What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-04-06 compared with 2021-03-10 · 228 added, 273 removed, 195 unchanged (72% of the section changed)

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Our principal product is an integrated system of steel supports, electric motors, gearboxes and electronic controllers commonly referred to as a single-axis “tracker.” Trackers move solar panels throughout the day to maintain an optimal orientation to the sun, which significantly increases their energy production.

Solar energy projects that use trackers generate up to 25% more energy than projects that use “fixed tilt” mounting systems, which do not move.

Solar energy projects that use trackers generate more energy and deliver a lower LCOE than projects that use “fixed tilt” mounting systems, which do not move.

The vast majority of ground mounted solar systems in the United States use trackers.

Our trackers use a patented design that allows one motor to drive multiple rows of solar panels through articulated driveline joints.

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We sell our products to engineering, procurement and construction firms (“EPCs”) that build solar energy projects and to large solar developers, independent power producers and utilities, often under master supply agreements or multi-year procurement contracts.

In 2020, we derived 92% and 8% of our revenues from customers in the U.S.

and rest of the world, respectively.

During the year ended December 31, 2021, we derived 97% and 3% of our revenues from customers in the United States and rest of the world, respectively.

We are a U.S.

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As of December 31, 2021, we had 471 full-time employees.

Impact of COVID-19

Acquisition of STI

On January 11, 2022 (the “Closing Date”), the Company completed the previously announced STI Acquisition, pursuant to that certain definitive agreement (the “Purchase Agreement”), dated as of November 10, 2021, by and among Array Tech, Inc, a wholly-owned subsidiary of the Company, Amixa Capital, S.L.

and Aurica Trackers, S.L., each a company duly organized under the laws of the Kingdom of Spain, and Mr.

Javier Reclusa Etayo.

In accordance with the Purchase Agreement, the Company paid closing consideration to STI consisting of $410.5 million in cash (the “Cash Consideration”) and 13,894,800 shares of the Company’s common stock (the “Stock Consideration”).

The fair value of the cash and common stock consideration was $610.7 million and resulted in the Company owning 100% of the interests in STI.

The Company is in the process of performing a valuation of the acquisition assets and liabilities and the related accounting impact.

The purchase price will be increased by the amount that is four times the audited Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of the target less €47.0 million ($53.5 million at current

exchange rates), such that the amount of contingent consideration is subject to a cap of €45.0 million ($52.0 million at current exchange rates).

In connection with the entry into the Purchase Agreement, the Company entered into a debt commitment letter dated November 10, 2021 pursuant to which third-party financial institutions have committed, subject to the satisfaction of standard conditions, to provide the Company with a bridge loan facility in aggregate principal amount of up to $300 million.

The Company was able, however, to finance the transaction and related fees and expenses with cash on hand, borrowings under its senior credit facilities, proceeds from our option to require the holders of our Series A Redeemable Perpetual Preferred Stock to purchase additional shares of Series A Redeemable Perpetual Preferred Stock, and through the proceeds of its Convertible Notes Offering.

Series A Redeemable Perpetual Preferred Stock

On August 10, 2021, the Company entered into the Securities Purchase Agreement with an investment vehicle of funds affiliated with Blackstone Inc.

(the “Purchaser”).

Pursuant to the Securities Purchase Agreement, on August 11, 2021, the Company issued and sold to the Purchaser 350,000 shares of Series A Redeemable Perpetual Preferred Stock, having the powers, designations, preferences, and other rights set forth in the Certificate of Designations, and 7,098,765 shares of the Company’s Common Stock, for an aggregate purchase price of $346.0 million.

Further, pursuant to the Securities Purchase Agreement, the Company has issue and sold to the Purchaser 776,235 shares of Common Stock for an aggregate purchase price of $776 on September 27, 2021.

For more information related to the Series A Redeemable Perpetual Preferred Stock, see Note 11 - Redeemable Perpetual Preferred, to the accompanying consolidated financial statements.

In connection with the Stock Purchase Agreement and the Certificate of Designations governing the Series A Redeemable Perpetual Preferred Stock (see Note 11 - Redeemable Perpetual Preferred), on January 7, 2022, the Company issued and sold to the Purchasers 50,000 shares of Series A Redeemable Perpetual Preferred Stock and 1,125,000 shares of Common Stock in an Additional Closing for an aggregate purchase price of $49,376,125.

Update on the Impact of COVID-19

In December 2019, a novel strain of coronavirus, SARS-CoV-2, which causes coronavirus disease 2019, or COVID-19, surfaced in Wuhan, China.

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On March 11, 2020, the World Health Organization declared COVID-19 a pandemic.

To date, we have maintained uninterrupted business operations with normal turnaround times for the delivery of solar tracking systems.

We have implemented adjustments to our operations designed to keep employees safe and comply with federal, state and local guidelines, including those regarding social distancing.

The extent to which COVID19 may further impact the Company’s business, results of operations, financial condition and cash flows will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

In response to COVID-19, the United States government has passed legislation and taken other actions to provide financial relief to companies and other organizations affected by the pandemic.

With the second wave of the pandemic including variants of COVID-19, we continue to closely monitor the situation in all the locations where we operate.

Our priority remains the welfare of our employees.

We expect persistent waves of COVID-19 to remain a headwind into the near future.

Refer to “Risk Factors - The ongoing COVID-19 pandemic has materially and adversely affected our business and results of operations resulting in reduced margins due to the rise in steel and other commodity costs and as well as logistics delays and costs.

The duration and extent to which it will continue to adversely impact our business and results of operations remains uncertain and could be material,” as disclosed in Part II, “Item 1A.

Risk Factors.”

Performance Measures

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Our revenue growth is dependent on continued growth in the amount of solar energy projects installed each year as well as our ability to increase our share of demand in each of the geographies where we compete, expand our global footprint to new evolving markets, grow our production capabilities to meet demand and to continue to develop and introduce new and innovative products that address the changing technology and performance requirements of our customers.

Cost of Revenues and Gross Profit

Cost of revenues consists primarily of product costs, including purchased components, as well as costs related to shipping, tariffs, customer support, product warranty, personnel and depreciation of test and manufacturing equipment.

Personnel costs in cost of revenues includes both direct labor costs as well as costs attributable to any individuals whose activities relate to the transformation of raw materials or component parts into finished goods or the transportation of materials to the customer.

Cost of Revenue and Gross Profit

Cost of revenue consists primarily of product costs, including purchased components, as well as costs related to shipping, tariffs, customer support, product warranty, personnel and depreciation of test and manufacturing equipment.

Personnel costs in cost of revenue includes both direct labor costs as well as costs attributable to any individuals whose activities relate to the transformation of raw materials or component parts into finished goods or the transportation of materials to the customer.

Our product costs are affected by the underlying cost of raw materials, including steel and aluminum;

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economies of scale resulting in lower component costs, and improvements in production processes and automation.

In 2021, our business has been impacted by the Covid-19 pandemic by increased raw materials and shipping costs and delays which has resulting in reduced margins and in certain instances have incurred remediation costs and liquidated damages owed to the customer.

We have modified our processes in order to decrease the impact on our margins of these cost increases however we do not know how long the current operating environment will persist.

We do not currently hedge against changes in the price of raw materials.

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Operating expenses consist of general and administrative costs, contingent consideration, as well as depreciation and amortization expense.

Personnel-related costs are the most significant component of our operating expenses and include salaries, benefits, payroll taxes and commissions.

Our full-time employee headcount in our general and administrative departments has grown from approximately 150 as of December 31, 2019 to 177 at December 31, 2020, and we expect to continue to hire new employees to support our growth.

Personnel-related costs are the most significant component of our

operating expenses and include salaries, benefits, payroll taxes and commissions.

