driving the increase in our order book. Then I'll let Neil weigh in a little bit on what we're seeing internationally just in terms of pricing and the dynamics we still see on the international. Go ahead Neil.

Yes. I'll certainly weigh in. On the international front, certainly from a Spain and Brazil standpoint, both of those markets are going through a number of macro issues, including curtailment. As part of that, we've also then seen some low-cost competitors in the parts of the world come in as well. We've been very open in past quarters about talking about being selective and returns focused about where we strive to diversify internationally. We've been looking to locations that specifically have an appreciation for the value proposition that we bring for difficult train, potentially extreme weather and also areas where domestic content is a requirement. That's where we're really now seeing returns as we referenced in the updates around the new projects in Turkey and Colombia and Peru. All of those are examples of difficult train or local content requirements where Array can really differentiate from the competition and then drive to a margin level that's more within our expectations. As we go forward, we look at the international recovery beyond that, that's going to be really our prism. We're going to be looking for areas that have an appreciation for the differentiation that we bring. That's also been a key part of why we brought D2S to market because it's bringing a 2-row configuration then combined with the best features from DuraTrack that allow us to drive that different value proposition for customers.

The next question comes from Brian Lee from Goldman Sachs.

This is Tylor Bison on for Brian. I appreciate the nice to see the continued traction on the new products. I guess out of the 80% of the order book that's getting delivered in the next 6 quarters, how much of that is related to new products? Like is that split pretty similar to the current 53% today? Or is there a slightly heavier weighting to the 20% beyond that 6-quarter time frame?

No, I think it's very similar weighting, frankly. Yes.

Then I guess just from a capital allocation.

I guess one other – sorry, one other proof point I'll give you is that this was a critical quarter because the percentage of our backlog that's from OmniTrack, our terrain following tracker versus DuraTrack flipped for the first time this quarter. Now we have more OmniTrack in the backlog. That just gives you a sense of how strong that product is being accepted by the market at this point. This is the first quarter where that has gone the other way. It's flipped now.

Then just from a capital allocation standpoint, how are you thinking about future potential M&A opportunities versus investing in your existing business today?

This is Keith Jennings. The way we think about it is, right now, we are running the business as best as we can, disciplined, earnings and cash focused. As we generate cash, we're thinking about managing our flexibility, of course, making sure that we can take advantage of opportunities. We continue to think about our capital structure and opportunistically, we are scanning the marketplace to make sure that we continue to add to the portfolio under the theme we laid out last quarter about ensuring that as we acquire new businesses, we can prove that there is interoperability between the parts and increase our relevance to our customer base.

The next question come from Corinne Blanchard from Deutsche Bank. Ladies and gentlemen, apologies, we do apologize for that, but we have been rejoined by the main speaker. Corinne, I would like to hand over to you to pose your questions.

I just wanted to ask actually on the cost profile. I think 1Q was slightly better maybe than expectations. If you can just walk us through expectation and your view into 2Q and the second half of the year, that would be helpful.

When it comes to our gross margin profile, again, looking at Q1. Q1 was heavily influenced by the segment mix of ATI versus SPI, once you separate out the onetime items. When we look to the second quarter, we expect to be at the higher end of our full-year range of 26% to 27%. We expect to average across the full-year in line with our guide of being inside of 26% to 27%. The second half of the year will see a higher SDI proportion, and that will impact the consolidated margins.

I appreciate it. Maybe like one more question, Middle East conflict and any potential like any impact or anything that has maybe changed your view in terms of your geographies and portfolio diversification?

This is Neil Manning. Not at this point. We're obviously monitoring it closely. We've seen from a logistics perspective, obviously, what that's done from an elevated cost standpoint on that front that we're managing very effectively. When it comes to delivery time lines and other impacts, we have not seen it other than elevated costs that we're seeing around the world as is most industries at this point.

The next question comes from David Benjamin from Mizuho.

Of the remaining 2026 guidance, can you talk about how much of that is already booked versus -- is there any booking turn required to achieve that?

When it comes to the revenue guide, we do have some normal amount of go get left to close it. However, we are working off a very elevated backlog, a record backlog of $2.4 billion that gives us some level of flexibility. We are really confident in the guide at this point in time.

A follow-up as you guys are increasingly selling to developers, are you able to leverage the safe harbor process where the customer development customers have better visibility into the project pipeline in order to convert longer-term agreements and book a little bit of more work?

Look, I think for the Tier 1 customers, that's the disproportionate amount of our current backlog, they've safe harbored for a long time. We have very little incremental near-term rush for safe harbor. You'll see a little bit of that in the APA business in those smaller size orders, but the size and programs that we're working to, these top developers have safe harbored for some time now. We're not seeing any acceleration from that -- any meaningful acceleration, I should say.

The next question comes from Colin Rusch from Oppenheimer & Co.

Could you talk about some of the international sales activity that you've got going on and how we should think about acceleration in that part of your business and thinking about it from a regional perspective with the EU, Middle East and Latin America along with Australia?

