Good morning, and welcome to today's call to discuss the merger between ARRAY Technologies and Shoals Technologies Group. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Matt Tractenberg, Vice President of Finance and Investor Relations for Shoals Technologies Group. Thank you. You may begin.
Thank you, Warren. Good morning, everyone, and thank you for joining us to discuss the agreement announced today between Shoals and ARRAY to combine in a stock-for-stock merger, creating an integrated energy infrastructure platform. The transaction announcement and accompanying presentation are available on both companies' investor relations websites and our joint transaction website at poweringforwardtogether.com. We also have issued separate releases this morning with each company's third quarter results, which we will cover before taking your questions. Joining today's call is the Chairman of the Board for both ARRAY and Shoals, Brad Forth, CEO of Shoals Technologies Group, Brandon Moss, and CEO of ARRAY Technologies, Kevin Hostetler. Dominic Bardos and Keith Jennings, CFOs of Shoals and ARRAY respectively, will also be available for Q&A following today's prepared remarks. Before we begin, today's discussion includes forward-looking statements based on current expectations and assumptions.
These include statements regarding the proposed transaction, its expected timing and benefits, anticipated synergies, capital structure, and future financial performance. These statements are subject to risks and uncertainties, and actual results may differ materially. Please refer to the disclosures in today's releases and presentation, as well as each company's filings with the SEC. We will also discuss certain non-GAAP financial measures, including Adjusted EBITDA. Please refer to the applicable earnings materials for definitions and reconciliations of historical non-GAAP measures to the most directly comparable GAAP measures. As described in the transaction materials, the companies are not providing reconciliations of certain of these non-GAAP measures to the most directly comparable GAAP financial measure because certain information necessary to calculate such measures are not available without unreasonable effort.
In connection with the transaction, the companies expect to file a registration statement and joint proxy statement and prospectus with the U.S. Securities and Exchange Commission. Investors should read those documents carefully when they become available because they will contain important information about the companies and the proposed transaction. We anticipate these filings will be available in the coming weeks. Brad, I'll turn the call to you.
Thank you, Matt. Good morning, everyone. I am very pleased to announce the merger of Shoals and ARRAY. I have had the privilege of serving as Chairman of both companies since they became public, and over that time, I have seen firsthand the strength of each business, the quality of each team, and the significant opportunity that could be unlocked by bringing these two platforms together. Customers across the utility-scale solar market are increasingly looking for partners that can simplify sourcing, reduce vendor complexity, accelerate project execution, and deliver greater value through innovation. We believe this combination is uniquely positioned to do exactly that. The timing is also right. Shoals has built the category-leading electrical balance of systems through its BLA solution. ARRAY has assembled a highly differentiated structural balance of system platform, including APA, a leading foundation solution, AWM, a leading wire management solution, and its latest innovation, DuraTrack D2S.
At the same time, both companies have strengthened their operations, expanded their capabilities, and built the foundation required to execute a transaction of this scale successfully. I also want to thank Kevin. Kevin had the foresight to build ARRAY into a much broader platform through both strategic M&A and through significant investment in a global supply chain and a state-of-the-art manufacturing facility. Together, those steps have assembled a portfolio and an operating base that we believe have significant embedded potential. In many ways, he has created the equivalent of a coiled spring, and we believe this combination is the catalyst that will allow that platform to reach its full potential. I am also very excited about Brandon's leadership of the combined company.
Since joining Shoals, Brandon has brought a higher level of execution across nearly every discipline in the organization, growing our customer relationships, diversifying the business into adjacent markets, and building a world-class manufacturing campus. I believe he is the right leader for the combined company and its next phase of growth. With that, I will turn it over to Brandon to walk you through the transaction.
Thank you, Brad. I would also like to thank Kevin for setting ARRAY up for success, and I look forward to working with him to ensure a smooth transition. I will begin with an overview of the transaction, as there are several elements which we want our shareholders to clearly understand. ARRAY and Shoals are merging in a stock-for-stock transaction. ARRAY will be the surviving legal entity, and their common stock will be the equity of the combined company. Under the terms of the transaction, each Shoals shareholder will receive 1.6931 shares of ARRAY stock for each share of Shoals they own. While ARRAY is the legal acquirer, Shoals shareholders will own approximately 65% of the combined company's basic shares outstanding, and ARRAY shareholders will own the remaining 35%. One reason we structured the transaction this way was to avoid the need to refinance ARRAY's existing debt.