Our full-time employee headcount in our general and administrative departments has grown from approximately 150 as of December 31, 2019 to approximately 177 as of December 31, 2020 to approximately 210 at December 31, 2021, and we expect to continue to hire new employees to support our growth.

The timing of these additional hires could materially affect our operating expenses in any particular period, both in absolute dollars and as a percentage of revenue.

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We expect an increase in the number of sales and marketing personnel in connection with the expansion of our global sales and marketing footprint, enabling us to penetrate new markets.

The majority of our sales in 2020 were in the U.S.;

The majority of our sales in 2021 were in the United States;

however, during the year we expanded our international presence with additional global sales staff.

We currently have a sales presence in the U.S., Australia, the U.K.

We currently have a sales presence in the United States, Australia, the U.K.

We intend to continue to expand our sales presence and marketing efforts to additional countries.

We also expect that as a public company we will incur additional audit, tax, accounting, legal and other costs related to compliance with applicable securities and other regulations, as well as additional insurance, investor relations and other costs associated with being a public company.

We also anticipate an increase in our spend related to product innovation as we hire additional engineering resources and increase our external R&D spend.

We also anticipate an increase in our spend related to product innovation as we hire additional engineering resources and increase our external research and development spend.

Contingent Consideration

Contingent consideration consists of the changes in fair value of the earn-out and the TRA entered into with Ron P.

Corio, our indirect stockholder, concurrent with Former Parent’s acquisition of Patent, LLC.

The earn-out liability was recorded at fair value at the acquisition date and subsequent changes in the fair value are recognized in earnings.

Corio, a former indirect stockholder, concurrent with the acquisition of Patent LLC by ATI Investment Parent, LLC (“Former Parent”).

The earn-out liability was recorded at fair value as of July 8, 2016 (the “Acquisition Date”) and subsequent changes in the fair value are recognized in earnings.

Fair value of the earn-out liability is measured based upon the expected return of investment of Former Parent, among other things.

Payments related to the earn-out liability are required to be evaluated upon the occurrence of certain events, including the consummation of an IPO;

the sale, transfer, assignment, pledge, encumbrance, distribution or disposition of shares of Former Parent held by Oaktree Power and Oaktree Investors to a third party;

the sale of equity securities or assets of Former Parent, ATI Investment Sub, Inc.

or Array Technologies, Inc.

Cash payments related to the earn-out liability are required to be evaluated upon the occurrence of certain events, including the consummation of an initial public offering;

the sale, transfer, assignment, pledge, encumbrance, distribution or disposition of shares of Former Parent held by Oaktree Power Opportunities Fund IV (Delaware) Holdings, L.P.

and Oaktree ATI Investors, L.P.

to a third-party;

or a merger, consolidation, recapitalization or reorganization of Former Parent, ATI Investment Sub, Inc.

or the Company.

The IPO, Special Distribution and our follow-on offering in December 2020 (the “Follow-on Offering”) required the Company to make a cash payment of $9.1 million in October 2020 and $15.9 million in December 2020.

the sale of equity securities or assets of Former Parent, ATI Investment Sub, Inc.

(“Investment Sub”) or the Company to a third-party;

or a merger, consolidation, recapitalization or reorganization of Former Parent, Investment Sub, or the Company.

Our IPO, the cash distribution of $589 million that we paid to ATI Investment Parent, LLC upon the closing of our IPO, and our 2020 Follow-on Offering required the Company to make a cash payment of $9.1 million in October 2020 and $15.9 million in December 2020.

As a result of these payments our earn-out liability has been paid in full.

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tax benefits deemed realized in post-closing taxable periods by Array Tech, Inc.

(f/k/a Array Technologies, Inc.) from the use of certain deductions generated by the increase in the tax value of the developed technology.

Estimating fair value of the

TRA is by nature imprecise.

from the use of certain deductions generated by the increase in the tax value of the developed technology.

Estimating fair value of the TRA is by nature imprecise.

The significant fair value inputs used to estimate the future expected TRA payments to Ron P.

Corio include the timing of tax payments, a discount rate, book income projections, timing of expected adjustments to calculate taxable income and the projected rate of use for attributes defined in the TRA.

Corio include the

timing of tax payments, a discount rate, book income projections, timing of expected adjustments to calculate taxable income and the projected rate of use for attributes defined in the TRA.

Depreciation in our operating expense consists of costs associated with property, plant and equipment (“PP&E”) not used in manufacturing of our products.

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Income Tax Expense

We are subject to federal and state income taxes in the United States.

We are subject to federal and state income taxes in the United States and certain foreign markets.

As we expand into additional foreign markets, we may be subject to additional foreign tax.

Results of Operations

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2021 2020 $ %

Revenues $ 872,662 $ 647,899 $ 224,763 35 %

Cost of Revenues 669,861 497,138 172,723 35 %

Revenue $ 853,318 $ 872,662 $ (19,344) (2) %

Cost of revenue 770,459 669,861 100,598 15 %

Gross profit 82,859 202,801 (119,942) (59) %

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Total operating expenses 107,600 107,589 11 — %

Income from Operations 95,212 83,409 11,803 14 %

(Loss) income from operations (24,741) 95,212 (119,953) (126) %

Other expense

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Total other expense (36,380) (17,434) 18,946 109 %

77,778 64,579 13,199 20 %

Income Tax Expense 18,705 24,834 (6,129) (25) %

Net Income $ 59,073 $ 39,745 $ 19,328 49 %

Other Financial Information (unaudited):

Adjusted EBITDA $ 160,539 $ 121,789 $ 38,750 32 %

Adjusted Net Income $ 112,411 $ 80,179 $ 32,232 40 %

Income (loss) before income tax expense (benefit) (61,121) 77,778 (138,899) (179) %

Income tax expense (benefit) (10,718) 18,705 (29,423) (157) %

Net (loss) income $ (50,403) $ 59,073 $ (109,476) (185) %

Comparison of the years ended December 31, 2021 and 2020

Revenues increased by $224.8 million, or 35%, for the year ended December 31, 2020 compared to the year ended December 31, 2019.

Total MW delivered increased by approximately 32% for the year ended December 31, 2020 driven by a higher number of projects delivered in 2020 compared to 2019.

ASPs were up 2% year over year reflecting a change in the mix of our projects.

Cost of Revenues and Gross Profit

Cost of revenues increased by $172.7 million, or 35%, for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to the increase in the number of MW delivered.

Gross profit as a percentage of revenue remained relatively flat at 23.2% for the year ended December 31, 2020 compared to 23.3% for the year ended December 31, 2019.

Cost Per Watt was up 2% year over year reflecting a change in the mix of our projects.

Revenue decreased by $19.3 million, or 2%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

Total MW delivered increased by approximately 19% for the year ended December 31, 2021 due to increased demand for our products.

Cost of Revenue and Gross Profit

Cost of revenue increased by $100.6 million, or 15%, for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to the cost of raw materials and logistics increasing in 2021.

Gross profit as a percentage of revenue decreased from 23.2% for the year ended December 31, 2020 to 9.7% for the year ended December 31, 2021.

The decrease in Gross Profit as percentage of revenue reflects the higher commodity and logistics prices which we did not fully pass through to our customers via price increases.

Operating Expenses:

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General and administrative expenses increased by $25.3 million, or 46%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase in general and administrative expense was due to a $4.1 million collection of an accounts receivable for which the allowance for bad debt was recorded in 2018, an increase in equity-based compensation of $4.0 million related to the Class B and C unit grants in November 2019 and May 2020.

Equity-based compensation is amortized monthly over the vesting period resulting in more equity-based compensation as the grants were outstanding for more monthly periods in 2020.

We also increased our internal headcount in 2020 to support our growth and business plan resulting in higher payroll and related costs.