Colin, it's Neil. I'll take that one. When we look at international, we've talked quite openly that it's a strategic priority for us, but we're also being really targeted and selective about where we want to go. We obviously have well embedded home bases in our legacy markets in Spain and Brazil, which historically have been some of the largest in the world, but now obviously, they're facing some macro challenges with curtailments and other factors are slowing those down. When we look at areas of opportunity for us, it is specifically in the markets that have appreciation that -- of what the DuraTrack platform and OmniTrack platforms bring to bear, which is train adaptability, SmarTrack software-enabled controls, passive wind stow and the things that make a tracker perform at a higher level and also present less risk to developers over the life cycle of the opportunity. We also then look from a supply chain standpoint where areas of local content are required that we do exceptionally well at when we can localize production to meet specific requirements in certain countries. We're doing that currently in Turkey, and we've done that historically very effectively in Australia. We look for areas of opportunity that allow Array to differentiate from what is often a more crowded space, and set ourselves apart, and we get a lot of great traction when we do so. That was really what then led us to develop the D2S DuraTrack platform that we talked about that we'll be introducing in Munich here next month. It really is bringing the best to bear of the DuraTrack platform that customers have appreciated here in North America for a long, long time and then configuring a 2-row configuration that we've seen that international customers prefer based on parcel sizes being smaller and more varied from a training standpoint. 2-row configurations allow a lot more optionality for deployment and customization to a particular parcel. The D2S was developed specifically in mind for those international markets. You're going to see us going forward talking more and more about these countries and areas of opportunity that allow us to set ourselves apart from what is oftentimes a crowded space. We're really excited by the recent wins we've had in Turkey and Colombia and Peru, and we expect to see more coming from there.

Then can you talk a little bit about the cadence for deployment time lines? This is your R&D effort in terms of shortening infield deployments for your customers. Just curious about how we should think about that coming into the market and how much you can really pull out of the process?

Yes. I think that's really customer-driven. We've historically said that we can deliver any of our products within a 16-week time period, which includes that period of design, sourcing, customization for the site-specific elements that we have to deal with. We've routinely been able to accelerate that for customers when they get into a gem and ask us to. We can pull that in substantially. We have -- it's -- for us, with the build-out of our global supply chain and the optionality we have, we've created an environment that we could pull forward when our customers. Look, you got to see some of that in Q1. We had customers ask us to accelerate midway through the quarter, and we were able to accelerate and bring some things into the first quarter that was originally scheduled for the second quarter. I think we've got a lot of flexibility there ourselves. Now we're going to continue working on the upfront work in our business. We have several projects on to collapse the design cycle, quote cycle, those kind of things. to just be even more responsive to our customers. We're going to continue our programs internally to drive that even better, but once we have the locked down order, we can still accelerate for our customers.

The next question comes from Chris Dendrinos from RBC Capital Markets.

Maybe just one for me here. I wanted to go back to maybe the answer to the first question around gross margins and the cost structure here. Clearly doing a good job offsetting some of the inflationary cost pressures, particularly freight. If I look at the 10-Q, I think it's maybe 4.5% of revs is freight cost. Can you maybe walk us through a bit here how we think about the impact of that cost inflation there and how quickly you all can offset that? Is that just a process of changing your bid process to reflect higher freight? Or how should we think about that?

Sure. Great question. As you know, we are a project-based business with contracting and scheduled deliveries. We've all experienced the shock of the Iran-U.S.-Israel war in Q1, which had an immediate impact on freight costs. Everything that was already in flight in Q1 for scheduled deliveries, we couldn't change that. We can adjust our bid processes for new projects, which are going to be delivered somewhere out in Q3 and Q4. The items that are contracted and already scheduled for Q2, early Q3, also probably will not be easily changed. We are working through contracts with our legal team to see where we can apply fuel surcharges to recover some of the things. For the most part, we're not expecting a quick snapback. We're expecting to build this into our cost and bid models over the longer term. However, over the short term, we're still driving productivity and cost-out initiatives to manage this.

Yes, I'll just weigh in from there, Chris. Any time we see a shock, we've talked in the past about supply chain resiliency. We really don't know when the next shock will come, but we need to be ready for it. In this particular case, when it came to logistics and the conflict in the Middle East, we had a really impressive response. We renegotiated carrier agreements. We looked at our routings by region for optimization. Then we also updated our contracted freight capacity moving to more contract-based versus spot. Then while we did that, we're then embedding it rapidly into new bids and new contracting. To Keith's point, for the projects that are in flight, obviously, those flow through, and we have to deal with that, but for anything new in the pipeline, we're rapidly updating our cost modeling and methodology and making sure we're protecting margins from that standpoint.

There are no further questions, and this does conclude the question-and-answer session as well as the conference call as well. Thank you very much for participating and joining this call. This does conclude the call, and you may disconnect your lines. Thank you.