ARRAY has attractive financing in place today, and this structure preserves that financing, keeps interest costs down, and reduces transaction-related execution risk and financing costs. It is also important to understand that at closing, all Shoals shares will be exchanged for ARRAY common stock. From this point forward, ARRAY's share price should be viewed as reflecting the value of the combined business, not ARRAY on a standalone basis. Following closing, I will serve as CEO of the combined company, Brad Forth will serve as Chairman, and Kevin will transition to a special advisor role. The combined board will have 10 directors, four independent directors from each of the current Shoals and ARRAY boards, plus Brad and me. As Brad noted, we believe this transaction is transformational.
To reflect the broader platform, expanded product offering, and larger opportunity set, we plan to announce a new corporate name and ticker symbol in the coming months. We recognize that reducing the Series A preferred stock is an important priority for ARRAY investors. In connection with the merger, the company will redeem $161.3 million of its preferred stock within 90 days of closing, and we've committed to redeem an additional $156.3 million of preferred stock over the next three years, together reducing preferred stock outstanding by over 60%. Finally, the transaction is subject to approval by a majority of both ARRAY and Shoals shareholders. We expect the transaction, which is subject to regulatory approvals, to close in the first quarter of 2027. Now, let me turn to why we believe this combination creates such a compelling strategic and financial opportunity.
At a high level, we believe this merger does three very important things. One, it provides us faster revenue growth. Two, it creates greater profitability and free cash flow. And three, it provides more strategic flexibility. Let me break each one of these down further. On revenue growth, the combination of SBOS and EBOS is expected to enhance customer value by simplifying sourcing, reducing vendor complexity, streamlining project execution, lowering installation cost, and providing integrated warranty support, all of which we believe should help us win share. While we believe in preserving choice for our customers, we see a significant cross-selling opportunity. Today, only 20% of solar projects use products from both companies. This provides a significant opportunity to bring a full portfolio of products to customers who already know and trust at least one side of the business.
Also, by bringing EBOS and SBOS under one roof, we can engineer new integrated products that create a compelling reason for customers to buy the full stack from us. On profitability and cash flow, the combined company will be able to address a larger profit pool with minimal incremental investment. Our customers already buy foundations, trackers, EBOS, and wire management. We are not trying to reach a new universe of customers. We are expanding the solutions we bring to customers we already serve. We also expect significant savings from eliminating duplicate public company cost and other corporate overhead, totaling more than $20 million annually. Another important cash flow benefit comes from Shoals' tax assets. Shoals has approximately $1.6 billion of tax amortization and $237 million of NOLs, which we expect will reduce the combined company's cash tax obligations.
In addition, the preferred stock redemptions are expected to reduce future cash distributions by approximately $100 million over the next five years. Finally, this transaction enhances balance sheet flexibility. We expect the combined company to have net debt to EBITDA of 2.6 times on a pro forma 2026 basis, less than two times on a 2027 basis, which gives us better access to capital and flexibility to continue investing in growth, including future M&A. Together, ARRAY and Shoals will be able to supply essentially all of the key SBOS and EBOS components required for a utility-scale solar project. That includes Shoals' EBOS platform, APA fixed tilt and engineered foundations, ARRAY trackers, and AWM wire management solutions. The power of this combination is not simply that we will have a broader product set.
It is that each of these products is either a leading solution in its category or highly differentiated from a technical standpoint. That matters. There are other companies that claim to offer a full stack, but in many cases, those offerings have been assembled by acquiring products that customers do not view as category leaders. We believe this transaction creates something different, an integrated SBOS and EBOS offering built around leading products. Customers will not have to compromise in order to buy the full stack from us. Instead, they will get the benefits of best-in-class products combined with the convenience, engineering coordination, execution benefits, and accountability of a single-source solution. That is the customer value proposition at the heart of this merger. The combined offering also gives us access to a very attractive profit pool. Importantly, the opportunity should not be evaluated only on revenue dollars.
Some of these product categories may be smaller on a revenue basis, but they carry highly attractive margins. So we believe the more relevant lens is the gross margin pool available across the products we offer. Based on the presentation, the combined company will have access to an estimated US profit pool of approximately $1.8 billion annually. That is a significant opportunity, we already have the customer access required to pursue it. Between AWM and Shoals, we serve many of the most important developers and EPCs in the market today. This is not a situation where we need to build a new channel or introduce ourselves to a new customer base. The task ahead is to bring the combined solution to customers in a coordinated way, demonstrate the value of integration, execute at the level our customers expect.
If we do all that well, we believe we can capture a very meaningful share of this profit pool over time. Through this merger, we remain committed to offering our customers choice across the entirety of the product portfolio. However, I want to spend a moment on why combining SBOS and EBOS together creates immediate value for customers. For developers and operators, an integrated offering can simplify procurement, reduce the number of vendors they need to manage, and improve project certainty. Developers care deeply about schedule, cost, reliability, and risk. By coordinating the design of foundations, trackers, wire management, and electrical balance of systems, we can help reduce friction across the project lifecycle, support faster execution, and optimize energy yield. For EPCs, the value is equally clear. EPCs are responsible for turning designs into working projects in the field, every installation hour saved matters.