The increase in general and administrative expenses was partially offset from a reduction in third-party spend related to business process outsourcing, consulting costs, and other professional fees as a result of the completion of our ERP implementation as well as a reduction in travel expenses due to the COVID-19 pandemic.

The increase in general and administrative expense

relates to a $11.5 million expense increase in equity-based compensation during the year ended December 31, 2021 compared to the prior year due to the acceleration of the Class B awards that occurred in 2021.

Further, in 2021, we had higher legal and professional fees of approximately $7 million due to higher capital markets activity, M&A activity, as well as on-going securities litigation.

In addition, in 2021 we had higher insurance costs of approximately $4 million as this was our first full year as a public company.

Finally, we added headcount in 2021 to support growth, innovation, and to ensure operational execution;

however, the increased costs related to these additions was largely offset by a reduction in variable compensation

Contingent consideration

Contingent consideration expense increased by $25.8 million for the year ended December 31, 2020 compared to $0.6 million for the year ended December 31, 2019.

The increase was due to an increase in the fair value of our earn-out obligation and a slight increase in the fair value of our TRA.

The earn-out value was based upon the anticipated return of investment our sponsor expects to receive upon liquidation of its investment in Array.

As a result of the IPO, Special Distribution and Follow-on Offering, we were required to pay the maximum amount of the earn-out ($25 million) during the fourth quarter of 2020 resulting in a change in the fair value of the earn-out of $24.6 million during the year ended December 31, 2020.

Contingent consideration expense decreased by $23.7 million, or 90%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The decrease was primarily due to an increase in the fair value of our earn-out obligation in the prior year period for which there was no corresponding increase in the current year period.

Depreciation expense for the year ended December 31, 2021 was similar to the year ended December 31, 2020 as we did not add any significant capital assets.

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Interest expense

Interest expenses decreased by $3.7 million, or 20%, for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to lower interest on our Term Loan Facility (as defined below) as it was paid in full in February 2020 and our Senior Secured Promissory Note as it was paid in full in July 2020.

During October 2020 we entered into our Senior Secured Credit Facility and borrowed $575 million.

We used IPO proceeds to repay $105 million and made additional principal payments of $10.0 million in December 2020 resulting in a balance of $460.0 million outstanding at December 31, 2020.

We anticipate an increase in interest expense as a result of our Senior Secured Credit Facility.

Income Tax Expense

Interest expenses increased by $20.3 million, or 134%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily due to interest on the higher average balance of our Term Loan Facility and Revolving Facility which were not outstanding during the year ended December 31, 2020.

In addition, $9.6 million in capitalized fees and discount was written off in 2021 in connection with unscheduled principal payoffs that occurred in February and August of 2021.

As of December 31, 2021, we had $326.8 million outstanding under the Term Loan and no balance outstanding under the Revolving Senior Facility, as it was paid off in August 2021.

The Convertible Notes issued in December of 2021 have a balance of $425.0 million as of December 31, 2021.

Income tax expense (benefit)

Income tax expense decreased by $29.4 million, or 157% for the year ended December 31, 2021 compared to the year ended December 31, 2020.

Our effective tax rate was 17.5% for year ended December 31, 2021 and 24.0% for the year ended December 31, 2020.

The effective tax rate for the year ended December 31, 2019 was higher than the statutory rate as a result of a $9.3 million permanent difference from the settlement of an IRS examination which reduced the value of the developed technology from $210.0 million to $188.0 million for federal income tax purposes.

The reduction in value increased our deferred tax liability related to the developed technology by $4.6 million.

The settlement with the IRS also resulted in payments related to the TRA being non-deductible for tax purposes, resulting in the write-off of the deferred tax asset related to the TRA totaling $4.7 million.

The effective tax rate for the year ended December 31, 2020 benefited from a $6.6 million income tax benefit received from the NOL carryback provision provided by the CARES Act.

The benefit from the CARES Act was offset by a significant amount of permanent differences.

As a result of the factors discussed above, our net income increased by $19.3 million, or 49%, in 2020 as compared to 2019.

Comparison of the years ended December 31, 2019 and 2018

A discussion and analysis covering the comparison of the year ended December 31, 2019 to the year ended December 31, 2018 is included in our prospectus filed pursuant to Rule 424(b) with the Securities and Exchange Commission on December 4, 2020.

Non-GAAP Financial Measures

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains the presentation of Adjusted EBITDA and Adjusted Net Income, which are not presented in accordance with GAAP.

Adjusted EBITDA and Adjusted Net Income are being presented because they provide the Company and readers of this Form 10-K with additional insight into our operational performance relative to earlier periods and relative to our competitors.

We do not intend Adjusted EBITDA and Adjusted Net Income to be substitutes for any GAAP financial information.

Readers of this Form 10-K should use Adjusted EBITDA and Adjusted Net Income only in conjunction with Net Income, the most comparable GAAP financial measure.

Reconciliations of Adjusted EBITDA and Adjusted Net Income to Net Income, the most comparable GAAP measure to each, are provided in “—Non-GAAP Financial Measure.”

Adjusted EBITDA and Adjusted Net Income (Non-GAAP)

We present Adjusted EBITDA and Adjusted Net Income as supplemental measures of our performance.

We define Adjusted EBITDA as net income (loss) plus (i) interest expense, (ii) other (income) expense, (iii) income tax expense (benefit), (iv) depreciation expense, (v) amortization of intangibles, (vi) equity based compensation, (vii) remeasurement of the fair value of contingent consideration, (viii) ERP implementation costs, (ix) certain legal expense, and (x) other costs.

We define Adjusted Net Income as net income (loss) plus (i) amortization of intangibles, (ii) amortization of debt discount and issuance costs, (iii) equity based compensation, (iv) remeasurement of the fair value of contingent consideration, (v) ERP implementation costs, (vi) certain legal expense, (vii) other costs, and (viii) income tax (expense) benefit of adjustments.

Adjusted EBITDA and Adjusted Net Income are intended as supplemental measures of performance that are neither required by, nor presented in accordance with, GAAP.

We present Adjusted EBITDA and Adjusted Net Income because we believe they assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.

In addition, we use Adjusted EBITDA and Adjusted Net Income:

(i) as factors in evaluating management’s performance when determining incentive compensation;

(ii) to evaluate the effectiveness of our business strategies;

and (iii) because our credit agreement uses measures similar to Adjusted EBITDA and Adjusted Net Income to measure our compliance with certain covenants.

Among other limitations, Adjusted EBITDA and Adjusted Net Income do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations;

do not reflect income tax expense or benefit;

and other companies in our industry may calculate Adjusted EBITDA and Adjusted Net Income differently than we do, which limits their usefulness as comparative measures.

Because of these limitations, Adjusted EBITDA and Adjusted Net Income should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP.

We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA and Adjusted Net Income on a

supplemental basis.

You should review the reconciliation of net income (loss) to Adjusted EBITDA and Adjusted Net Income below and not rely on any single financial measure to evaluate our business.

The following table reconciles net income (loss) to Adjusted EBITDA (in thousands):

Year Ended December 31,

2020 2019 2018

The reduction in the effective tax rate is primarily related to unfavorable non-deductible costs for equity-based compensation and our 2021 Follow-on Offering for the year ended December 31, 2021, a favorable tax benefit related to an NOL carryback as a result of the CARES Act in the year ended December 31, 2020, and the level of earnings in each period.

Net income (loss)

Interest expense 15,129 18,797 19,043

Other expense, net 2,305 33 447

As a result of the factors discussed above, our net income decreased by $109.5 million, or 185%, for the year ended December 31, 2021 as compared to the year ended December 31, 2020.

Comparison of the years ended December 31, 2020 and 2019

A discussion and analysis covering the comparison of the year ended December 31, 2020 to the year ended December 31, 2019 is included in our annual report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2021.

