Array Technologies’ revenue down 44% in Q1

Tax credit extension, rising costs key factors

Array Technologies Inc. reported a 44% decline in revenue in the first quarter of 2021 compared with the same period last year, largely reflecting a change in federal solar tax credits, along with skyrocketing prices for steel and shipping.

The Albuquerque-based company, which went public on Nasdaq in October, manufactures solar tracking systems for utility-scale projects in the U.S. and elsewhere.

Revenue fell to $245.9 million in the January-March period this year, down from $437.7 million in the first quarter of 2020, Array reported Tuesday. Net income plummeted from $73.7 million to $2.9 million.

A two-year extension last December of the federal government’s 26% income tax credit for solar projects is largely to blame, company executives told investors in an earnings conference call. In late 2019, customers had raced to place orders for solar trackers to begin projects before tax breaks ratcheted down, pushing company revenue up in the first quarter of 2020 as Array scrambled to meet demand.

But with the tax-credit extension, customers now have more time to plan projects, slowing the pace of product delivery now on new orders, Array Chief Financial Officer Nipul Patel said. As a result, revenue comparisons with the first quarter of 2020 are misleading, he said.

“It’s not an indication of the trajectory in our business,” Patel told investors.

Still, a huge increase in freight and commodity prices is cutting into the company’s bottom line, slowing customer orders, decreasing profit margins and forcing Array to adjust pricing for its solar-tracking products, CEO Jim Fusaro said.

From the first quarter of 2020 to the first quarter of 2021, prices for hot rolled steel — the primary raw

material for Array’s products — more than doubled. And spot prices have risen another 10% just since April 1.

Rapidly climbing freight costs on sea and land are also affecting the company.

“The average cost for shipping is up 145% from April 2020 to April 2021,” Fusaro told investors. “Truck freight per mile is up more than 30% compared with the first quarter last year.”

The price shock reflects the global economy’s post-pandemic rebound as industry scrambles to meet rapidly growing demand. It will likely level out as inventory and supply chains recover, Fusaro said. But in the meantime, Array is working to mitigate the impact by negotiating price hikes with customers and locking in cost stability through longer-term supply agreements with steel makers and freight companies.

Despite the challenges, there is an upside to inf lation, potentially allowing Array to gain market share from smaller competitors with less buying power to negotiate with suppliers, Fusaro said.

In addition, the market outlook remains promising as government, business and consumers accelerate efforts to move to a low-carbon economy.

“Demand for our products remains strong, with quoting activity at the highest levels we have seen in our history,” Fusaro said.