Integrated design can optimize field labor, reduce coordination challenges, minimize rework, and create a cleaner installation process. It can also improve accountability because the customer is working with one integrated partner rather than multiple vendors whose components may not have been designed to work together. In short, developers and operators benefit from a simpler, more reliable, and more coordinated project experience. EPCs benefit from faster, more efficient installation and fewer execution challenges in the field. That is why we believe the combined platform is differentiated immediately, even before we begin co-developing the next generation of integrated products. Over the long term, bringing SBOS and EBOS together creates meaningful opportunities for product innovation.
The immediate value is coordination and simplicity, but the bigger opportunity is to design products that work together from the beginning, products that reduce labor, improve reliability, lower the total project cost, and give customers a compelling reason to buy the full interoperable solution from us. One straightforward example is designing tracker torque tubes with integrated attachment points for the Shoals BLA system. Today, that process can involve manual fieldwork, including drilling holes and spending significant labor hours on a typical project. By designing the attachment points into the tracker system upfront, we can save customers time in the field, reduce installation complexity, and create a more robust installation that is better suited to withstand the elements.
Other potential areas of innovation include integrated wire management and tracker designs, pre-engineered EBOS and SBOS kits, foundation and wiring layouts optimized together, and digital project design tools that coordinate mechanical and electrical layouts. Each of these opportunities have the same underlying objectives: reduce field labor, reduce complexity, enable automation, improve reliability, and help customers bring projects online faster. This is one of the most exciting parts of the merger. We are not just combining two product portfolios. We are creating a platform for the next generation of integrated solutions. While solar is at the core of this merger, our opportunity does not stop there. It provides an opportunity to accelerate the diversification of our business. The combined company's growth opportunities extend beyond solar, including into battery energy storage systems and data center power infrastructure. In battery storage, AWM's wire management products and APA's foundation solutions are highly relevant.
Those capabilities pair naturally with the EBOS products Shoals has developed for batteries. By bringing that amount of content together in a combined offering, we believe we can become a more important partner to battery storage developers who are looking for reliable, scalable, and efficient infrastructure solutions. In data centers, Shoals has been developing AirLink, a plug-and-play power distribution solution. We believe AWM's wire management products will complement that offering. Data center customers are increasingly focused on speed to power, installation efficiency, and reliability. A combined power distribution and wire management solution can help address those needs. While the combination strengthens our position in solar, it also gives us additional growth factors in markets where electrification, power demand, and speed of deployment are becoming increasingly important. The benefits of this merger go beyond products. They also extend to what each organization brings in terms of capabilities, culture, and customer relationships.
Shoals has built a strong reputation as an innovator. The company has consistently developed products that reduce field labor, accelerate speed to power, and solve real pain points for developers and EPCs. Shoals also has a deeply customer-focused culture, and that focus has created strong momentum with key customers across the industry. ARRAY brings exceptional engineering capability, high-quality products, deep technical expertise, and a strong international presence. ARRAY's experience operating across global markets, combined with its SBOS product platform, is highly complementary to Shoals' EBOS strengths. We believe the combination of these competencies will allow us to deliver both best-in-class products and a best-in-class customer experience. That is what we believe will set us apart over time. This is not a merger of two companies that do the same thing. It is a combination of two companies with highly complementary strengths and cultures.
When those are brought together, we believe the result is a more complete, more capable, and a more valuable partner for customers. Let me now turn to our priorities as a combined company, which we think about in three categories: commercial, financial, and strategic. Commercially, our first goal is to accelerate growth by selling the full stack of solutions into as many projects as possible. Our second goal is to leverage both companies' customer engagement, relationships, and credibility to increase tracker share. Our third goal is to expand Shoals' international reach by using the global footprint and customer relationships ARRAY has already built. Financially, we are focused on three things. First, we are targeting $100 million of annual incremental EBITDA from cost and commercial synergies by year three. Second, we are committed to reducing the amount of ARRAY's preferred stock outstanding.
Third, we want to maintain the balance sheet flexibility required to continue investing in growth and pursuing strategic M&A. Strategically, we will invest in integrated SBOS and EBOS product development, including some of the more advanced opportunities I discussed earlier. We will also continue advancing AirLink and PowerHub for battery storage and data center markets. Over time, we intend to expand into additional infrastructure categories beyond solar. Taken together, these priorities define the roadmap for how we plan to create value from this combination. Our first commercial priority is to sell the full stack of products to our existing customers. One of the things that made this merger so compelling was the relatively low project overlap between the two companies. Since 2025, only 20% of project volume deployed both companies' products. That means 80% of project volume represent an opportunity to expand wallet share.