Restatement of Quarterly Financial Data

The Company has restated its unaudited interim financial statements for the three months ended March 31, 2021, the three and six months ended June 30, 2021 and the three and nine months ended September 30, 2021.

Detailed restatements of the Company's consolidated quarterly financial statements are provided in Note 22.

The following unaudited quarterly statements of operations data for each of the four quarters in the period ended December 31, 2021 have been prepared on a basis consistent with our audited annual financial statements included in this Annual Report on Form 10-K and include, in our opinion, all normal recurring adjustments necessary for the fair presentation of the financial information contained in those statements.

Our historical results are not necessarily indicative of the results that may be expected in the future.

The following quarterly financial data should be read in conjunction with our audited financial statements and the related notes included in this Annual Report on Form 10-K.

The Company restated previously issued interim statements for the three months ended March 31, 2021, June 30, 2021, September 30, 2021 and for the six months ended June 30, 2021 and the for the nine months ended September 30, 2021 (the “Non-Reliance Periods”).

See Note 22, “Restatement of Previously Issued Unaudited Interim Condensed Consolidated Financial Statements,” for the impact of these adjustments on each of the first three quarters of fiscal 2021.

Three Months Ended

(in thousands) March 31, 2021 As Restated June 30, 2021 As Restated September 30, 2021 As Restated December 31, 2021

Revenue $ 248,240 $ 196,516 $ 188,686 $ 219,876

Gross profit 46,166 20,507 5,897 10,289

Income (loss) before income tax expense (benefit) 6,274 (7,347) (32,922) (27,126)

Income tax expense (benefit) 1,698 (1,830) (5,361) (5,225)

Depreciation expense 2,224 2,066 1,944

Amortization of intangibles 25,250 25,250 26,506

Equity-based compensation 4,809 799 —

Contingent consideration 26,441 640 (825)

ERP implementation costs (a)

1,946 2,874 5,810

Legal expense (b)

1,068 3,915 1,483

Other costs (c)

3,589 2,836 3,636

Adjusted EBITDA $ 160,539 $ 121,789 $ (22,652)

(a) Represents consulting costs associated with our enterprise resource planning system implementation.

(b) Represents certain legal fees and other related costs associated with (i) a patent infringement action against a competitor for which a judgement has been entered in our favor and successful defense of a related matter and (ii) a pending action against a competitor in connection with violation of a non-competition agreement and misappropriation of trade secrets.

We consider these costs not representative of legal costs that we will incur from time to time in the ordinary course of our business.

(c) For the year ended December 31, 2020, other costs represent (i) certain costs associated with our IPO and Follow-on Offering of $3.5 million and, (ii) costs associated with our initial Board of Directors search for $0.1 million.

For the year ended December 31, 2019, other costs represent (i) consulting fees for certain accounting, finance and IT services of $2.6 million and (ii) $0.2 million for the executive consulting costs.

For the year ended December 31, 2018, other costs represent (i) consulting fees for certain accounting, finance and IT services of $3.6 million.

The following table reconciles net income to Adjusted Net Income (loss) (in thousands):

Year Ended December 31,

2020 2019 2018

Net income (loss) 4,576 (5,517) (27,561) (21,901)

Amortization of intangibles 25,250 25,250 26,506

Amortization of debt discount and issuance costs 3,366 3,968 2,991

Equity based compensation 4,809 799 —

Contingent consideration 26,441 640 (825)

ERP implementation costs (a)

1,946 2,874 5,810

Legal expense (b)

1,068 3,915 1,483

Other costs (c)

5,821 2,836 3,636

Income tax expense of adjustments (d)

(8,755) (9,132) (9,338)

Non-recurring income tax adjustments related to the IRS settlement and CARES Act (6,608) 9,284 —

Adjusted Net Income (loss) $ 112,411 $ 80,179 $ (30,501)

(a) Represents consulting costs associated with our enterprise resource planning system implementation.

We consider these costs not representative of legal costs that we will incur from time to time in the ordinary course of our business.

(c) For the year ended December 31, 2020, other costs represent (i) certain costs associated with our IPO and Follow-on Offering of $3.5 million, (ii) $2.2 million to the former majority shareholder in connection with tax benefits received as part of the CARES act (this $2.2 million is reflected in the "Other Expense" line in Adjusted EBITDA) and (iii) costs associated with our initial Board of Directors search for $0.1 million.

For the year ended December 31, 2018, other costs represent (i) consulting fees for certain accounting, finance and IT services of $3.6 million.

(d) Represents the estimated tax impact of all Adjusted Net Income add-backs, excluding those which represent permanent differences between book versus tax.

Dividends and accretion — — (5,479) (10,236)

Net income (loss) to common stockholders $ 4,576 $ (5,517) $ (33,040) $ (32,137)

Earnings (loss) per share basic and diluted $ 0.04 $ (0.04) $ (0.25) $ (0.24)

Liquidity and Capital Resources

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Year Ended December 31,

Net Cash (Used in) Provided by Operating Activities $ (122,205) $ 386,073

2021 2020 2019

Net cash provided by (used in) operating activities $ (263,187) $ (122,205) $ 386,073

Net cash used in investing activities (15,332) (1,338) (1,697)

Net Cash (Used in) provided by Financing Activities (129,273) (63,945)

Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash $ (252,816) $ 320,431

We have historically financed our operations primarily with the proceeds from contributions, operating cash flows and short and long-term borrowings.

Our ability to generate positive cash flow from operations is dependent on the strength our gross margins as well as our ability to quickly turn our working capital.

Based on our past performance and current expectations, we believe that operating cash flows will be sufficient to meet our future cash needs.

Our Senior Secured Credit Facility (see discussion below) provides an additional source of short and long-term liquidity to fund operations.

As of December 31, 2020, our cash and cash equivalents was $108.4 million.

Net cash provided by (used in) financing activities 537,748 (129,273) (63,945)

Net change in cash and cash equivalents $ 259,229 $ (252,816) $ 320,431

We have historically financed our operations primarily with the proceeds from capital contributions, operating cash flows and short and long-term borrowings.

Our ability to generate positive cash flow from operations is dependent on the strength of our gross margins as well as our ability to quickly turn our working capital.

In December 2019, a novel strain of coronavirus, SARS-CoV-2, or COVID-19, surfaced in Wuhan, China.

Since then, COVID-19 has spread to multiple countries, including the United States.

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic.

Due to economic conditions our industry has seen rapid commodity price increases and strained logistics, adversely impacting our business and causing us to experience decreased margins and thus decreased cash from operations.

Due to strained logistics issues, we have experienced an increase in our unbilled revenues and also in some instances, liquidated damages owed to our customers.

Unbilled receivables, which represent temporary timing differences between shipments made and billing milestones achieved, were $111.2 million and $18.1 million of the accounts receivable balances as of December 31, 2021 and 2020, respectively.

These amounts have not been billed because we are waiting for agreed upon billing stipulations such as billing on a specified date of the month or upon completion of mega-watt deliveries.

The unbilled balance has increased as of December 31, 2021 due to global challenges with supply chain logistics and labor shortages in some instances causing delays in delivering specific components to complete a mega-watt delivery.

These will be invoiced once the commercial criteria have been met at which point we will invoice and expect payment within 30 to 60 days.

We have taken mitigating steps to overcome the economic challenges but cannot be certain the timing of when we will achieve better margins.

In response to the recent challenging environment, we continuously evaluate our ability to meet our obligations over the next 12 months.

We have sufficient liquidity as well as financing options available to fund current and future commitments.

As of December 31, 2021, our cash was $367.7 million.

Net working capital as of December 31, 2021 was $606.7 million.

As of December 31, 2020, we had outstanding borrowings of $460.0 million under the Term Loan Facility and $103.4 million available of our $150.0 million commitment under our Revolving Credit Facility.

In December of 2021, we issued $425.0 million in aggregate principal amount of 1.00% Convertible Senior Notes due 2028, as further discussed below.

In August of 2021, we issued 350,000 shares of Series A Redeemable Perpetual Preferred Stock and 7,098,765 shares of common stock, par value $0.001 per share, for an aggregate purchase price of $346 million, as further described below.

In January 2022, we issued 50,000 of Series A Redeemable Perpetual Preferred Stock, and 1,125,000 shares of our Common Stock, par value $0.001 per share, in an Additional Closing for an aggregate purchase price of $49,376,125.

As of March 31, 2022, we estimate our cash on hand to be $40.4 million and the balance available to be drawn on the Revolving Credit Facility was $114.8 million, however, we had limited ability to draw on the available balance due to debt covenants.

As of December 31, 2021, we had outstanding borrowings of $326.8 million under the Term Loan Facility and $186.4 available of our $200.0 million commitment under our Revolving Credit Facility.

Operating Activities

For the year ended December 31, 2020, cash used by operating activities was $122.2 million primarily due to payments to our suppliers for products that were paid for by customers in 2019, but that we did not ship until 2020.

For the year ended December 31, 2021, cash used by operating activities was $263.2 million primarily due to lower gross profit on projects delivered due to rapid increases in commodity and logistic costs which we were not able to fully pass on to our customers.

Additionally, the cash used in operating activities reflects $96.6 million in cash used to build inventory due to growth in demand coupled with longer shipping lead-times leading the Company to carry more safety stock.

Finally, the increase in accounts receivable used $118.4 million in cash during 2021 driven by increased sales coupled with a number of large projects not reaching billing milestones at the end of the year.

For the year ended December 31, 2020 cash provided by operating activities was $122.2 million, primarily due to payments to our suppliers for products that were paid for by customers in 2019, but that we did not ship until 2020.

In order for our customers to take advantage of the ITC credit, we received payment on these projects in the fourth quarter of 2019.

For the year ended December 31, 2019 cash provided by operating activities was $386.1 million, due to an increase in deferred revenue of $307.0 million resulting from payments made by customers for products we did not ship until the first half of 2020.

Additionally, there was a $94.6 million increase in inventory and a $105.5 million increase in accounts payable in preparation of expected volume increases in the first quarter of 2020.

Investing Activities

For the years ended December 31, 2020 and 2019, net cash used in investing activities was $1.3 million and $1.7 million, respectively, primarily attributable to the purchase of property and equipment.

For the year ended December 31, 2021, net cash used in investing activities was $15.3 million primarily attributable to a $12 million investment in equity securities.

For the year ended December 31, 2020, net cash used in investing activities was $1.3 million primarily attributable to the purchase of property and equipment.

Financing Activities

For the year ended December 31, 2021, net cash provided by financing activities was $537.7 million of which $225.0 million was proceeds from the offering of our Series A Redeemable Perpetual Preferred Stock and $120.6 million from the proceeds of the sale of common stock, each of which that closed on August 11, 2021, $413.3 million in proceeds from the issuance of the Convertible Notes, $126.0 million was from proceeds under the Revolving Facility, offset by a $133.2 million payment on the Term Loan Facility, a $126.0 million payment of the Revolving Credit Facility, $11.1 million in equity issuance costs associated with the Series A and $6.6 million in fees paid on the Senior Secured Credit Facility and to increase the limit on the Revolving Facility by $50.0 million.

For the year ended December 31, 2020, net cash used by financing activities was $129.3 million.

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The Company also paid a special distribution to its members prior to our IPO of $589.0 million (the “Special Distribution”) along with $57.7 million and $45.6 million payments of the Term Loan and Senior Secured Promissory Note, respectively.

For the year ended December 31, 2019, net cash used by financing activities was $63.9 million, of which $25.0 million and $39.1 million was attributable to the payment of the Prior Term Loan Facility and Senior ABL Facility.

Acquisition of STI

and Aurica Trackers, S.L., each a company duly organized under the laws of the Kingdom of Spain, and Mr.

Javier Reclusa Etayo.

The fair value of the purchase consideration was $610.7 million and resulted in the

Company owning 100% of the interests in STI.

The Company is in the process of performing a valuation of the acquisition assets and liabilities and the related accounting impact.

The purchase price will be increased by the amount that is four times the audited EBITDA of the target less €47.0 million ($53.5 million at current exchange rates), such that the amount of contingent consideration is subject to a cap of €45.0 million ($52.0 million at current exchange rates).

Subsequent to December 31, 2021, it was determined that the targets were not met.

The Company financed the STI Acquisition and related fees and expenses with cash on hand, the sale and proceeds from the Convertible Notes, and $50.0 million in proceeds from the Delayed Draw.

1.00% Convertible Senior Notes due 2028

On December 3, 2021 and December 9, 2021, the Company completed a private offering of $375 million and $50 million over allotment, respectively, in aggregate principal amount of 1.00% Convertible Senior Notes due 2028 (the “Convertible Notes”) resulting in proceeds of $364.7 million and $48.6 million, respectively, after deducting the original issue discount of 2.75%.

The Convertible Notes were issued pursuant to an indenture, dated December 3, 2021 (the “Indenture”), between the Company and U.S.

Bank National Association, as trustee.

The Convertible Notes are senior unsecured obligations of the Company and will mature on December 1, 2028, unless earlier converted redeemed or repurchased.

The Convertible Notes will bear interest at a rate of 1.00% per year, payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2022.

Series A Redeemable Perpetual Preferred Stock

On August 10, 2021, the Company entered into the Securities Purchase Agreement with an investment vehicle of funds affiliated with Blackstone Inc.

(the “Purchaser”) Pursuant to the Securities Purchase Agreement, on August 11, 2021, the Company issued and sold to the Purchaser 350,000 shares of the Series A Redeemable Perpetual Preferred Stock, having the powers, designations, preferences, and other rights set forth in the Certificate of Designations, and 7,098,765 shares of the Company’s Common Stock, for an aggregate purchase price of $346.0 million.

Further, pursuant to the Securities Purchase Agreement, and subject to the terms and conditions set forth therein, including the expiry or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the Company has agreed to issue and sell to the Purchaser 776,235 shares of Common Stock for an aggregate purchase price of $776.

For more information related to the Series A Redeemable Perpetual Preferred Stock, see Note 11 - Redeemable Perpetual Preferred, to the accompanying consolidated financial statements.

Registration Rights Agreement

In connection with the Securities Purchase Agreement, on August 10, 2021, the Company and the Purchaser entered into a Registration Rights Agreement pursuant to which, among other things, the Company granted the Purchaser certain registration rights with respect to Common Stock purchased pursuant to the Securities Purchase Agreement, including customary shelf registration rights and “piggyback” registration rights.

Direct costs associated with the issuance of the Securities were $11.1 million, which along with the $4.4 million discount, have been accounted for as a reduction in the proceeds of the Securities.

These net proceeds of $334.6 million have been allocated on the balance sheet to the Series A Redeemable Perpetual Preferred Stock of $229.8 million, common stock of $105.4 million and additional paid-in capital of $12.4 million for the committed financing put right.

The Company has presented the Series A Redeemable Perpetual Preferred Stock in temporary equity and accreting the carrying, amount to its full redemption amount from the date of issuance to the earliest redemption date using the effective interest method.

Such accretion totaled $7.4 million for the year ended December 31, 2021.

The Company accreted the regular cash rate of dividends of 5.75% to the liquidation preference amount of the Series A Redeemable Perpetual Preferred Stock, or $8.2 million in dividends, for the year ended December 31, 2021.