To put this in perspective, if we had delivered the combined company's full product suite to every project we touched, we would have generated $2.5 billion of incremental sales. This is a very large cross-selling opportunity. Importantly, this is not a theoretical market opportunity. These are customers we already know, projects we already touched, and relationships where one of the two companies has already earned a position. We do not need to capture all of this opportunity to create meaningful value. Even converting a portion of it over time would have significant impact on revenue growth, EBITDA, and the overall earnings power of the combined company. Now I'll turn it over to Kevin to discuss our second commercial priority.
Thanks, Brandon. One of the things we have been working on at ARRAY over the past few years is upgrading our commercial organization and increasing the level and quality of engagement we have with customers. We've taken steps to make ARRAY a more customer-centric organization. We've changed the way we engage with customers through improved responsiveness and investments in customer service resources, commercial processes, project management capabilities, and engineering support. On top of these efforts, we intend to leverage Shoals' customer engagement excellence. The company has built a reputation for being responsive, customer-focused, and highly effective in helping customers solve execution challenges. That creates a major opportunity for our combined company. By doubling down on the voice of customer mindset and continuing to invest in AI-enabled capabilities, we believe we can enhance customer satisfaction and accelerate the progress already underway at ARRAY.
The entire organization is excited about what this means, and we believe the combined commercial team can improve its competitive position and win share in the tracker market. This slide helps put the tracker share opportunity into context. In the U.S. market, even relatively small share gains can have a significant impact on the combined company's financial results. For example, winning just two additional projects per year can move our U.S. market share by roughly 2 percentage points or more. We believe the combined commercial organization can deliver those types of gains, and potentially more, over time. The resulting EBITDA upside is also meaningful. Using the 2-point share gain example, that would translate into nearly $20 million of incremental EBITDA. The third commercial priority is international expansion. ARRAY has historically moved faster than Shoals in penetrating markets outside the United States.
ARRAY has built an established international footprint, customer relationships, and market knowledge that would take Shoals significant time and investment to replicate on its own. This creates a very attractive opportunity. We can use ARRAY's existing international sales infrastructure and relationships to introduce Shoals products into markets where Shoals has not yet had the same level of presence. This should allow us to expand Shoals' reach more quickly while avoiding much of the expense and time required to build that infrastructure from scratch. The logic is straightforward. ARRAY brings the global platform, Shoals brings a highly differentiated EBOS offering, and together, we can approach international customers with a broader and more valuable solution. With that, I will turn it back to you, Brandon.
Thanks, Kevin. Let me now turn to our financial priorities, starting with synergies. Synergies were one of the driving forces behind this transaction, and achieving our targets is our number 1 financial priority. We expect to achieve $35 million of run rate synergies in year one, ramping to more than $100 million by year three. In year one, we expect more than half of those synergies to come from cost savings. By year three, we expect roughly one-third of our savings from cost and two-thirds from commercial synergies. On the cost side, we expect savings from eliminating duplicate public company cost, consolidating corporate overhead, improving procurement leverage, and creating operating efficiencies across the combined organization.
On the revenue side, the largest opportunities are cross-selling the combined portfolio into existing customer relationships, increasing ARRAY tracker share through stronger customer engagement, expanding Shoals internationally through ARRAY's global footprint, and developing integrated products that allow us to capture more content per project. We are confident in these targets because many of the cost opportunities are within our control, and many of the commercial opportunities are rooted in relationships and projects where one of the two companies is already present. This is not a synergy case that depends on entering new markets or building a new customer base, but rather it is based on doing more with customers, products, and capabilities we already have. We believe the upside for our shareholders is very significant. I will pass it back to Kevin to discuss the treatment of ARRAY's preferred stock.
Thanks, Brandon. Our second financial priority is reducing the preferred stock outstanding. As we mentioned earlier, we have heard investors clearly on this point. They would like to see the combined company reduce the amount of outstanding preferred stock, and we agree that doing so will create value. As part of this transaction, ARRAY has reached an agreement with the preferred shareholders that includes several important elements. Initially, we will redeem $161.3 million of our preferred stock at $0.93 on the dollar within 90 days following the closing of the merger. This initial redemption captures seven points of discount, or approximately $11.3 million, and improves free cash flow by reducing future distributions by more than $60 million over the next five years.
Next, we have committed to redeem an additional $156.3 million of preferred stock over the next three years at $0.96 on the dollar in amounts of not less than $52 million on each of the first, second, and third anniversaries of the initial redemption. Together with the initial redemption, that will save the company nearly $100 million in distributions over the next five years. Importantly, that is the minimum schedule. We may elect to redeem more or redeem earlier. We have the option to redeem the balance of preferred stock in excess of $317.5 million at $0.96 on the dollar, provided that the redemptions occur within 48 months of closing. That effectively builds an attractive discount if we choose to accelerate the reduction of the preferred.
Finally, the structure enables regular redemptions using available free cash flow by reducing the minimum amount that we could redeem at one time from $200 million to $50 million. Brandon?
Our third financial priority is to maintain balance sheet flexibility. This page shows our current estimate of the combined company's year-end 2026 balance sheet, pro forma for the merger, and the initial $161.3 million Series A preferred stock redemption. The key point is, this transaction is structured to preserve financial flexibility. We do not expect to issue new debt to complete the merger, and the combined company is expected to have both manageable leverage and solid liquidity at closing. On a pro forma basis, we expect 2026 net debt to Adjusted EBITDA to be 2.6 times, with leverage declining to less than two times in 2027. The flexibility is strategically important. It allows us to continue investing in the business, fund innovation, support customer growth, reduce the remaining Series A preferred stock over time, and pursue additional M&A opportunities that can further diversify and strengthen the platform.
In short, we believe this combination creates a larger, more capable company without over-levering the balance sheet, and that positions us well for the next phase of growth. This is a summary of the key figures and preliminary 2027 outlook for the combined company. On the balance sheet, the figures are presented on an indicative pro forma basis, assuming the transaction closed on December 31st, 2026. For the combined company, our preliminary estimated 2027 revenues range between $2.2 billion and $2.4 billion, and Adjusted EBITDA, including synergies, ranges between $410 million and $480 million. This indicative revenue estimate is supported by the combined company's significant backlog in awarded orders as of September 30th of approximately $3.4 billion. We will provide more details in the S-4, which will be filed in the coming weeks. Turning briefly to our Q3 results.
Shoals had an exceptional quarter, delivering revenue and Adjusted EBITDA well above our guided range. Revenue of $195.3 million, a company record, grew at 44% from the prior year. This was driven by meaningful productivity improvements made on our factory floor. Congratulations to the team for a great quarter. Gross profit percentage came in at 31.9%, a 160 basis point improvement from the second quarter. The commercial team added approximately $186 million in new orders, the third-highest bookings period on record. Book to bill, given our strong revenue performance, was approximately 1.0. Adjusted EBITDA was approximately $40 million, representing 20.4% of revenue. And we delivered healthy operating cash flow of $28.9 million, enabling us to pay down $33 million of our revolving credit facility in the period. Guidance for our fourth quarter can be found in the earnings release issued this morning. Kevin?
Thank you, Brandon. Q3 was a quarter of strong execution for ARRAY, operationally, commercially, and strategically. We delivered an order book of $2.6 billion, up 42% year-over-year, a record for the fourth consecutive quarter. We booked well over $400 million of new orders for the fifth consecutive quarter, bringing trailing 12-month new orders to more than $1.8 billion, and our book to bill to 1.6 times. New products now represent nearly 60% of the order book, evidence that our innovation investments are translating into adoption. Revenue came in at $330 million, including our first month of contribution from Affordable Wire Management, or AWM, which we closed on August 31st. Excluding AWM, revenue was $321 million, driven by strong domestic tracker execution. Adjusted gross margin was 22.8%, which included a 330 basis point charge for a long-dated 45X rebate reserve with a certain supplier.
Our year-to-date Adjusted Gross Margin stands at 27.8%, 30 basis points higher than the same period last year. Finally, Adjusted EBITDA was $32 million, a 10% margin. AWM's first month was accretive to both our margins and our earnings, an early validation of the investment thesis we laid out last quarter. I will now turn it back to Brandon for some closing remarks.
Thanks, Kevin. In closing, this transaction is about creating something neither company could build as quickly or as effectively on its own. Together, we will have leading products across SBOS and EBOS, deeper customer relationships, greater scale, stronger financial capacity, and a platform that can grow well beyond solar. We see a significant opportunity ahead of us, and we have a clear roadmap to turn that opportunity into growth, earnings, and long-term shareholder value. We could not be more excited about the future of the combined company. With that, operator, let us take your questions.
We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Brian Lee with Goldman Sachs & Co. Your line is open. Please go ahead.
Hey. Good morning. Congrats. A lot went into this deal, I am sure, so kudos to you guys. A couple questions from me. Just if I look at the pro forma guide, it implies, I guess, 12% revenue growth at the midpoint. Just be curious, how much of that is organic? Because I know there was a bit of M&A here for ARRAY this year. And then how should we think about what is embedded in that combined view for the company in terms of share gain, revenue synergy, if any, and then just market growth next year? And then I had a follow-up.
Yeah, Brian, good morning. Thank you for the question. Just as a reminder to you and everybody, there will be more detail that is available in the S-4. But I think the way that I would consider that revenue range is it is organic growth. There is obviously some overlap for the AWM business that will be picked up in 2027 versus 2026, about three quarters, 10 months, something like that, Kevin, it is about probably
It is about eight months.
Organic growth in that number. As far as the market growth potential, as we have discussed over the last couple quarters, at least on the Shoals side, we are big believers in the market right now. We have said again and again, stronger for longer. I think we have seen market forecasts adjust in the out years of the decade up, and we believe that the market will be a high 30s, low 40s gig market for the foreseeable future.
Okay, that is helpful. Just second question, just bigger picture strategy. You guys outlined a lot of the key drivers of why this deal makes sense. But just if we think about it simplistically, how much of this is maybe a competitive response to the inroads from Pure and Nextpower? Maybe just give us a sense of how this combination positions you competitively. Beyond the cost synergies in year one, what are sort of the most immediate benefits we should be looking out for, whether it is product X synergy, revenue synergy, international? Just trying to understand where you guys see the most inroads from a competitive perspective beyond the cost in year one. Thank you.
Yeah, Brian, great question. Look, probably at a high level, most importantly, there is a big belief these companies are better together than separate. I think what differentiates us, and I am not denying any consolidation in the marketplace because there are obviously trends there both at the peer level, customer level, it is across the industry, right? I think what makes this special is it truly builds a comprehensive solution of category leaders. If you think about the suite of products this company has, it is very exciting. I mean, you have got category leaders in each of the market. It is going to give us the ability to really do three things that we talked about in the prepared remarks. We believe we can drive faster revenue growth together. There is an unbelievable cross-sell opportunity.
A lot of the research that we did in preparation for the deal, looked back at past projects, our order books, and to really see how many of the same products were appearing on projects together. There is tremendous opportunity. About 80% of the projects only had one of our products between the two company. So that unlocks a marketplace, a cross-sell marketplace opportunity of $2.5 billion, which is larger than the combined revenue of the two companies today. So we are really excited about that. Additionally, it drives greater profitability and free cash flow. There is an amazing profit pool out there to get. Kevin has done a great job of adding businesses that are accretive. We are really excited about the AWM acquisition. Arguably, it is maybe more synergistic with EBOS than it is SBOS. So, that is very exciting for us.
One point I do want to make, just longer term strategy. This is not a departure from our strategy to diversify. We have communicated at Shoals a strategy of, one, protecting, growing our core business, which this certainly does that, right? We are going to protect our core domestic solar market. Two, to diversify into new end markets. There are some really exciting things to help us do that with this transaction, as it relates to AWM and APA foundations, when we think about data centers. We are going to continue to push to grow our BESS business and get our AirLink product line launched in 2027. Thanks, Brian. Warren, next question, please.
Your next question comes from the line of Julien Dumoulin-Smith with Jefferies LLC. Your line is open. Please go ahead.
Excellent, guys. Thank you and good morning. Nicely done. Congratulations on bringing this together. Look, maybe just ask you explicitly, you talk about this $100 million type synergy number. How does that transpose to that 25% overlap? What does that bring you to pro forma when you think about getting to that cross-sell? Are there early wins that you can potentially point to here? As well as when you think about the ability to integrate the product, how do you think about the timeliness of providing that product to the market, inasmuch as it fully capitalizes on the ability to easily integrate and, quote, unquote, "snap together," if you will, the two different product portfolios here? Then finally, how do you think about what other categories you may want to enter into?
Inasmuch as this is, really seems like it is going up toe-to-toe with your closest peer here in providing a one-stop shop, if you will. What other end markets do you really need to enter into, if you think about that from that perspective? You got a lot here already.
Thanks, Julien. A lot to unpack there. I guess I will unpack the synergies first and try to take these one by one. When you think about our synergies near term, say one year, more than half of those committed synergies will come from redundant public company costs. Call it more low-hanging fruit. As we advance, think of it in year three, those synergies change to skew more commercial. You can think about the synergies in year three being roughly two-thirds commercial and one-third cost. We have outlined really specific areas where to get not only the cost synergies, but the commercial synergies. There is very little overlap in our business in terms of, again, in terms of projects that have more than one product on there. If you look at it from a customer standpoint, there is immediate opportunities for pull-through on both sides of the table.
What is specifically exciting is, I think there is an opportunity leveraging our market share and our customer engagement to pull through ARRAY trackers. The math is pretty simple, right? If we can drive one gigawatt of additional tracker sales, it is about $100 million in revenue and $30 million in Adjusted EBITDA. When you break that down to a project perspective, we do not have to make miracles to make these synergies come through. I mean, you pick up two, three projects, you are in really good shape. We also just, thinking about customer engagement in general with top EPCs, since this announcement has come out this morning, I have gotten a couple texts from top-tier, top 10 EPCs saying, "Hey, we need to hook up and find ways to do more business together." I think the value that this can unlock is really exciting.
What about AirLink?
Your next question comes from the line of Philip Shen with Roth Capital. Your line is open. Please go ahead.
Hey, guys. Congrats as well, and thanks for taking the questions. Hey, Brandon, on that last point, I wanted to dig into that a bit more in terms of the conversations you've had with EPCs post-announcement. You highlighted earlier also that 80% of the projects that you guys are out there on only had one of your products. Can you talk to us about why that was the case? Did customers affirm that if you guys were together, then they would have bought more? The sales process for your respective core products are different slightly in the sense that EBOS is almost exclusively selling to EPC, while ARRAY is selling not just to EPC, but also very much so to IPPs.
I wanted to see if you guys could help us understand the difference in go-to-market strategy, and then how you combine that, and then ultimately, could the customers have bought much more, and did they actually affirm that? Thanks.
Yeah, Philip. Our goal is to give customers choice of top-tier products. I think starting with project design, starting early stages in the sales cycle, there is a tremendous amount of benefit, not only for the EPC, but also the developer, depending on what path we take to market. Our products, longer term, can be designed to be interoperable, number one. That is a longer-term view. I think just short term, when you think about project execution, delivery, enhanced response, maybe specifically around warranty, there is a lot of value to present to our customers short term. In terms of channel to market, Kevin, feel free to speak up here. Yeah, while Shoals has been primarily an EPC go-to-market, we are excited about the way that ARRAY goes to market through developers. We think there is a lot of opportunity there to come in and meet those guys together.
On the other side of the coin, ARRAY still does a lot of business direct with EPCs as well. Maybe talk a little bit about that.
Yeah. I think, Philip, you are hitting on one of the things that we think is a really compelling advantage of this merger. As we have talked publicly many times over the last three years or so, we have shifted our order book much more, where we have given the commentary about over 50% of the order book is direct to tier 1s. Those are largely tier 1 developers and direct to utilities. So our ability to partner with Shoals and get specified far earlier in the process, we think is really going to enhance this, right? We could come in together, get specified on the foundations, get specified on the EBOS, on the trackers, on the wire management, and offer an integrated design selection process to those developers and utilities.
We think that is going to be a really compelling advantage, because we are going to be doing that with all tier 1s of the developers who recognize these brands, they love these brands, and they would love for them to be integrated and sold together.
Sure.
Thanks, Phil. Warren, next question, please.
Your next question comes from the line of Moses Sutton with BNP Paribas. Your line is open. Please go ahead.
Good morning. This is Heidi on for Moses. Thank you for taking my question, and congrats on the merger. I have just two questions. The first, you outlined potential for future M&A, but how should we think about the combined company's capital allocation priorities between further M&A versus paying down the remaining preferreds, specifically the roughly $190 million outstanding beyond the existing commitment? Do you expect to prioritize paying down the full Series A before any incremental M&A, for example?
I think the important thing is we've got balance sheet flexibility. That is probably first and foremost. We've got optionality to do either of those. The most important thing for us near term is going to be being successful in capturing the $100 million in synergies that we've outlined by year three. M&A is a potential way for us to grow, as always, but I think the prioritization is capturing those synergies in the near term.
Thank you, Heidi. Warren, next question.
Your next question comes from the line of Jon Windham with UBS. Your line is open. Please go ahead.
Hey, perfect. Thanks for taking the questions, and congratulations on the merger. I guess my question would be to get your thoughts around why now? Obviously, you both have a shared history with the same Chairman of the Board. I believe you were both part of the same private equity fund at some point. What makes today the right time for this deal? Again, congratulations. Thanks for taking the questions.
Thanks, Jon. As you know, and probably everybody else on the call, this idea has been around since I joined Shoals and probably before Kevin joined ARRAY. So, it's always been out there. We are two companies that have always been close. Kevin and I have been close since I joined the industry. Our teams know each other. We have similar cultures. I think, again, as I started with, we're both believers in the market. We think there's a fantastic market backdrop for us to execute against. To be honest, both of our companies right now are in a position of strength. We have unbelievably strong order books. Kevin has brought a bunch of new products to market that are getting well-positioned for deployment in future projects this year, as has Shoals. So there's just a tremendous amount of synergistic value between the two companies.
I think we can unlock more significant shareholder value together than we can separately. We felt now was the right time to come together.
Thank you, Jon. Warren, keep going, please.
Your next question comes from the line of Joseph Osha with Guggenheim Securities. Your line is open. Please go ahead.
Thank you, and thanks for taking my question. As I look at the pro forma here, I see about $30 million in cash post-transaction, which is perhaps a little thin for a $2.5 billion company. I am wondering what level of liquidity you think would be appropriate on an ongoing basis for the entity, and what type of incremental operating cash facilities you might have. Thank you.
Yeah. Joe, one of the reasons that we structured the deal, and I appreciate the question, the way that we did was to take advantage of the balance sheet of both companies. We continue to work with our lending syndicate, and we will do so post-close to make sure there is ample liquidity for the combined company. Probably most importantly, both of these organizations are strong cash generators. You are seeing that in the back part of the year for Shoals. You will see that probably more so first part of the year for ARRAY. So we think we are in a very good position to, one, handle the pref as we have outlined in the call. But also, we still feel very strong about available liquidity in the future.
Thank you, Joe. Warren, I think we have time for just a couple more.
Your next question comes from the line of Colin Rusch with Oppenheimer & Co. Inc. Your line is open. Please go ahead.
Thanks so much, guys. As you look at the sales synergies, can you just talk a little bit about how quickly you might see some of those synergies overseas and the order of magnitude of the mix really around synergies in the U.S. versus synergies outside the U.S.?
Yeah, Colin, it's a great question. We're really excited about leveraging ARRAY's infrastructure overseas. As you know, Shoals has made some inroads the last couple years, and our order book has grown to about $100 million for international projects. But to be fair, we have not penetrated some of the regions that ARRAY has and has some potential wins on the books. I think Kevin has talked about some opportunities in Eastern Europe on prior calls. I think there's an opportunity there to really combine our strong team internationally, which honestly is small, significantly smaller than what the ARRAY team has, and bring a full suite of products together to international customers. Kevin, I don't know if you've got anything to add there.
No, I think you said it.
Thank you. Thank you, Colin. Warren?
Your next question comes from the line of Dylan Nassano with Wolfe Research. Your line is open. Please go ahead.
Yeah. Hey, guys. Thank you. Just wanted to touch on kind of the data center exposure. I know Shoals kind of already is a little closer to that market via the battery offering and AirLink. Is there anything to note on kind of how this could expand the opportunity set more from the ARRAY side to get closer to data centers?
Yeah, there still is. It's a great question. There is some obvious product synergy there, both when you think about the traditional battery energy storage infrastructure on a data center. Affordable Wire Management has a lot of cable fastening products that can be paired with our BLA products on site, which is very exciting. Then there's also products from the APA side related to foundations. So that's great for the data center infrastructure side. The other really exciting potential synergy is on our AirLink product. If you've seen pictures of our AirLink product and designs, a lot of what makes that product special is the way that it is fastened and fixed in a data center. And those are all products that AWM can certainly help us out with, help design. They're experts in free air rating, which is one of the key points to our AirLink product.
We think that there's just a tremendous amount of value there between the two combinations.
Thank you. Warren?
Your final question comes from the line of Dimple Gosai with Piper Sandler. Your line is open. Please go ahead.
Hi. Good morning, and congratulations. I have a question here just on, can you talk a little bit about how the combination here of the two entities can help deepen or broaden your customer reach and the type of new customers this could potentially allow in? Then secondly, are there any obvious and natural new products that this would be a good fit for, given that we've already put these two pieces together, the tracker and the EBOS?
Yeah, Dimple, it's a great question. I think one of the beautiful things about this transaction is we are not required to go find new customers. We are not required to go find new markets. We have the same customers, either on the Shoals side or the ARRAY side. We just need to leverage those relationships, get closer to those customers, and help them understand the value of buying a full stack from us to sell more product. There's not an additional customer acquisition cost here, is a way to think about it. In terms of new products for the future, there is a lot of potential between the tracker, the wire management system, and EBOS to build products that are more easily installed in the field, reduce labor hours, improve safety by maybe taking drilling out of the equation for products, for projects.
Tremendous upside, and that is probably one of the most exciting pieces of this transaction, is to get our two respective engineering teams together and really start executing on the product roadmap that we articulated in the prepared remarks.
Thanks, Dimple. Warren, that is going to be our last question for today. To our audience, please note that both companies have several opportunities for you to meet with management, including at RE+ this month. If you have questions about where and when, please see our respective websites or reach out to the IR teams for more information. Thanks for joining us today. Have a great day, everyone.
This concludes today's call. Thank you for attending. You may now disconnect.