Discussion of 2019 Historical Cash Flows

A discussion and analysis covering historical cash flows for the year ended December 31, 2018 is included in our prospectus filed pursuant to Rule 424(b) with the Securities and Exchange Commission on December 4, 2020.

A discussion and analysis covering historical cash flows for the year ended December 31, 2019 is included in our annual report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2021.

Debt Obligations

1.00% Convertible Senior Notes due 2028

On December 3, 2021 and December 9, 2021, the Company completed a private offering (the “Convertible Notes Offering”) of $375 million and $50 million over allotment, respectively, in aggregate principal amount of 1.00% Convertible Senior Notes due 2028 resulting in proceeds of $364.7 million and $48.6 million, respectively, after deducting the original issue discount of 2.75%.

The Convertible Notes were issued pursuant to an indenture, dated December 3, 2021 (the “Indenture”), between the Company and U.S.

Bank National Association, as trustee.

The Convertible Notes are senior unsecured obligations of the Company and will mature on December 1, 2028, unless earlier converted redeemed or repurchased.

The Convertible Notes bear interest at a rate of 1.00% per year, payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2022.

The Convertible Notes were not convertible during the quarter ended December 31, 2021 and none have been converted to date.

Also, given the average market price of the common stock has not exceeded the exercise price since inception, there was no impact to the diluted earnings per share for the quarter ended December 31,2021.

Senior Secured Credit Facility

On October 14, 2020, the Company entered into a senior secured credit facility consisting of (i) a $575.0 million senior secured seven-year term loan facility (the “Term Loan Facility”) and (ii) a $150.0 million senior secured 5-year revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Secured Credit Facility”).

On October 14, 2020, we entered into a senior secured credit facility which was amended on February 23, 2021 by the first amendment and on February 26, 2021 by the second amendment.

The senior secured facility consisted originally of (i) a $575 million senior secured seven-year term loan facility (the “Term Loan Facility”) and (ii) a $150 million senior secured 5-year revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Secured Credit Facility”).

On February 23, 2021, we entered into the first amendment (“First Amendment”) to our Senior Secured Credit Facility.

The First Amendment, in the case of Eurocurrency borrowings, lowers the London interbank offered rate floor to 50 basis points from 100 basis points and lowers the applicable margin to 325 basis points from 400 basis points per annum.

This results in our current rate on the Term Loan Facility decreasing to 3.75% down from 5% prior to the First Amendment.

On February 26, 2021, we entered into the incremental facility amendment No.

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The Second Amendment increases the $150.0 million Revolving Credit Facility from $150.0 million to $200.0 million.

As of December 31, 2020, the Term Loan Facility had a balance of $460.0 million.

The Term Loan Facility accrued interest equal to applicable margin of 1% plus base rate (4% at December 31, 2020).

On February 23, 2021 we entered into the first amendment (“First Amendment”) to our Senior Secured Credit Facility.

The First Amendment, in the case of the Eurocurrency borrowings, lowers the London interbank offered rate floor to 50 basis points from 100 basis points and lowers the applicable margin to 325 basis points from 400 basis points per annum.

This results in our current rate on the Term Loan Facility decreasing to 3.75% down from 5% prior to the First Amendment.The balance of the Term Loan Facility is presented in the accompanying consolidated balance sheets net of debt discount and issuance costs of $31.7 million at December 31, 2020.

The debt discount and issuance costs are being amortized using the effective interest method and the rate as of December 31, 2021 is 4.9%.

The Term Loan Facility has an annual excess cash flow calculation beginning with the year ended December 31, 2021, which could require the Company to make advance principal payments.

The balance of the Term Loan Facility is presented in the accompanying consolidated balance sheets net of debt discount and issuance costs of $23.3 million at December 31, 2021.

As of December 31, 2021, the Term Loan Facility had a balance of $326.8 million.

We are in compliance with all covenants as of December 31, 2021.

Letters of Credit

Under the Revolving Credit Facility, the Company had no outstanding balance, $46.6 million in standby letters of credit and availability of $103.4 million under the Revolving Credit Facility.

Under the Revolving Credit Facility, the Company had no outstanding balance, $13.6 million in standby letters of credit and availability of $186.4 million under the Revolving Credit Facility as of December 31, 2021;

however, we had limited ability to draw on the available balance due to debt covenants..

Interest Rate

The interest rates applicable to the loans under the Term Loan Facility equal, at our option, either, (i) in the case of ABR borrowings, the highest of (a) the Federal Funds Rate as of such day plus 50 basis points, (b) the prime rate and (c) the adjusted LIBOR rate as of such day for a deposit in U.S.

dollars with a maturity of one month plus 100 basis points, provided that in no event shall the ABR be less than 150 basis points, plus, in each case, the applicable margin of 300 basis points per annum;

or (ii) in the case of Eurocurrency borrowings, the greater of (a) the LIBOR for the relevant currency, adjusted for statutory reserve requirements, and (b) 100 basis points, plus, in each case, the applicable margin of 400 basis points per annum.

Pursuant to the First Amendment, (i) the applicable margin (a) with respect to ABR borrowings was reduced to 225 basis points and (b) with respect to Eurocurrency borrowings was reduced to 325 basis points and (ii) the LIBOR floor referred to in clause (ii)(b) above was reduced from 100 to 50 basis points.

The interest rates applicable to the loans under the Revolving Facility equal, at our option, either, (i) in the case of ABR borrowings, the highest of (a) the Federal Funds Rate as of such day plus 50 basis points, (b) the prime rate and (c) the adjusted LIBOR rate as of such day for a deposit in U.S.

dollars with a maturity of one month plus 100 basis points, provided that in no event shall the ABR be less than 150 basis points, plus, in each case, the applicable margin of 225 basis points per annum;

or (ii) in the case of Eurocurrency borrowings, the greater of (a) the LIBOR for the relevant currency, adjusted for statutory reserve requirements, and (b) 50 basis points, plus, in each case, the applicable margin of 325 basis points per annum.

The Term Loan Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00% per annum of the original principal amount of the loans funded thereunder.

There is no scheduled amortization under the Revolving Credit Facility.

Guarantees and Security

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The Senior Secured Credit Facility contains affirmative and negative covenants including covenants that restrict our incurrence of indebtedness, incurrence of liens, dispositions, investments, acquisitions, restricted payments, transactions with affiliates, as well as other negative covenants customary for financings of this type.

The Revolving Credit Facility also includes a springing financial maintenance covenant that is tested on the last day of each fiscal quarter if the outstanding loans and certain other credit extensions under the New Revolving Credit Facility exceed 35% of the aggregate amount of commitments thereunder.

The Revolving Credit Facility also includes a springing financial maintenance covenant that is tested on the last day of each fiscal quarter if the outstanding loans and certain other credit extensions under the Revolving Credit Facility exceed 35% of the aggregate amount of commitments thereunder, subject to customary exclusions and conditions.

If the financial maintenance covenant is triggered, the first lien net leverage ratio will be tested for compliance not to exceed 7.10 to 1.00.

The Senior Secured Credit Facility also includes customary events of default, including the

occurrence of a change of control.

Senior ABL Facility

The Company had a Senior ABL Facility which, as amended on March 23, 2020, had maximum availability of $100.0 million and matures on March 23, 2025.

The amount available to be borrowed under the Senior ABL Facility was determined by a borrowing base consisting of our eligible inventory, eligible accounts receivable and cash.

On October 14, 2020, we repaid the entire outstanding balance of the Senior ABL Facility and closed this facility.

The interest rates applicable to the loans under the Senior ABL Facility were based on a fluctuating rate of interest determined by reference to a base rate plus an applicable margin ranging from 0.50% to 1.00% or a prime rate or Eurocurrency rate plus an applicable margin ranging from 1.50% to 2.00%.

The applicable margin was adjusted after the completion of each full fiscal quarter based upon the pricing grid in the Senior ABL Facility.

The Senior ABL Facility contained a number of customary affirmative and negative covenants, including covenants that restricted our ability to borrow money, grant liens, pay dividends or dispose of assets, and events of default.

Specifically, we were required to maintain a fixed charge coverage ratio, measured as of the last day of each full fiscal quarter, of at least 1.10 to 1.00.

Letter of Credit Facility

On December 16, 2019, we entered into a letter of credit facility (the “LC Facility”) to provide customers with additional credit support in the form of a standby letter of credit to secure our performance obligations under contracts for which certain customers elected to prepay for the design and manufacture of tracker systems.

The LC Facility has a commitment of $100.0 million in standby letters of credit which expired August 31, 2020.

Senior Secured Promissory Note

On August 22, 2018, High Desert Finance LLC, our wholly owned subsidiary, issued $38.6 million Senior Secured Promissory Note (the “Senior Secured Promissory Note”) in favor of Ron P.

Corio, our indirect stockholder, that was secured by the outstanding common stock of ATI Investment Holdings, Inc.

The maturity due date of the Senior Secured Promissory Note was originally February 22, 2020 but was subsequently amended to extend the due date to September 22, 2020.

The Company paid the remaining outstanding balance and accrued interest on July 31, 2020 to settle the obligation with respect to the Senior Secured Promissory Note.

Prior Term Loan Facility

On June 23, 2016, we entered into a term loan agreement with Jefferies Finance LLC, providing for a term loan in an aggregate amount of $200 million (the “Prior Term Loan Facility”).

As of December 31, 2019, the Prior Term Loan Facility had a balance of $57.7 million.

The balance of the Prior Term Loan Facility is presented in the accompanying consolidated balance sheet net of debt discount and issuance costs of $1.8 million at December 31, 2019.

The Prior Term Loan Facility contains a provision under which a percentage of excess cash flow must be used to pay down the loan.

As of December 31, 2019, the excess cash flow provision resulted in the Prior Term Loan Facility being classified as current on the accompanying consolidated balance sheet.

On February 7, 2020, the Company repaid the Prior Term Loan Facility in full and settled all obligations with respect to the Prior Term Loan Facility.

The Senior Secured Credit Facility also includes customary events of default, including the occurrence of a change of control.

As of December 31, 2021, the Company was in compliance with all the required covenants.

As of December 31, 2021, we posted surety bonds in the total amount of approximately $160.4 million.

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These off-balance sheet arrangements do not adversely impact our liquidity or capital resources.

Critical Accounting Policies and Significant Management Estimates

We prepare our consolidated financial statements in accordance with GAAP.

The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

Actual results could differ significantly from the estimates made by our management.

To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Critical accounting policies and

estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.

Revenue Recognition 2020 and 2019

The Company recognized revenues from the sale of solar tracking systems and parts and determines its revenue recognition through the following steps:

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

Due to the COVID-19 pandemic, there has been and will continue to be uncertainty and disruption in the global economy and financial markets.

We have made estimates and assumptions taking into consideration certain possible impacts due to COVID-19.

These estimates may change, as new events occur, and additional information is obtained.

Actual results may differ from those estimates and assumptions.

The critical accounting estimates discussed below are estimates made in accordance with U.S.

GAAP that we believe involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

Revenue Recognition

Under ASC 606, Revenue from Contracts with Customers (“ASC 606), the Company recognizes revenues from the sale of solar tracking systems and parts and determines its revenue recognition through the following steps:

(i) identification of the contract or contracts with a customer;

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Performance Obligations

The Company’s contracts with customers are predominately accounted for as one performance obligation, as the majority of tasks and services is part of a single project or capability.

As these contracts are typically a customized assembly for a customer-specific solution, the Company uses the expected cost-plus margin approach to estimate the standalone selling price of each performance obligation.

The majority of the Company’s contracts with customers are accounted for as one performance obligation, because the Company is integrating the solar tracker system components and related services as part of a single project.

Certain contracts associated with customers using the federal investment tax credit (“ITC”) for solar energy projects and other standalone tracker component sales are accounted for as multiple performance obligations because some of these contracts consist of orders for tracker system components without certain of the related services.

For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the contract.

In assessing the recognition of revenue, the Company also evaluates whether two or more contracts should be combined and accounted for as one contract and if the combined or single contract should be accounted for as multiple performance obligations which could change the amount of revenue and profit (loss) recorded in a period.

Change orders may include changes in specifications or design, manner of performance, equipment, materials, scope of work, and/or the period of completion of the project.

The Company analyzes its changed orders to determine if they should be accounted for as a modification to an existing contract or a new stand-alone contract.

The Company’s change orders are generally modifications to existing contracts and are included in the total estimated contract revenue when it is probable that the change order will result in additional value that can be reliably estimated and realized.

The majority of the Company’s contracts do not contain variable consideration provisions as a continuation of the original contract.

The Company’s performance obligations are satisfied predominately over-time as work progresses for its custom assembled solar systems, utilizing an output measure of completed products and based on the timing of the product’s shipments considering the shipping terms described in the contract.

The Company uses the expected cost-plus margin approach to estimate the standalone selling price of each performance obligation.

In contracts with one performance obligation, the Company’s performance obligation is satisfied over-time as control is transferred to the customer by measuring the progress toward complete satisfaction of the performance obligation using an input (i.e., “cost to cost”) method.

Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation.

Revenue recognized for the Company’s ITC related contracts and standalone system component sales are recorded at a point in time and recognized when obligations under the terms of the contract with our customer are satisfied.

Generally, this occurs with the transfer of control of the asset, which is typically upon delivery to the customer in line with shipping terms.

In certain situations, when product is still in our custody, and title and risk of loss has passed to the customer (known as bill-and-hold arrangement), revenue will be recognized when all the specific requirements for transfer of control under a bill-and-hold arrangement have been met.

Revenue recognized for the Company’s part sales are recorded at a point in time and recognized when obligations under the terms of the contract with our customer are satisfied.

Generally, this occurs with the transfer of control of the asset, which is in line with shipping terms.

Contracts are often modified through change orders to account for changes in specifications or design, manner of performance, equipment, materials, scope of work, and/or the period of completion of the project.

Although the Company evaluates each change order to determine whether such modification creates a separate performance obligation, the majority of change orders are not distinct within the context of the original contract and, therefore, not treated as separate performance obligations but rather as a modification of the existing contract and performance obligation.

Contract Estimates

Accounting for contracts utilizing the over-time method and their expected cost-plus margins is based on various assumptions to project the outcome of future events that can exceed a year.

These assumptions include labor productivity and availability;

the complexity of the work to be performed;

the cost and availability of materials;

and the availability and timing of funding from the customer.

The Company reviews and updates its contract-related estimates each reporting period.

The Company recognizes adjustments in estimated expected cost-plus on contracts under the cumulative catch-up method.

Accounting for contracts utilizing the cost-to-cost measure of progress is based on various assumptions to project the outcome of future events that can exceed a year.

These assumptions include the cost and availability of materials.

The cost estimation process for recognizing revenues over time under the cost-to-cost method is based on the professional knowledge and experience of the Company’s project managers, engineers and finance professionals.

The Company reviews and updates its contract-related estimates on an ongoing basis and recognizes adjustments for any project specific facts and circumstances that could impact the measurement of the extent of progress, such as the total costs to complete the contracts, under the cumulative catch-up method.

Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified.

Revenue and profit in future periods of contract performance is recognized using the adjusted estimate.

If at any time the

estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes the total loss in the period it is identified.

If at any time the estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes the total loss in the period it is identified.

Contract Balances

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The changes in contract assets (i.e.

unbilled receivables) and the corresponding amounts recorded in revenue relate to fluctuations in the timing and volume of billings for the Company’s revenue recognized over-time.

unbilled receivables) and the corresponding amounts recorded in revenue relate to fluctuations in the timing and

volume of billings for the Company’s revenue recognized over-time.

As of December 31, 2021 and December 31, 2020, contract assets consisting of unbilled receivables totaling $111.2 million and $18.1 million, respectively, were recorded within accounts receivable on the consolidated balance sheet.

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Product Warranty

The Company offers an assurance type warranty for its products against defects in design, materials and workmanship for a period ranging from five to twenty years from customer acceptance.

The Company offers an assurance type warranty for its products against manufacturer defects and does not contain a service element.

For these assurance type warranties, a provision for estimated future costs related to warranty expense is recorded when they are probable and reasonably estimable, which is typically when products are delivered.

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(f/k/a Array Technologies, Inc.) entered into the TRA with Ron P.

Corio, our indirect stockholder.

Corio, a former indirect stockholder.

The TRA is accounted for as contingent consideration and subsequent changes in fair value of the contingent liability are recognized in general and administrative in the Company’s consolidated statement of operations.

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The significant fair value inputs used to estimate the future expected TRA payments to Ron P.

Corio include the timing of tax payments, a discount rate, book income projections, timing of expected

adjustments to calculate taxable income and the projected rate of use for attributes defined in the TRA.

As of December 31, 2021 and December 31, 2020, the estimated fair value of the TRA is $14.6 million and $19.7 million, respectively, which has been recorded as a liability.

Subsequent changes in fair value of the TRA will be recognized in earnings.

Earn-Out Obligations

Under the Earn-Out Agreement, dated June 23, 2016, by and among ATI Investment Former Parent, LLC, ATI Investment Sub, Inc., Array Technologies, Inc., and the seller parties thereto (the “Earn-Out Agreement”), the Company is required to pay the former stockholders of Array Technologies, Inc., including Ron P.

Corio, an indirect stockholder, future contingent consideration consisting of earn-out payments in the form of cash upon the occurrence of certain events, including the consummation of an IPO;

the sale, transfer, assignment, pledge, encumbrance, distribution or disposition of shares of Former Parent held by Oaktree Power and Oaktree Investors to a third party;

the sale of equity securities or assets of Former Parent, ATI Investment Sub, Inc.

or Array Technologies, Inc.

to a third-party;

or a merger, consolidation, recapitalization or reorganization of Former Parent, ATI Investment Sub, Inc.

or the Company.

The maximum aggregate earn-out consideration is $25.0 million.

During the year ended December 31, 2020 we were required to pay the maximum aggregate earn-out consideration as a result of our IPO, Special Distribution and Follow-on Offering.

As a result of the $25.0 million payment we are no longer obligated under the earn-out agreement.

Equity-Based Compensation Expense

The Company accounts for equity grants to employees (Class B units of Former Parent) as stock-based compensation under ASC 718, Compensation-Stock Compensation .

The Class B units contain vesting provisions as defined in the agreement.

Vested units do not forfeit upon termination and represent a residual interest in Former Parent.

Equity-based compensation cost is measured at the grant date fair value and is recognized on a straight-line basis over the requisite service period, including those units with graded vesting with a corresponding credit to additional paid-in capital as a capital contribution from Former Parent.

However, the amount of equity-based compensation at any date is equal to the portion of the grant date value of the award that is vested.

The Class B units issued to employees are measured at fair value on the grant date using an option pricing model.

The Company utilizes the estimated weighted average of the Company’s expected fund life dependent on various exit scenarios to estimate the expected term of the awards.

Expected volatility is based on the average of historical and implied volatility of a set of comparable companies, adjusted for size and leverage.

The risk-free rates are based on the yields of U.S.

Treasury instruments with comparable terms.

Actual results may vary depending on the assumptions applied within the model.

On November 19, 2019 and May 19, 2020, Former Parent issued 22,326,653 and 4,344,941, respectively, Class B units to certain employees of the Company.

On March 28, 2020, Former Parent issued 1,000 Class C units to a member of the board of directors of Array Technologies, Inc.

Effective October 14, 2020, the Company granted an aggregate of 29,398 restricted stock units (RSU’s) to its non-employee directors in connection with their service on the board of directors and 470,608 RSU’s to certain executives and members of management.

The RSU’s were granted under the 2020 Plan at the IPO price of $22.00 per share.

Each share has a vesting commencement date of and is subject to a two to three-year vesting schedule, vesting annually on the anniversary date of the vesting commencement date.

For the years ended December 31, 2020 and 2019, the Company recognized $4.8 million and $0.8 million, respectively, in equity-based compensation.

At December 31, 2020, the Company had $17.0 million of unrecognized compensation costs related to Class B units and restricted stock units which is expected to be recognized over a period of 3 years.

There were no forfeitures during 2019 or 2020.

Following the Corporate

Conversion, the Class B Units in Former Parent remained outstanding and were not converted into shares of common stock of the Company.

Equity-Based Compensation

The Company granted restricted stock units (RSU’s) to employees and Performance Stock Units (PSUs) to certain executives.

The PSUs contain performance and market conditions.

The PSU grants were valued using the Monte Carlo simulation method and the assigned fair value on grant date will be recognized on a straight-line basis over the vesting term of the awards.

The probability of the awards meeting the performance related vested conditions is not included in the grant date fair value, but rather will be estimated quarterly and the Company will true-up the expense recognition accordingly upon any probability to vest revision.

The Company accounts for forfeitures as they occur.

Temporary Equity

Equity instruments that are redeemable for cash or other assets are classified as temporary equity if the instrument is redeemable, at the option of the holder, at a fixed or determinable price on a fixed or determinable date or upon the occurrence of an event that is not solely within the control of the issuer.

Redeemable equity instruments are initially carried at the fair value of the equity instrument at the issuance date, which is subsequently adjusted at each balance sheet date if the instrument is currently redeemable, or probable of becoming redeemable.

The Series A Redeemable Preferred Stock issued in connection with the Securities Purchase Agreement, as described in Note 11 - Redeemable Perpetual Preferred in the accompanying notes to our consolidated financial statements included in this Annual Report on Form 10-K, is classified as temporary equity in the accompanying consolidated financial statements.

The Company elected the accreted redemption value method under which is accretes changes in redemption value over the period from the date of issuance of the Series A Redeemable Preferred Stock to the earliest costless redemption date (the fifth anniversary) using the effective interest method.

Such adjustments are included in preferred undeclared dividends and accretion on Series A Redeemable Preferred Stock on the Company’s consolidated statements of changes in equity and treated similarly to a dividend on preferred stock for GAAP purposes.

Recent Accounting Pronouncements

Refer to Note 2 - Summary of Significant Accounting Policies in the accompanying notes to our consolidated financial statements included in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.

JOBS Act Accounting Election

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.

An emerging growth company may take advantage of relief from certain reporting requirements and other burdens that are otherwise applicable generally to public companies.

These provisions include:

• a requirement to present only two years of audited financial statements and only two years of selected financial data;

• an exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act;

• reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements, and registration statements;

• exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements.

In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies.

We have elected to avail ourselves of this exemption from new or revised accounting standards, and, therefore, we will not be subject to the same new or revised accounting standards at the same time as other public companies that are not emerging growth companies or those that have opted out of using such extended transition period, which may make comparison of our financial statements with such other public companies more difficult.

We may take advantage of these reporting exemptions until we no longer qualify as an emerging growth company, or, with respect to adoption of certain new or revised accounting standards, until we irrevocably elect to opt out of using the extended transition period.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more;

(ii) the last day of our fiscal year following the fifth anniversary of the date of our IPO;

(iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years;

and (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

We may choose to take advantage of some but not all of these reduced reporting burdens.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis