What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-04-06 compared with 2021-03-10 · 1356 added, 359 removed, 642 unchanged (73% of the section changed)

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Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021.

Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective at a reasonable assurance level as a result of the material weakness that existed in our internal control over financial reporting as described below.

Material Weakness in Internal Control over Financial Reporting

In connection with the audit of our financial statements as of December 31, 2020, we identified a material weakness in our internal control over financial reporting involving inventory.

This material weakness is in the inventory process related to inventory cut-off.

It was noted that we recorded inventory for which we did not hold risk at year-end for inventory in-transit.

This risk was initially identified during our audit for fiscal year 2018 and remained as of December 31, 2019.

Although we began efforts to remediate this issue immediately upon identification, this issue remained at year end 2020.

We have begun to implement measures designed to improve our internal control over financial reporting to remediate this material weakness, including the following:

• We have taken steps intended to remediate the inventory cut-off material weakness through additional procedures and controls in the inventory and financial statement close processes while working to deploy system enhancements designed to improve the accuracy of inventory reporting.

These controls include instituting electronic data interchange with key inventory carriers as well as enhancements in the review process over in-transit inventory.

• We have hired an external consulting firm that specializes in internal controls and internal audit work to assist in the organizational risk assessment, identification of control activities, controls documentation and testing and the enhancement of ongoing monitoring activities related to the internal controls over financial reporting.

These system enhancements and activities are designed to enable us to broaden the scope and quality of our internal review of underlying information related to financial reporting and to formalize and enhance our internal control procedures.

With the oversight of senior management and our audit committee, we have begun taking the above steps and plan to take additional measures to remediate the underlying causes of the material weakness.

Remediation Efforts to Address Previously Reported Material Weaknesses in Internal Control Over Financial Reporting

In connection with the audit of our financial statements as of and for each of the years ended December 31, 2018 and 2019, we identified material weaknesses in our internal control over financial reporting relating to our financial close process, reconciliation of deferred revenue and unbilled revenue and inventory pricing, specifically due to lack of qualified accounting and finance personnel and lack of system capabilities which resulted in certain material corrections to the financial statements.

In order to address these previously reported material weaknesses, we hired additional accounting and finance personnel with technical accounting and financial reporting experience as well as implemented procedures and controls in the financial statement close process, which include enhanced system capabilities in most areas, enhanced reconciliation controls, enhanced review controls and financial close checklists which ensure all necessary reviews and reconciliations are occurring as designed.

Based on these remediation efforts, management has concluded that the previously reported material weaknesses in our internal control over financial reporting relating to our financial close process, reconciliation of deferred revenue and unbilled revenue and inventory pricing have been remediated as of December 31, 2020.

Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective at a reasonable assurance level as a result of the material weaknesses that existed in our internal control over financial reporting as described below.

Management’s Report on Internal Control Over Financial Reporting.

This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f).

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on the results of this evaluation, the Company’s management concluded that

internal control over financial reporting was not effective as of December 31, 2021, due to the material weaknesses listed below.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management has determined that the Company had the following material weaknesses in its internal control over financial reporting at December 31, 2021:

Control Environment and Monitoring – We did not maintain appropriately designed entity-level controls impacting the control environment and effective monitoring controls to prevent or detect material misstatements to the consolidated financial statements.

These deficiencies were attributed to (i) the lack of a sufficient number of qualified resources and inadequate oversight and accountability over the performance of controls, and (ii) ineffective evaluation and determination as to whether the components of internal control were present and functioning.

Control Activities – These material weaknesses contributed to the following additional material weaknesses within certain business processes:

• Inventory – We did not appropriately design and implement controls over the existence, accuracy, and cutoff of inventory.

As previously reported, we identified a material weakness relating to inventory cut-off and in-transit inventory, which continued to exist at December 31, 2021.

In addition, we identified a material weakness relating to ineffective controls over our year-end inventory reconciliation process, which resulted in adjustments being recorded as of December 31, 2021.

• Revenue Recognition – We did not design, implement and maintain effective controls over revenue recognized for certain contracts relating to the proper application of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”).

Specifically, we did not maintain effective controls relating to (1) the identification and recognition of performance obligations for customer contracts, and (2) evaluation of customer contracts for potential combination, which resulted in adjustments being recorded as of December 31, 2021, and restatement of the Company’s interim unaudited consolidated financial statements during 2021.

• Accounts Receivable – We did not design, implement and maintain effective controls over the existence of accounts receivable.

Specifically, we did not design controls at an appropriate precision level to identify material misstatements, which resulted in balance sheet adjustments being recorded as of December 31, 2021.

After giving full consideration to these material weaknesses, and the additional analyses and other procedures that we performed to ensure that our consolidated financial statements included in this Annual Report on Form 10-K were prepared in accordance with U.S.

GAAP, our management has concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods disclosed in conformity with U.S.

Remediation Plan for Existing Material Weaknesses

We have begun the process of, and we are focused on, designing and implementing effective measures to strengthen our internal controls over financial reporting and remediate the material weaknesses.

Our planned internal control remediation efforts include the following:

Control Environment and Monitoring – Consistent with the COSO 2013 Framework, Principle 4, attracting, developing, and retaining competent personnel, we have recently hired a Chief Accounting Officer who will provide an additional level of technical accounting expertise, oversight, and monitoring of the design and

performance of both existing and newly implemented controls as noted below.

We will continue to hire in 2022, additional accounting and IT personnel in 2022 to bolster our accounting and IT capabilities and capacity, and we will concentrate on retaining key accounting, IT, and operational personnel.

These actions will further serve to remediate the noted material weakness under the COSO 2013 Framework, Principle 16, by enhancing the efforts towards separate evaluations regarding the presence and functionality of the components of internal control, specifically in the areas of inventory, revenue recognition, and accounts receivable, as noted below.

Control Activities:

• Inventory – We will enhance the design of existing controls and implement new controls over the accounting, processing, and recording of inventory.

Specifically, we have strengthened the design of the management review control over inventory-in-transit.

Additionally, we have implemented processes to ensure timely identification and evaluation of inventory cut-off and are requiring additional accountability from counterparties on the accuracy of incoming and outgoing shipment documentation.

We also plan to deploy information system enhancements and better use of current system capabilities in order to improve the accuracy of inventory cut-off, reporting, and reconciliation.

• Revenue Recognition – We will enhance the design of existing controls and implement new controls over the review of the application and recording of revenue for customer contracts under the guidance outlined in ASC 606.

We will also design and implement more precise reviews regarding evaluation of contract terms and whether contracts should be combined.

These reviews will include increased contract analysis from our legal team as well as ensuring qualified resources are involved and adequate oversight is performed during the internal technical accounting review process.

• Accounts Receivable – We will enhance the design of existing controls and implement new controls over the processing and review of accounts receivable billings.

We also plan to supplement our accounting staff with more experienced personnel.

Additionally, we will evaluate information system capabilities in order to reduce the manual calculations within this business process.

While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles, we are committed to the continuous improvement of our internal control over financial reporting and will continue to diligently review our internal control over financial reporting.

Attestation Report of Independent Registered Public Accounting Firm

The effectiveness of the company’s internal control over financial reporting as of December 31, 2021, has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in its report included herein.

Changes in Internal Control over Financial Reporting.

Other than the implementation of measures described above under Material Weaknesses in Internal Control over Financial Reporting, there were no changes in our internal control over financial reporting during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting .

During the quarter ended December 31, 2021, except for the changes discussed above, there have been no other no changes in the company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

Other Information

On March 8, 2020, the compensation committee of the Board of directors approved certain changes to employment terms applicable to the Company’s named executive officers.

A description of these arrangements is filed as exhibit 10.13 filed herewith.

We maintain a website at www.arraytechinc.com.

The contents of our website are not incorporated in, or otherwise to be regarded as part of, this Annual Report on Form 10-K.

We make available, free of charge on our website, access to our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of

the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we file or furnish them electronically with the Securities and Exchange Commission (“SEC”).

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Directors, Executive Officers and Corporate Governance.

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Number Description of Document Form Date No.

2.1+ Purchase Agreement, dated November 10, 2021, by and among Array Technologies, Inc., Array Tech, Inc., Amixa Capital, S.L., Aurica Trackers, S.L., and Mr.

Javier Reclusa

8-K 11/12/2021 2.1

3.1 Amended and Restated Certificate of Incorporation of Array Technologies, Inc., dated October 19, 2020

2 unchanged sentences

8-K 10/19/2020 3.2

3.3 Certificate of Designations of Series A Perpetual Preferred Stock

8-K 08/11/2021 3.1

4.1 Description of securities registered under Section 12 of the Exchange Act

4.2 Form of Common Stock Certificate of the Registrant

10.1 Registration Rights Agreement, dated as of October 19 by and among Array Technologies, Inc.

10-K 03/10/2021 4.1

4.2 Indenture, dated December 3, 2021, among Array Technologies, Inc.

Bank National Association

8-K 12/07/2021 4.1

4.3 Form of 1.00% Convertible Senior Note due 2028 (included in Exhibit 4.1)

8-K 12/07/2021 4.2

10.1 Registration Rights Agreement, dated October 19 by and among Array Technologies, Inc.

and certain holders identified therein

8-K 10/19/2020 10.1

Number Description of Document Form Date No.

10.2 Credit Agreement, dated as of October 14, 2020, by and among Array Technologies, Inc., as borrower, ATI Investment Sub, Inc., as guarantor, Goldman Sachs Bank USA, as administrative agent and collateral agent, and the Lenders (as defined therein) from time to time party thereto

10.2 Registration Rights Agreement, dated August 10, 2021, by and between Array Technologies, Inc.

and BCP Helios Aggregator L.P.

8-K 08/11/2021 10.2

10.3 Amended and Restated ABL Credit and Guarantee Agreement, dated as of March 23, 2020, by and among ATI Investment Holdings, Inc., Wells Fargo Bank, National Association, as administrative agent, and the lenders from time to time party thereto

10.3 Registration Rights Agreement, dated January 11, 2022, by and among Array Technologies, Inc.

and the holders identified therein

8-K 01/11/2022 10.1

10.4 Securities Purchase Agreement, dated August 10, 2021, by and between the Company and BCP Helios Aggregator L.P.

8-K 08/11/2021 10.1

10.5 Credit Agreement, dated October 14, 2020, by and among Array Technologies, Inc., as borrower, ATI Investment Sub, Inc., as guarantor, Goldman Sachs Bank USA, as administrative agent and collateral agent, and the Lenders (as defined therein) from time to time party thereto

8-K 10/19/2020

10.6 Amended and Restated ABL Credit and Guarantee Agreement, dated March 23, 2020, by and among ATI Investment Holdings, Inc., Wells Fargo Bank, National Association, as administrative agent, and the lenders from time to time party thereto

S-1/A 10/14/2020 10.1

10.4 Tax Receivable Agreement, dated as of July 8, 2016, between Array Technologies, Inc.

10.7 Tax Receivable Agreement, dated July 8, 2016, between Array Technologies, Inc.

S-1/A 10/14/2020 10.3

Number Description of Document Form Date No.

10.8 Form of Array Technologies, Inc.

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S-1/A 10/14/2020 10.1

10.15 Offer Letter, dated as of April 3, 2022, by and between Array Technologies, Inc.

and Kevin Hostetler

8-K 04/05/2022 10.1

10.16 Array Technologies, Inc.

Executive Severance and Change in Control Plan

8-K 04/05/2022 10.2

10.17 Separation Agreement, dated as of March 31, 2022, by and between Array Technologies, Inc.

and Jim Fusaro

8-K 04/05/2022 10.3

10.18 Form of Director and Officer Indemnification Agreement

S-1/A 10/14/2020 10.11

10.13* Emp loyment Agreement Term s

10.14* A mendment 1 to Credit Agreement

10.15 A mendment 2 to Credit Agreement

10.19 Employment Agreement Terms

10-K 03/10/2021 10.13

10.20 Amendment No.

1, dated February 23, 2021, to the credit agreement by and among Array Tech, Inc., as borrower, ATI Investment Sub, Inc., as guarantor, Goldman Sachs Bank USA, as administrative agent and collateral agent, and the lenders from time to time party thereto

10-K 03/10/2021

10.21 Amendment No.

2, dated February 26, 2021, to the credit agreement by and among Array Tech, Inc., as borrower, ATI Investment Sub, Inc., as guarantor, Goldman Sachs Bank USA, as administrative agent and collateral agent, and the lenders from time to time party thereto

8-K 03/02/2021

10.22 Form of Capped Call Confirmation

8-K 12/07/21 10.1

21.1* List of Subsidiaries of the Registrant

23.1* Consent of Independent Registered Public Accounting Firm

Number Description of Document Form Date No.

31.1* Certification of the Chief Executive Officer, as required by Section 302 of the Sarbanes- Oxley Act of 2002 (18 U.S.C.

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32.1** Certification of the Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.

Number Description of Document Form Date No.

32.2** Certification of the Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.

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** Furnished herewith

+ Exhibits and schedules have been omitted pursuant to Regulation S-K Item 601(a)(5) and will be furnished on a supplemental basis to the Securities and Exchange Commission upon request.

Form 10–K Summary

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 9, 2021.

Array Technologies, Inc.

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Signature Title Date

/s/ Jim Fusaro Chief Executive Officer March 9, 2021

/s/ Jim Fusaro Chief Executive Officer April 6, 2022

Jim Fusaro (Principal Executive Officer)

/s/ Nipul Patel Chief Financial Officer March 9, 2021

/s/ Nipul Patel Chief Financial Officer April 6, 2022

Nipul Patel (Principal Financial and Accounting Officer)

/s/ Brad Forth Chairman of the Board of Directors March 9, 2021

/s/ Troy Alstead Member of the Board of Directors March 9, 2021

/s/ Brad Forth Chairman of the Board of Directors April 6, 2022

/s/ Paulo Almirante

Member of the Board of Directors April 6, 2022

Paulo Almirante

/s/ Troy Alstead

Member of the Board of Directors April 6, 2022

/s/ Orlando D.

Member of the Board of Directors March 9, 2021

/s/ Frank Cannova

Member of the Board of Directors March 9, 2021

Frank Cannova

Corio Member of the Board of Directors March 9, 2021

/s/ Peter Jonna Member of the Board of Directors March 9, 2021

/s/ Jason Lee Member of the Board of Directors March 9, 2021

Member of the Board of Directors April 6, 2022

/s/ Jayanthi Iyengar

Member of the Board of Directors April 6, 2022

Jayanthi Iyengar

/s/ Bilal Kahn Member of the Board of Directors April 6, 2022

Signature Title Date

/s/ Gerrard Schmid Member of the Board of Directors April 6, 2022

Gerrard Schmid

INDEX TO FINANCIAL STATEMENTS

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and Subsidiaries

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm ( BDO USA, LLP ;

Austin, Texas ;

PCAOB ID# 243 )

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

Consolidated Balance Sheets

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In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated April 6, 2022 expressed an adverse opinion thereon.

Change in Accounting Method Related to Leases

As discussed in Notes 2 and 15 to the consolidated financial statements, the Company changed its method of accounting for leases during the year ended December 31, 2021 due to the adoption of Accounting Standards Codification (“ASC”) 842, Leases.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,

providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for Issuance of the Security Purchase Agreement

As described in Notes 2 and 11 to the Company’s Consolidated Financial Statements, the Company entered into a Security Purchase Agreement, issuing shares of a newly designated Series A Redeemable Perpetual Preferred Stock of the Company and shares of the Company’s common stock for an aggregate purchase price of $346.0 million.

The Company has the option to require the Purchaser to purchase, in one or more additional closings, additional shares of the Series A Redeemable Perpetual Preferred Stock and Common Stock.

The Company evaluated the accounting for the instruments issued in the Securities Purchase Agreement and accounted for the Series A preferred stock as temporary equity on the consolidated balance sheets.

We identified the accounting evaluation of the Securities Purchase Agreement to be a critical audit matter.

Significant judgments and highly complex technical accounting guidance are required in the determination of the scope of the applicable accounting guidance and appropriate balance sheet classification, including the identification and evaluation of embedded features potentially requiring bifurcation as derivatives as well as the determination of initial and subsequent recognition and measurement.

Auditing these elements involved especially challenging and complex auditor judgment due to extent of audit effort required to address these matters, including the extent of specialized skills or knowledge needed.

The primary procedures we performed to address this critical audit matter included:

• Reading and analyzing the contract terms related to the Securities Purchase Agreement.

• Evaluating the reasonableness of the conclusions made by the Company related to the accounting treatment for issuance of the Security Purchase Agreement, including the Company’s consideration of relevant accounting standards to analyze the proper balance sheet classification, the embedded features, and the initial and subsequent recognition and measurement.

• Utilizing personnel with specialized knowledge and skills in the relevant technical accounting guidance to assist in evaluating the appropriateness of Management’s application of relevant accounting guidance for the issuance of the Security Purchase Agreement.

Accounting for Convertible Debt

As described in Note 10 to the Company’s consolidated financial statements, 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 “Notes”).

The Notes contain certain redemption, conversion, and other features that require the Company to assess if such features are embedded derivatives that require bifurcation from the Notes and receive separate accounting treatment.

The Company determined the embedded features did not require bifurcation from the Notes, and therefore were not accounted for separately.

We identified the accounting evaluation of embedded features in the Convertible Debt to be a critical audit matter because the evaluation of the appropriate accounting treatment for potential derivatives involved a high degree of auditor judgment and an increased extent of effort, including the extent of specialized skill or knowledge needed to evaluate the Company’s conclusions.

The primary procedures we performed to address this critical audit matter included:

• Reading and analyzing the contract terms included in various agreements related to the issuance of the Convertible Debt, including the indenture agreement and other agreements entered into on or around the issuance date to identify and assess the reasonableness of management's accounting treatment for the different embedded features as they impacted bifurcation conclusions.

Revenue Recognition of Certain Customer Contracts

As described in Note 2 to the Company’s consolidated financial statements, certain of the Company’s contracts are accounted for as multiple performance obligations because the delivery of the components and other services specified in the contract do not represent a single integrated project.

We identified the determination of multiple performance obligations in certain customer contracts and the timing of associated revenue recognition to be a critical audit matter because there was a significant amount of judgment exercised by management in identifying and evaluating terms and conditions of these customer contracts that impact the timing of revenue recognition.

In addition, a material weakness was identified over the accounting associated with certain contracts.

Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill and knowledge needed.

The primary procedures we performed to address this critical audit matter included:

• Evaluating management’s accounting policies and practices, including the reasonableness of management’s judgments and assumptions related to the identification of each distinct performance obligation and its pattern of delivery related to certain customer contracts.

/s/ BDO USA, LLP

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Austin, Texas

March 9, 2021

April 6, 2022

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

Array Technologies, Inc.

Albuquerque, New Mexico

Opinion on Internal Control over Financial Reporting

We have audited Array Technologies, Inc.’s and Subsidiaries (the “Company’s”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in member’s equity/stockholders’ deficit, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as “the financial statements”) and our report dated April 6, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Report on Internal Control over Financial Reporting.” Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Material weakness have been identified and described in management’s assessment.

These material weaknesses related to managements’ failure to design and maintain effective controls over financial reporting, specifically related to the following:

(1) entity-level controls impacting the control environment and effective monitoring controls to prevent or detect material misstatements to the consolidated financial statements;

(2) the design and implementation of controls over the existence, accuracy, and cutoff of inventory;

(3) the design, implementation and maintenance of effective controls over revenue recognized for certain contracts relating to the proper application of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”);

and (4) the design, implementation and maintenance of effective controls over the existence of accounts receivable.

The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2021 financial statements, and this report does not affect our report dated April 6, 2022, on those financial statements.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

Austin, Texas

April 6, 2022

Array Technologies, Inc.

and Subsidiaries

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Cash and cash equivalents $ 367,670 $ 108,441

Restricted cash — 50,995

Accounts receivable, net 236,009 118,694

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Other intangible assets, net 174,753 198,260

Deferred tax assets 9,345 —

Other assets 26,429 3,088

Total assets $ 1,142,979 $ 656,024

Liabilities and Member’s Equity/Stockholders’ Deficit

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

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Current portion of contingent consideration 1,773 8,955

Current portion of long-term debt 4,313 55,949

Current portion of related party loans — 41,800

Current portion of term loan 4,300 4,313

Other current liabilities 5,909 —

Total current liabilities 245,305 289,103

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Contingent consideration, net of current portion 12,804 10,736

Other long-term liabilities 5,557 —

Long-term debt, net of current portion, debt discount and issuance costs 711,056 423,970

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Commitments and contingencies (Note 16)

Member’s equity — 305,151

Series A Redeemable Perpetual Preferred Stock of $ 0.001 par value - 500,000 authorized;

350,000 and none issued as of December 31, 2021 and 2020, respectively;

liquidation preference of $ 350.0 million and none as of December 31, 2021 and 2020, respectively

Stockholders’ deficit

Preferred stock of $ 0.001 par value - authorized 5,000,000 shares as of December 31, 2020;

none issued as of December 31, 2020

Common stock of $ 0.001 par value - authorized 1,000,000,000 shares as of December 31, 2020;

126,994,467 as of December 31, 2020

Preferred stock of $ 0.001 par value - 4,500,000 authorized;

none issued as of December 31, 2021 and 2020, respectively

Array Technologies, Inc.

and Subsidiaries

Consolidated Balance Sheets (continued)

(in thousands)

Common stock of $ 0.001 par value - 1,000,000,000 authorized;

135,026,940 and 126,994,467 issued as of December 31, 2021 and 2020, respectively

Additional paid-in capital 202,562 140,473

Accumulated deficit ( 271,902 ) ( 221,499 )

Total member’s equity/stockholders’ deficit ( 80,899 ) 305,151

Total Liabilities and Member’s Equity/Stockholders’ Deficit $ 656,024 $ 923,581

Total stockholders’ deficit ( 69,205 ) ( 80,899 )

Total liabilities, redeemable perpetual preferred stock and stockholders’ (deficit) $ 1,142,979 $ 656,024

The accompanying notes are an integral part of these consolidated financial statements.

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2021 2020 2019

Revenues $ 872,662 $ 647,899 $ 290,783

Cost of Revenues 669,861 497,138 279,228

Revenue $ 853,318 $ 872,662 647,899

Cost of revenue 770,459 669,861 497,138

Gross profit 82,859 202,801 150,761

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Total other expense ( 36,380 ) ( 17,434 ) ( 18,830 )

Income (Loss) Before Income Tax Expense (Benefit) 77,778 64,579 ( 80,696 )

Income before income tax expense (benefit) ( 61,121 ) 77,778 64,579

Income tax expense (benefit) ( 10,718 ) 18,705 24,834

Net income (loss) ( 50,403 ) 59,073 39,745

Preferred dividends and accretion ( 15,715 ) — —

Net income (loss) to common shareholders $ ( 66,118 ) $ 59,073 $ 39,745

Earnings (loss) per share

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(in thousands)

Preferred Stock Common Stock Additional paid-in capital Retained Earnings Total Member’s Equity/Stockholders’ Deficit

Units Amount Shares Amount Shares Amount

Balance, December 31, 2017 1 $ 275,238 — $ — — $ — $ — $ — $ 275,238

Capital contribution — 50,000 — — — — — — — 50,000

Net loss — ( 60,764 ) — — — — — — ( 60,764 )

For the years ended December 31, 2019 and 2020

Common Stock Additional paid-in capital Retained Earnings Total Member’s Equity/Stockholders’ Deficit

Units Amount Shares Amount

Balance, December 31, 2018 1 $ 264,474 — $ — $ — $ — $ 264,474

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Balance, December 31, 2020 — $ — 126,994 $ 127 $ 140,473 $ ( 221,499 ) $ ( 80,899 )

Array Technologies, Inc.

and Subsidiaries

Consolidated Statements of Changes in Member’s Equity/Redeemable Perpetual Preferred Stock and Stockholders’ Equity/(Deficit) (continued)

(in thousands)

For the year ended December 31, 2021

Temporary Equity Permanent Equity

Series A Redeemable Perpetual Preferred Stock Preferred Stock Common Stock Additional paid-in capital Accumulated deficit Total Stockholders’ Equity/(Deficit)

Shares Amount Shares Amount Shares Amount

Balance, December 31, 2020 — $ — — $ — 126,994 $ 127 $ 140,473 $ ( 221,499 ) $ ( 80,899 )

Equity-based compensation — — — — 157 — 13,562 — 13,562

Issuance of common stock, net — — — — 7,875 8 104,756 — 104,764

Issuance of Series A Preferred, net of fees 350 229,799 — — — — — — —

Premium on capped call, net of deferred tax — — — — — — ( 40,514 ) — ( 40,514 )

Preferred cumulative dividends — 8,226 — — — — ( 8,226 ) — ( 8,226 )

Payment of dividends — ( 8,052 ) — — — — — — — —

Preferred accretion — 7,489 — — — — ( 7,489 ) — ( 7,489 )

Net (loss) — — ( 8,052 ) — — — — — ( 50,403 ) ( 50,403 )

Balance, December 31, 2021 350 $ 237,462 7,489 — $ — 135,026 $ 135 $ 202,562 $ ( 271,902 ) $ ( 69,205 )

The accompanying notes are an integral part of these consolidated financial statements.

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2021 2020 2019

Cash Flows from Operating Activities

Cash flows used in (provided by) operating activities

Net income (loss) $ ( 50,403 ) $ 59,073 $ 39,745

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Accounts payable 8,637 ( 50,519 ) 105,481

Accounts payable - related party ( 1,622 ) — —

Accrued expenses and other 9,133 10,913 ( 1,978 )

Income tax payable ( 8,754 ) 6,870 1,944

Deferred revenue ( 178,960 ) 306,994 7,383

Lease liabilities 221 — —

Contingent consideration — ( 25,000 ) —

( 25,000 ) — —

Net Cash (Used in) Provided by Operating Activities ( 122,205 ) 386,073 ( 11,727 )

Cash Flows from Investing Activities

Deferred revenue ( 50,619 ) ( 178,960 ) 306,994

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

Cash flows used in investing activities

Purchase of property, plant and equipment ( 3,357 ) ( 1,338 ) ( 1,697 )

Internal-use software modification costs — — ( 4,357 )

Investment in equity security ( 11,975 ) — —

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

Cash flows from financing activities

Proceeds from issuance of convertible notes 413,321 — —

Premium paid on capped call ( 52,870 ) — —

Fees paid on issuance of convertible notes ( 1,591 ) — —

Dividends paid on Series A Preferred ( 8,051 ) — —

Proceeds from Series A issuance 224,987 — —

Proceeds from common stock issuance 120,645 — —

Series A equity issuance costs ( 7,195 ) — —

Array Technologies, Inc.

and Subsidiaries

Consolidated Statements of Cash Flows (continued)

(in thousands)

Year Ended December 31,

2021 2020 2019

Common stock issuance costs ( 3,873 ) — —

Proceeds from revolving credit facility 126,033 — —

Payments on revolving credit facility ( 126,033 ) — —

Principal payments on term loan — ( 57,702 ) ( 25,000 )

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Proceeds from (Payments on) revolving loan — ( 70 ) ( 39,078 )

Proceeds from related party loan — — 50,600

Payments on related party loans — ( 45,558 ) —

Debt discount and financing costs

( 36,011 ) — ( 3,615 )

Payment of special distribution — ( 589,000 ) —

Year Ended December 31,

2020 2019 2018

Proceeds from issuance of Class A Common Stock, net of underwriting discount and commissions

Proceeds from issuance of common stock, net of underwriting discount and commissions

Contingent consideration ( 7,810 ) — —

Deferred offering costs — ( 6,464 ) —

Debt issuance costs ( 6,590 ) ( 36,011 ) —

Capital contribution — — 133

Net Cash (Used in) provided by Financing Activities ( 129,273 ) ( 63,945 ) 50,863

Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash ( 252,816 ) 320,431 32,706

Cash, Cash Equivalents and Restricted Cash, beginning of year 361,257 40,826 8,120

Cash, Cash Equivalents and Restricted Cash, end of year $ 108,441 $ 361,257 $ 40,826

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

Cash and cash equivalents, beginning of period 108,441 361,257 40,826

Cash and cash equivalents, end of period $ 367,670 $ 108,441 $ 361,257

Supplemental Cash Flow Information

Cash paid for interest $ 24,306 $ 6,935 $ 11,343

$ 6,935 $ 11,343 $ 14,257

Cash paid for income taxes $ 13,318 $ 31,103 $ 443

$ 31,103 $ 443 $ 176

The accompanying notes are an integral part of these consolidated financial statements.

Table of C ontent s

Array Technologies, Inc.

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Organization and Business

Array Technologies, Inc., (the “Company”) formerly ATI Intermediate Holdings, LLC, is a Delaware corporation formed in December 2018 as a wholly owned subsidiary of ATI Investment Parent, LLC (“Former Parent”).

On October 14, 2020, we converted from a Delaware limited liability company to a Delaware corporation and changed our name to Array Technologies, Inc.

Array Technologies, Inc.

(the “Company”) formerly ATI Intermediate Holdings, LLC, is a Delaware corporation formed in December 2018 as a wholly owned subsidiary of ATI Investment Parent, LLC (“Former Parent”).

On October 14, 2020, the Company converted from a Delaware limited liability company to a Delaware corporation and changed the Company’s name to Array Technologies, Inc.

The Company is headquartered in Albuquerque, New Mexico, and manufactures and supplies solar tracking systems and related products for customers across the United States and internationally.

The Company, through its wholly-owned subsidiaries, High Desert Finance, LLC (“HDF”) and ATI Investment Holdings, Inc.

(“ATI Investment”) owns two other subsidiaries through which it conducts substantially all operations;

The Company, through its wholly-owned subsidiary, ATI Investment Sub, Inc.

(“ATI Investment”) owns one subsidiary through which it conducts substantially all operations;

Array Tech, Inc.

and Array Technologies Patent Holdings Co., LLC (“Array”).

Former Parent acquired Array on July 8, 2016.

On October 19, 2020, the Company completed the initial public offering of its common stock (the “IPO”).

In the IPO, the Company sold 7,000,000 shares of its common stock at a public offering price of $ 22.00 per share.

The Company received net proceeds of $ 139.1 million, net of underwriting discounts and commissions of $ 8.5 million and other offering costs of $ 6.5 million.

(collectively “AT”).

Summary of Significant Accounting Policies

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Certain prior year amounts have been reclassified to conform to the current year presentation.

Recently Adopted Accounting Pronouncements

On January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) No.

2016-02 (Topic 842) “Leases” which supersedes the lease recognition requirements in ASC Topic 840, “Leases” .

Under ASU No.

2016-02, lessees are required to recognize assets and liabilities on the consolidated balance sheets for most leases and provide enhanced disclosures.

For companies that are not emerging growth companies (“EGCs”), the ASU was effective for fiscal years beginning after December 15, 2018.

For EGCs, the ASU is effective for fiscal years beginning after December 15, 2021.

The Company early adopted the new standard using the modified retrospective method by recording a right-of-use asset of $ 13.2 million, short-term portion of lease liabilities of $ 6.3 million and long-term portion of lease liabilities of $ 7.2 million as of the effective date.

Prior periods will not be restated and will continue to be reported under Topic 840 guidance in effect during those periods.

The Company applied the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following:

(i) whether any expired or existing contracts contain leases;

(ii) the lease classification for any expired or existing leases;

and (iii) initial direct costs for any existing leases.

The adoption did not have a material impact on its consolidated statements of operations or its consolidated statements of cash flows.

See Note 15, Leases, for further information and disclosures related to the adoption of this standard.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU No.

2019-12”), which is intended to simplify various aspects of the accounting for income taxes.

2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application.

This standard is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020.

Early adoption is permitted.

The Company has adopted the pronouncement and it did not have a material impact on its consolidated financial statements and related disclosures.

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) .

The amendments in this update simplifies accounting for certain convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature.

As a result, convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features.

Additionally, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer be available for convertible debt instruments.

The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020.

The Company early adopted the new standard effective January 1, 2021 using the modified retrospective method.

There was no impact on the Company's financial statements as of the adoption date.

As further discussed in Note 10, "Convertible Debt," the Company issued $ 425 million principal amount of convertible senior notes on December 3, 2021, which have been accounted for in accordance with the provisions of ASU 2020-06.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments - Credit Losses , which was subsequently amended by ASU No.

2018-19 and ASU No.

2019-10, requires the measurement of expected credit losses for financial instruments carried at amortized cost held at the reporting date based on historical experience, current conditions and reasonable forecasts.

The updated guidance also amends the current other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value.

In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists.

The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

The standard was adopted on January 1, 2021 as the Company lost it’s status as an Emerging Growth Company effective December 31, 2021 and therefore was required to adopt the standard for the year ending December 31, 2021.

The adoption of this standard did not have an impact on consolidated financial statements.

Corporate Conversion and Stock Split

On October 14, 2020, prior to the issuance of any of our shares of common stock in the IPO, we converted from a Delaware limited liability company to a Delaware corporation.

On October 14, 2020, prior to the issuance of any of our shares of common stock in our initial public offering (the “IPO”), we converted from a Delaware limited liability company to a Delaware corporation.

In connection with the corporate conversion we converted all 1,000 of our outstanding member units into 100,000,000 shares of common stock and then completed a stock split of 1.19994 -for-1.

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The consolidated financial statements include the accounts of Array Technologies, Inc.

and its Subsidiaries, which include HDF, ATI Investment and Array.

and its Subsidiaries.

All intercompany accounts and transactions have been eliminated upon consolidation.

Use of Estimates

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The preparation of consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of

Array Technologies, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with U.S.

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

Actual results could differ materially from those estimates.

Significant estimates include impairment of goodwill, impairment of long-lived assets, fair value of contingent consideration, allowance for doubtful accounts, reserve for excess or obsolete inventories, valuation of deferred tax assets and warranty reserve.

Management believes that these estimates and assumptions provide a reasonable basis for the fair presentation of the consolidated financial statements.

contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Significant estimates include impairment of goodwill, impairment of long-lived assets, fair value of contingent consideration, Series A Redeemable Preferred Stock and the related future tranche, allowance for credit losses, reserve for excess or obsolete inventories, valuation of deferred tax assets and warranty reserve.

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

Management has 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 previously estimated amounts, and such differences may be material to the consolidated financial statements;

however, management believes that these estimates and assumptions provide a reasonable basis for the fair presentation of the consolidated financial statements.

Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur.

Impact of COVID-19 Pandemic

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

To date, the Company has maintained uninterrupted business operations with normal turnaround times for its delivery of solar tracking systems.

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

In addition, due to global tightening of supply chain and strained logistics issues we have experienced an increase in our unbilled revenues and also in some instances incurred liquidated damages.

We have taken, and continue to take, mitigating steps to overcome the economic challenges and, therefore, believe the impact to be temporary, but cannot be certain the timing of when we will achieve better margins.

The Company believes it has sufficient liquidity and financing options available and expects to have sufficient liquidity to operate for the next 12 months.

The Company expects to use cash generated from operations and if needed, can access funds from the Revolving Credit Facility.

The Company also has $ 100 million in delayed draw ability under the Series A Redeemable Perpetual Preferred Stock future draw commitment, however this would increase the Company’s dividend obligations and outstanding common stock.

The Revolving Credit Facility has $ 186.4 million of availability;

however the Company may have limited ability to draw on the funds due to debt covenants.

The Company has implemented adjustments to its operations designed to keep employees safe and comply with federal, state and local guidelines, including those regarding social distancing.

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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.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

At December 31, 2019, the Company had $ 51.0 million in restricted cash.

The restricted cash secured its standby letter of credit facility which expired August 31, 2020 (see Note 8).

As such, the restricted cash is considered a current asset in the accompanying balance sheets.

The following table provides a reconciliation of cash, cash equivalents and restricted cash as reported within the consolidated balance sheets to the same such amounts shown in the consolidated statements of cash flows (in thousands):

Cash and Cash Equivalents

Restricted cash — 50,995

Cash and cash equivalents and restricted cash

$ 108,441 $ 361,257

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

The Company’s accounts receivable are due primarily from solar contractors across the United States and internationally.

Credit is extended in the normal course of business based on evaluation of a customer’s financial condition and, generally, collateral is not required.

Trade receivables consist of uncollateralized customer obligations due under normal trade terms requiring payment within 30-60 days of the invoice date.

Management regularly reviews outstanding accounts receivable and provides for estimated losses through an allowance for doubtful accounts or direct write-off.

In evaluating the level of established reserves, management

Table of C ontent s

Credit is extended in the normal course of business based on evaluation of a customer’s

Array Technologies, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

makes judgments regarding the customers’ ability to make required payments, economic events, and other factors.

As the financial conditions of these customers change, circumstances develop, or additional information becomes available, adjustments to the allowance for doubtful accounts may be required.

When deemed uncollectible, the receivable is charged against the allowance or directly written off.

At December 31, 2020 and 2019, the allowance for doubtful accounts was $ 0.7 million and $ 0.2 million, respectively.

financial condition and, generally, collateral is not required.

Trade receivables consist of uncollateralized customer obligations due under normal trade terms requiring payment within 30-60 days of the invoice date.

Management regularly reviews outstanding accounts receivable and provides for estimated credit losses through an estimate of expected credit losses valuation account.

The allowance for credit losses is a valuation account that is deducted from a financial asset’s amortized cost to present the net amount we expect to collect from the asset.

We estimate allowances for credit losses using relevant available information from both internal and external sources.

We monitor the estimated credit losses associated with our trade accounts receivable and unbilled accounts receivable based primarily on our collection history and the delinquency status of amounts owed to us, which we determine based on the aging of such receivables.

In evaluating the level of established reserves, management makes judgments regarding the customers’ ability to make required payments, economic events, and other factors.

As the financial conditions of these customers change, circumstances develop, or additional information becomes available, adjustments to the valuation account may be required.

When deemed uncollectible, the receivable is charged against the valuation account for credit losses or directly written off.

At December 31, 2021 and 2020, the valuation account was $ 0.1 million and $ 0.7 million, respectively.

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.

Amounts retained by project owners under contracts and included in accounts receivable at December 31, 2021 and 2020 were $ 13.5 million and $ 4.1 million, respectively.

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All retention amounts outstanding as of December 31, 2021 are collectible within the next 12 months.

The following is the activity of the reserve for credit losses on accounts receivable which includes trade accounts receivable and unbilled accounts receivable (in thousands):

Beginning balance $ 663

Provision for credit losses ( 303 )

Collected ( 130 )

Written-off ( 90 )

Ending balance $ 140

The following is the activity of the allowance for doubtful accounts (in thousands):

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Beginning balance $ 162

Provision for bad debts 847

Collected ( 242 )

Written-off ( 104 )

Ending balance $ 663

Inventories consist of raw materials and finished goods.

19 unchanged sentences

The qualitative assessment evaluates factors including macroeconomic conditions, industry-specific and company-specific considerations,

Table of C ontent s

Array Technologies, Inc.

7 unchanged sentences

The Company completes its annual goodwill impairment test as of year-end.

At December 31, 2020, the Company performed a qualitative assessment of its goodwill.

At December 31, 2019 and 2018, the Company performed a quantitative assessment of its goodwill.

For the years ended December 31, 2020, 2019 and 2018 no goodwill impairment was recorded by the Company.

At December 31, 2021, the Company performed both a qualitative and quantitative test for impairment of goodwill and no impairment was recorded.

At December 31, 2020, the Company performed a qualitative assessment of its goodwill and no impairment was recorded.

At December 31, 2019, the Company performed a quantitative assessment of its goodwill and no impairment was recorded.

Amortizable and Other Intangible Assets

6 unchanged sentences

Deferred Offering Costs

Deferred offering costs consist primarily of registration fees, filing fees, listing fees, specific legal and accounting costs, and transfer agent fees, which are direct and incremental fees related to the IPO.

Deferred offering costs were offset against the IPO proceeds.

Deferred offering costs were offset against the proceeds.

Debt Discount and Financing Costs

Debt discount and financing costs incurred to issue debt are deferred and amortized using the effective interest method as a component of interest expense over the life of the related debt agreement.

Amortization expense of debt discount and deferred financing costs was $ 3.4 million, $ 4.0 million and $ 3.0 million, respectively, for the years ended December 31, 2020, 2019 and 2018.

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 (i) identification of the contract or contracts with a customer, (ii) identification of the performance obligations within the contract, (iii) determination of the transaction price, (iv) allocation of the transaction price to the performance obligations within the contract, and (v) recognition of revenue when, or as the performance obligation has been satisfied.

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.

For contracts with multiple

Table of C ontent s

Amortization expense and write-off of debt discount and deferred financing costs was $ 15.0 million, (including $ 9.6 million in write-offs in connection with unscheduled principal payoffs that occurred in February and August of 2021 – see Notes 9 and 10), $ 3.4 million and $ 4.0 million, respectively, for the years ended December 31, 2021, 2020 and 2019.

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, (ii) identification of the performance obligations within the contract, (iii) determination of the transaction price, (iv) allocation of the transaction price

Array Technologies, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

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 change 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.

to the performance obligations within the contract, and (v) recognition of revenue when, or as the performance obligation has been satisfied.

Performance Obligations

The majority of the Company’s contracts with customers are accounted for as one performance obligation, because the Company is integrating the solar tracking 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 the delivery of the components and other services specified in the contract do not represent a single integrated project.

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.

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.

The Company had $ 168.9 million in contracts with customers for the sale of goods and services that contained bill-and-hold obligations such as storage, handling and other custodial duties.

Any losses incurred on point-in-time projects are recognized as the goods are delivered.

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 for goods or services that 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.

We account for shipping and handling activities related to contracts with customers as costs to fulfill our promise to transfer the associated products.

Accordingly, we record amounts billed for shipping and handling costs as a component of revenue, and classify such costs as a component of cost of revenue.

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

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 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.

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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 .

At contract inception, any variable consideration such as liquidated damages are estimated based on probability of occurrence and then re-evaluated for probability at the end of the quarterly period.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and deferred revenue (contract liabilities) on the consolidated balance sheets.

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled accounts receivable for goods delivered but not invoiced, and deferred revenue (contract liabilities) on the consolidated balance sheets.

The majority of the Company’s contract amounts are billed as work progresses in accordance with agreed-upon contractual terms, which generally coincide with the shipment of one or more phases of the project.

Billing sometimes occurs subsequent to revenue recognition, resulting in contract assets.

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.

As of December 31, 2020 and December 31, 2019, contract assets consisting of unbilled receivables totaling $ 18.1 million and $ 16.1 million, respectively, are included within accounts receivable on the consolidated balance sheets on a contract-by-contract basis at the end of the reporting period.

The Company also receives

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Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

advances or deposits from its customers, before revenue is recognized, resulting in contract liabilities.

Billing sometimes occurs subsequent to revenue recognition, resulting in unbilled accounts receivable.

The changes in unbilled accounts receivable 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, unbilled accounts receivable totaled $ 111.2 million and $ 18.1 million, respectively, are included within accounts receivable on the consolidated balance sheets on a contract-by-contract basis at the end of the reporting period.

The Company also receives advances or deposits from its customers, before revenue is recognized, resulting in contract liabilities.

The changes in contract liabilities (i.e.

deferred revenue) relate to advanced orders and payments received by the Company and are the result of customers looking to take advantage of certain U.S.

federal tax incentives set to decrease at the end of 2019.

Based on the terms of the tax incentives the customer must pay for the goods prior to December 31, 2019 which accounts for the increase in the advanced orders and payments and the resulting deferred revenue at December 31, 2019 and subsequent reduction for deliveries which occurred during the year ended December 31, 2020.

federal tax incentives set to decrease at the end of 2019 and 2020.

Based on the terms of the tax incentives the customer must pay for the goods prior to December 31, 2019 and 2020, which accounts for the increase in the advanced orders and payments and the resulting deferred revenue at December 31, 2019 and 2020 and subsequent reduction for deliveries which occurred during the year ended December 31, 2020 and 2021.

As of December 31, 2021 and December 31, 2020, contract liabilities consisting of deferred revenue were $ 99.6 million and $ 149.8 million, respectively and were recorded on a contract-by-contract basis at the end of each reporting period.

3 unchanged sentences

The Company expects to recognize revenue on 100 % of these performance obligations in the next twelve months .

Revenue Recognition - 2018

Products are sold by the Company for cash-in-advance and on credit.

Revenue is recognized when persuasive evidence of an agreement exists and upon delivery and acceptance, or earlier if required by shipping terms, provided title is transferred, prices are fixed or determinable, and collection is deemed probable.

Revenues are presented net of sales, use, value-added and other excise taxes collected by the Company that are remitted to various governmental authorities.

Warranty Obligations

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

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.

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

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

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

products are delivered.

This provision is based on historical information on the nature, frequency and average cost of claims for each product line.

8 unchanged sentences

The current provision for income taxes represents actual or estimated amounts payable on tax return filings each year.

Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, and for

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Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

operating loss and tax credit carryforwards.

The change in deferred tax assets and liabilities for the period measures the deferred tax provision or benefit for the period.

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The grant date fair value of each unit is amortized on a straight-line basis over the requisite service period.

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 Perpetual Preferred Stock issued in connection with the Securities Purchase Agreement as described in Note 11 is classified as temporary equity in the

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

accompanying consolidated financial statements.

The Company elected the accreted redemption value method under which it accretes changes in redemption value over the period from the date of issuance of the Series A Redeemable Perpetual 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 Perpetual Preferred Stock on the Company’s consolidated statements of changes in equity and treated similarly to a dividend on preferred stock for GAAP purposes.

Earnings per Share (“EPS”)

Basic earnings per share, or EPS, is computed by dividing net income available to shareholders by the weighted average shares outstanding during the period.

Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue shares, such as stock options and unvested restricted stock, were exercised and converted into shares.

Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue shares, such as stock options, unvested restricted stock, or convertible debt, were exercised and converted into shares.

The convertible debt is not currently convertible.

Diluted EPS is computed by dividing net income available to shareholders by the weighted average shares outstanding during the period, increased by the number of additional shares that would have been outstanding if the potential shares had been issued and were dilutive.

CARES Act Payroll Tax Deferral

The CARES Act permits employers to defer the payment of the employer share of social security taxes due for the period beginning March 27, 2020 and ending December 31, 2020.

Of the amounts deferred, 50% are required to be paid by December 31, 2021 and the remaining 50% are required to be paid by December 31, 2022.

The Company began deferring payment of the employer share of social security taxes in April 2020.

As of December 31, 2020, the Company had deferred payment of $ 1.0 million of such taxes.

Credit Concentration

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, restricted cash and accounts receivable.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, and accounts receivable.

The Company has no significant off balance sheet concentrations of credit risk.

The Company maintains its cash and restricted cash with financial institutions that are believed to be of high credit quality and has not experienced any material losses relating to any cash and restricted cash.

The Company maintains its cash with financial institutions that are believed to be of high credit quality and has not experienced any material losses relating to any cash.

As of December 31, 2021 and December 31, 2020, $ 367.2 million and $ 108.2 million, respectively, of the Company’s bank balances were uninsured and uncollateralized and exposed to custodial credit risk.

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The Company does not require collateral on its trade receivables.

For the year ended December 31, 2020, the Company’s largest

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Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

customer and five largest customers constituted 11.2 % and 40.9 % of total revenues, respectively.

For the year ended December 31, 2021, the Company’s largest customer and five largest customers constituted 12.6 % and 46.0 % of total revenues, respectively.

Two customers made up 22.7 % of revenue and are the only customers greater than 10% of total revenue for the year ended December 31, 2021.

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Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company follows a fair value hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company follows a fair value

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Three levels of inputs may be used to measure fair value, as follows:

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Level 3 inputs are valued by management’s assumptions about the assumptions the market participants would utilize in pricing the asset.

The fair values of the Company’s cash, restricted cash, accounts receivable, and accounts payable approximate their carrying values due to their short maturities.

The carrying value of the Company’s notes payable and related party loans approximates their fair values, as they are based on current market rates at which the Company could borrow funds with similar terms.

The fair values of the Company’s cash, accounts receivable, and accounts payable approximate their carrying values due to their short maturities.

The carrying value of the Company’s notes payable, capped call, and related party loans approximates their fair values, as they are based on current market rates at which the Company could borrow funds with similar terms.

The Company follows the provisions of FASB ASC Topic 820-10 for nonfinancial assets and liabilities measured at fair value on a non-recurring basis.

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To be adopted

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Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

In February 2016, the FASB issued ASU No.

2016-02 (Topic 842) “Leases” which supersedes the lease recognition requirements in ASC Topic 840, “Leases” .

Under ASU No.

2016-02, lessees are required to recognize assets and liabilities on the consolidated balance sheets for most leases and provide enhanced disclosures.

Leases will continue to be classified as either finance or operating.

For companies that are not emerging growth companies (“EGCs”), the ASU is effective for fiscal years beginning after December 15, 2018.

For EGCs, the ASU is effective for fiscal years beginning after December 15, 2021.

The Company plans to adopt the new standard using the modified retrospective method, under which the Company will apply Topic 842 to existing and new leases as of the effective date of January 1, 2021, but prior periods will not be restated and will continue to be reported under Topic 840 guidance in effect during those periods.

The Company anticipates that the adoption will not have a material impact on its consolidated statements of operations or its consolidated statements of cash flows but expects to recognize right-of-use assets and liabilities for lease obligations associated with its operating leases.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments - Credit Losses , which was subsequently amended by ASU No.

2018-19 and ASU No.

In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists.

The standard is effective for the fiscal year beginning after December 15, 2022, or December 15, 2021 if we were to lose EGC’s status in 2021.

The Company will continue to assess the possible impact of this standard, but currently does not expect the adoption of this standard will have a significant impact on its consolidated financial statements and its limited history of bad debt expense relating to trade accounts receivable.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU No.

2019-12”), which is intended to simplify various aspects of the accounting for income taxes.

2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

This standard is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020.

Early adoption is permitted.

The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement , which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement against or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements.

The Company adopted ASU 2018-13 as of January 1, 2020.

The Company’s disclosures related to its Level 3 financial statements did not materially change for the periods presented.

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In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Codification Topic 606.

ASU 2021-08 is effective for fiscal years beginning after December 15, 2022 and early adoption is permitted.

While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2021-08, and continue to evaluate the impact that ASU 2021-08 will have, if any, on its consolidated financial statements.

Array Technologies, Inc.

6 unchanged sentences

Total $ 205,653 $ 118,459

The following is the activity of the inventory reserve (in thousands):

Beginning balance $ ( 6,425 ) $ ( 5,200 )

Increases ( 1,766 ) ( 2,518 )

Decreases 776 1,293

Ending balance $ ( 7,415 ) $ ( 6,425 )

Property, Plant and Equipment

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Hardware and software 3 - 5

Assets in progress NA 1,880 —

Total 21,915 18,557

1 unchanged sentence

Property, plant and equipment, net $ 10,692 $ 9,774

Depreciation expense was $ 2.2 million, $ 2.1 million and $ 1.9 million for the years ended December 31, 2020, 2019 and 2018, respectively, of which $ 2.0 million, $ 1.8 million and $ 1.7 million, respectively, has been allocated to cost of revenues and $ 0.2 million, $ 0.3 million and $ 0.2 million, respectively, is included in depreciation and amortization in the accompanying consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018.

Depreciation expense was $ 2.4 million, $ 2.2 million and $ 2.1 million for the years ended December 31, 2021, 2020 and 2019, respectively, of which $ 2.0 million, $ 2.0 million and $ 1.8 million, respectively, was allocated to cost of revenues and $ 0.4 million, $ 0.2 million and $ 0.3 million, respectively, is included in depreciation and amortization in the accompanying consolidated statements of operations for the years ended December 31, 2021, 2020 and 2019.

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Goodwill and Other Intangible Assets

22 unchanged sentences

Thereafter 46,918

The provision for income taxes charged to operations consists of the following for the years ended December 31, (in thousands):

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Array Technologies, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

6 Investment in Equity Securities

The Company made a $ 10.0 million and $ 2.0 million investment in preferred stock of a private company in February 2021 and April 2021, respectively.

The investment is accounted for in accordance with ASC 321 at its cost less any impairment.

The investment balance as of December 31, 2021 is $ 12.0 million and is recorded in other assets on the condensed consolidated balance sheet.

There is no impairment recorded for the year ended December 31, 2021.

The provision for income taxes charged to operations consists of the following (in thousands):

Year Ended December 31,

2021 2020 2019

2 unchanged sentences

State ( 668 ) 4,196 803

Foreign 60 — —

( 616 ) 21,444 2,512

4 unchanged sentences

Total Income Tax Expense (Benefit) $ ( 10,718 ) $ 18,705 $ 24,834

Significant components of the Company’s deferred tax assets and liabilities were as follows as of December 31, (in thousands):

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):

Deferred Tax Assets:

6 unchanged sentences

Equity-based compensation 948 154

Lease liabilities 2,661 —

Premium on capped call 12,356 —

Interest expense carryforward 5,301 —

Other 275 239

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Intangible assets ( 14,165 ) ( 16,604 )

ROU assets ( 2,670 ) —

Deferred Tax Liabilities ( 17,918 ) ( 17,647 )

Deferred Tax Asset (Liability), net $ 9,345 $ ( 13,114 )

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Array Technologies, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

A reconciliation of income tax expense computed at the federal statutory rate of 21% for the years ended December 31, to actual income tax expense at the Company’s effective rate is as follows (in thousands):

A reconciliation of income tax expense computed at the federal statutory rate of 21% to actual income tax expense at the Company’s effective rate is as follows (in thousands):

Year Ended December 31,

2021 2020 2019

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Foreign income benefit — ( 1,201 ) ( 155 )

Officer’s compensation 435 — —

Transaction costs 950 — —

Change in valuation allowance 14 — ( 45 )

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federal and state income tax examinations by tax authorities for years before 2015.

As of December 31, 2020, the Company had no federal income tax net operating loss (“NOL”) carryforwards.

As of December 31, 2021, the Company had federal income tax net operating loss (“NOL”) carryforwards of approximately $ 5.1 million.

The Company has state income tax NOL carryforwards of approximately $ 9.7 million that will expire in future years beginning in 2029.

Realization of deferred tax assets associated with net operating loss carryforwards is dependent upon generating sufficient taxable income in the appropriate jurisdictions prior to their expirations, if any expiration.

The existence of reversing temporary differences supports the recognition by the Company of certain deferred tax assets.

It is not more likely than not that those deferred tax assets from certain state net operating loss carryforwards would be realized due to the Company’s lack of earnings history and as such the Company established a valuation allowance of $ 208 thousand for the years ended years ended December 31, 2020 and 2019.

Realization of deferred tax assets associated with federal and state net operating loss and federal tax credit carryforwards is dependent upon generating sufficient taxable income of the appropriate type, and in the appropriate jurisdictions, to utilize them prior to their expiration, if any.

It is not more likely than not that deferred tax assets from certain state net operating loss and federal tax credit carryforwards would be realized due to type and location of future earnings and as such the Company increased the valuation allowance $ 14 thousand for the years ended December 31, 2021 and none for the year ended December 31, 2020.

ASC 740, Income Taxes, addresses the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.

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The Company had no unrecognized income tax benefits at either December 31, 2021 or 2020.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic.

Among other things, the CARES Act provided the ability for taxpayers to carryback a net operating loss (“NOL”) arising in a taxable year beginning after December 31, 2017 and before January 1, 2021 to each of the five years preceding the year of the loss.

The Company generated a significant

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Array Technologies, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

NOL during its tax year ended March 31, 2019 and filed a carryback claim in June 2020 for this NOL.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic.

The Company generated a significant NOL during its tax year ended March 31, 2019 and filed a carryback claim in June 2020 for this NOL.

As a result of the carryback claim, the Company recorded an income tax benefit of $ 10.7 million on its consolidated statement of operations for the year ended December 31, 2020, resulting from the difference in the current U.S.

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The following table summarizes the activity related to the estimated accrued warranty reserve (in thousands):

Year Ended December 31,

Beginning balance $ 3,049 $ 2,592

3 unchanged sentences

Ending balance $ 3,192 $ 3,049

Long-Term Debt

Senior Secured Credit Facility

Long term debt consisted of the following (in thousands):

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Array Technologies, Inc.

3 unchanged sentences

Revolving credit facility — —

Term loan — 57,702

Revolving loan — 70

326,775 460,000

3 unchanged sentences

Less current portion of long-term debt ( 4,300 ) ( 4,313 )

Long-term debt, net of current portion, debt discount and financing costs $ 423,970 $ —

Long-term Senior Secured Credit Facility debt, net of current portion, debt discount and financing costs $ 299,184 $ 423,970

Senior Secured Credit Facility

On October 14, 2020, the Company entered into a senior secured credit facility consisting 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”).

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).

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, 2020 is 6.08 %.

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.

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.

On October 14, 2020, the Company 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, the Company 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, the Company entered into the incremental facility amendment No.

2 (the “Second Amendment”) to the Senior Secured Credit Facility.

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

Revolving Credit Facility

Under the Revolving Credit Facility, the Company had a zero outstanding balance as of December 31, 2021 and 2020, $ 13.6 million and $ 46.6 million in standby letters of credit as of December 31, 2021 and 2020, and availability of $ 186.4 and $ 103.4 million at December 31, 2021 and 2020.

Term Loan Facility

The Term Loan Facility had a balance of $ 326.8 million and $ 460.0 million as of December 31, 2021 and 2020, respectively.

The Company made unscheduled payoffs of the Term Loan Facility during the year in the aggregate of $ 130.0 million which resulted in the write-off of capitalized fees in the aggregate of $ 9.6 million.

The Term Loan Facility accrued interest equal to applicable margin of 1 % plus base rate ( 2.75 % and 4.00 % at December 31, 2021 and 2020, respectively).

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 and $ 31.7 million at December 31, 2021 and 2020, respectively.

The debt discount and issuance costs are being amortized using the effective interest method.

The rate was 4.9 % and 6.08 % at December 31, 2021 and 2020, respectively.

The Term Loan Facility has an annual excess cash flow calculation, for which the prescribed formula did not result in requiring the Company to make any advance principal payments for the year ended December 31, 2021.

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Interest Rate

The interest rates applicable to the loans under the Term Loan Facility equals, 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.

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 London interbank offered rate 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.

The interest rates applicable to the loans under the Revolving Facility equals, 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.

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,

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Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

the greater of (a) the London interbank offered rate 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.

or (ii) in the case of Eurocurrency borrowings, the greater of (a) the London interbank offered rate 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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Restrictive Covenants and Other Matters

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

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.

1 unchanged sentence

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.

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.

Term Loan Credit and Guarantee Agreement

The Company had a Term Loan Credit and Guarantee Agreement (the “Term Loan”) as amended.

The Term Loan was secured by assets of ATI Investment.

The Term Loan was payable in quarterly installments of $ 5 million.

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

The Term Loan accrued interest equal to applicable margin of 6.25 % plus base rate ( 8.96 % at December 31, 2019).

The balance of the

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Future maturities of the Senior Secured Credit Facility (in thousands):

Thereafter 305,275

For the years ended December 31, 2021, 2020 and 2019, interest expense related to all long-term debt totaled $ 35.7 million, $ 11.3 million and $ 11.5 million, respectively, which consisted of cash interest, and amortization of the debt discount and financing costs.

Convertible Debt

1% Senior unsecured convertible notes $ 425,000 $ —

unamortized discount and issuance costs ( 13,137 ) —

1% Senior unsecured convertible notes, net (1)

$ 411,863 $ —

(1) Effective interest rate for the Notes for the year ended December 31, 2021 was 1.5 %.

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 “Notes”) resulting in proceeds of $ 364.7 million and $ 48.6 million, respectively, after deducting the original issue discount of 2.75 %.

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

Bank National Association, as trustee.

Array Technologies, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

Term loan is presented in the accompanying consolidated balance sheets net of debt discount and financing costs of $ 1.8 million at December 31, 2019.

The Term Loan had an annual excess cash flow calculation which could require the Company to make advance principal payments.

At December 31, 2019, the excess cash flow calculation resulted in the Term Loan be classified as current on the accompanying consolidated balance sheet.

The Company paid the outstanding amount due on the Term Loan on February 2, 2020 and settled all obligations with respect to the Term Loan.

Revolving Loan

The Company had a credit facility (the “Revolving Loan”) as amended, which had a commitment of $ 100.0 million as of December 31, 2019.

As of December 31, 2019, the Revolving Loan had an outstanding balance of $ 70 thousand.

The Company paid the outstanding amount due on the Revolving Loan on October 14, 2020 and settled all obligations with respect to the Revolving Loan.

Letter of Credit Facility

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

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

At December 31, 2019, the Company had $ 51.0 million in outstanding standby letters of credit outstanding, secured by cash collateral.

Future maturities of long-term debt (in thousands):

Thereafter 432,687

For the years ended December 31, 2020, 2019 and 2018, interest expense related to the long-term debt totaled $ 11.3 million, $ 11.5 million and $ 17.4 million, respectively, which consisted of cash interest, and amortization of the debt discount and financing costs.

Related Party Loan

On August 22, 2018, the Company entered into a $ 38.6 million senior secured promissory note, as amended (the “Related Party Loan”) with a unit holder of Former Parent that bore interest at a stated rate of 12 % per year.

Interest payments on the Related Party Loan were due quarterly and were based on the division of the Related Party Loan into two tranches:

a $ 22.5 million tranche (“Tranche A”) that required cash interest payments and;

a $ 16.1 million tranche (“Tranche B”) that provided for payments in kind (“PIK”) through the addition of accrued interest to the principal balance.

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

The 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 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 dilutive impact for the year ended December 31, 2021.

At any time prior to the close of business on the business day immediately preceding June 1, 2028, the Notes are convertible at the option of the holders only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2022 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price then in effect on each applicable trading day;

(2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $ 1,000 principal amount of Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate for the Notes on each such trading day;

(3) if the Company calls such Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date, but only with respect to the Notes called (or deemed called) for redemption;

or (4) upon the occurrence of specified corporate events as described in the Indenture.

On or after June 1, 2028 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or any portion of their Notes at any time regardless of the foregoing circumstances.

Upon conversion of the Notes, the Company will pay cash up to the aggregate principal amount of the Notes to be converted and pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, in respect of the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount of the Notes being converted.

The Company may redeem (an “Optional Redemption”) for cash all or any portion of the Notes, at its option, on or after December 6, 2025, if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

If the Company redeems less than all the outstanding Notes, at least $ 100 million aggregate principal amount of Notes must be outstanding and not subject to redemption as of the date of the relevant notice of redemption.

No sinking fund is provided for the Notes.

The conversion rate for the Notes was initially 41.9054 shares of the Company’s common stock per $ 1,000 principal amount of Notes, which was equivalent to an initial conversion price of approximately $ 23.86 per share of common stock or 10.1 million shares of common stock.

The initial conversion price of the Notes represented a premium of approximately 32.5 % to the last reported sale price of the Company’s common stock on the Nasdaq Global Market on November 30, 2021.

The conversion rate for the Notes is subject to adjustment under certain circumstances in accordance with the terms of the Indenture.

In addition, following

Array Technologies, Inc.

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Notes to Consolidated Financial Statements

The balance of the Related Party Loan, presented in the accompanying consolidated balance sheets net of debt discount and issuance costs, is $ 41.8 million at December 31, 2019.

The Company paid the remaining outstanding balance and accrued interest on July 31, 2020 to settle the obligation with respect to the Related Party Loan.

For the years ended December 31, 2020, 2019 and 2018, interest expense related to the Related Party Loan totaled $ 3.8 million, $ 7.3 million and $ 2.6 million, respectively, which consisted of cash interest, PIK interest and amortization of the debt discount.

certain corporate events that occur prior to the maturity date of the Notes or if the Company delivers a notice of redemption in respect of the Notes, the Company will, under certain circumstances, increase the conversion rate of the Notes for a holder who elects to convert its Notes (or any portion thereof) in connection with such a corporate event or convert its Notes called (or deemed called) for redemption during the related Redemption Period (as defined in the Indenture), as the case may be.

If the Company undergoes a Fundamental Change (as defined in the Indenture), holders may require, subject to certain conditions and exceptions, the Company to repurchase for cash all or any portion of their Notes at a Fundamental Change Repurchase Price (as defined in the Indenture) equal to 100 % of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, to, but excluding, the Fundamental Change Repurchase Date (as defined in the Indenture).

The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company or its Significant Subsidiaries after which the Notes become automatically due and payable.

The Convertible Notes were evaluated for embedded derivatives noting there were none that needed to be bifurcated and accounted for separately.

Interest expense on the convertible debt of $ 0.4 million was recognized for the Notes included contractual interest expense of $ 0.3 million and the amortization of debt discount and issuance cost of $ 0.1 million for the year ended December 31, 2021.

The discount and issuance costs will be amortized over the life of the debt using the effective interest rate of 1.5 %.

On November 30, 2021, concurrently with the pricing of the Notes, the Company also entered into privately negotiated capped call transactions (the “Capped Calls”) with Morgan Stanley & Co.

LLC, Credit Suisse Capital LLC, through its agent, Credit Suisse Securities (USA) LLC and JPMorgan Chase Bank, N.A., New York Branch (collectively, the “Counterparties”).

The Capped Calls each have an initial strike price of $ 23.8633 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes.

The Capped Calls have initial cap prices of $ 36.0200 per share, subject to certain adjustments.

The Capped Calls cover, subject to anti-dilution adjustments, approximately 17.8 million shares of the Company’s common stock.

The Capped Calls are expected generally to reduce potential dilution to the common stock upon conversion of any Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price.

The Company paid $ 52.9 million from the net proceeds from the issuance and sale of the Notes to purchase the Capped Calls.

The Capped Calls are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting the Company, including a merger event;

a tender offer;

and a nationalization, insolvency or delisting involving the Company.

In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to terminations of the Capped Calls, including changes in law;

failures to deliver;

and hedging disruptions.

Certain Initial Purchasers under the Array Technologies, Inc.

1.00% Convertible Senior Notes due 2028 Purchase Agreement and Counterparties under the confirmations entered into in connection with the Capped Calls, or their affiliates, have engaged in, and may in the future engage in, other commercial dealings with the

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Company or its affiliates in the ordinary course of business.

They have received, or may in the future receive, customary fees and commissions for those transactions.

The Capped Calls meet the criteria in ASC 815-40 to be classified within Stockholders' Equity, and therefore was recorded to additional paid in capital at the fair value on issuance which was equal to the premium paid.

Due to the instrument being classified in equity, it is not remeasured after issuance.

The Company made a tax election to integrate the Notes and the Capped Calls.

The accounting impact of this tax election makes the Capped Calls deductible as original issue discount interest for tax purposes over the term of the note, and results in a $ 12.4 million deferred tax asset recorded as an adjustment to Additional paid-in capital on our Balance Sheet as of December 31, 2021.

Redeemable Perpetual Preferred

Series A Redeemable Perpetual Preferred

On August 10, 2021, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) pursuant to which on August 11, 2021, the Company issued and sold to certain investors (the “Purchasers”) 350,000 shares of a newly designated Series A Redeemable Perpetual Preferred Stock of the Company, par value $ 0.001 per share (the “Series A Redeemable Perpetual Preferred Stock”), and 7,098,765 shares of the Company’s common stock, par value $ 0.001 per share (“Common Stock”), for an aggregate purchase price of $ 346.0 million (the “Initial Closing”).

Further, pursuant to the Securities Purchase Agreement, on September 27, 2021, the Company issued and sold to the Purchaser 776,235 shares of Common Stock for an aggregate purchase price of $ 776 (the “Prepaid Forward Contract”).

The Company used net proceeds from the Initial Closing to repay $ 102.0 million, which was the amount outstanding under the Company’s existing revolving credit facility and prepaid $ 100 million under the Company’s term loan.

The Purchaser is entitled to designate one representative to be appointed to the Company’s board of directors, and to appoint three non-voting observers to the Board, in each case until such time as the Purchaser no longer beneficially own shares of the Series A Redeemable Perpetual Preferred Stock with at least $ 100 million aggregate Liquidation Preference (as defined below).

The Series A Redeemable Perpetual Preferred Stock has no maturity date.

Additional Closings

The Securities Purchase Agreement gives the Company the option to require the Purchaser to purchase, in one or more additional closings, up to 150,000 shares, until June 30, 2023, of the Series A Redeemable Perpetual Preferred Stock and up to 3,375,000 shares of Common Stock (or up to 6,100,000 shares of Common Stock in the event of certain price-related adjustments) (subject to certain equitable adjustments pursuant to any stock dividend, stock split, stock combination, reclassification or similar transaction) for an aggregate purchase price up to $ 148 million (the “Delayed Draw Commitment”).

The Company evaluated the accounting for the instruments issued in the Securities Purchase Agreement and determined the Series A Redeemable Perpetual Preferred Stock and Common Stock issued in the Initial Closing, as well as the Prepaid Forward Contract, and Delayed Draw Commitment are freestanding instruments accounted for in equity.

The Series A Redeemable Perpetual Preferred Stock is recorded in temporary equity on the consolidated balance sheets as it has redemption features upon certain triggering events that are outside the Company’s

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Notes to Consolidated Financial Statements

control, such as a fundamental change.

The proceeds of the Series A Redeemable Perpetual Preferred Stock, and transactions costs and discount of $ 15.4 million have been allocated to each instrument based on its relative fair value.

At the Initial Closing date, $ 229.8 million was allocated to the Series A Redeemable Perpetual Preferred Stock, $ 105.4 million to Common Stock, $ 12.4 million to the Delayed Draw Commitment which was recorded as a debit to additional paid-in-capital, and $ 11.7 million for a Prepaid Forward Contract.

On or prior to the fifth anniversary of the Initial Closing, the Company may pay dividends on the Series A Redeemable Perpetual Preferred Stock either in cash at the then-applicable Cash Regular Dividend Rate (as defined below), through accrual to the Liquidation Preference at the Accrued Regular Dividend Rate of 6.25 % (the “Permitted Accrued Dividends”), or a combination thereof.

Following the fifth anniversary of the Initial Closing, dividends shall be payable only in cash.

To the extent the Company does not declare such dividends and pay in cash following the fifth anniversary of the Initial Closing, the dividends accrue to the Liquidation Preference (“Default Accrued Dividends”) at the then-applicable Cash Regular Dividend Rate plus 200 basis points.

In the event there are Default Accrued Dividends outstanding for six consecutive quarters, the Company, at the option of the holder of the Series A Redeemable Perpetual Preferred Stock (each a “Holder”), will pay 100 % of the amount of Default Accrued Dividends by delivering to the Holder a number of shares of Common Stock equal to the quotient of (i) the amount of Default Accrued Dividends) divided by (ii) 95 % of the 30-day VWAP of the Common Stock (“Non-Cash Dividend”).

The “Cash Regular Dividend Rate” of the Series A Redeemable Perpetual Preferred Stock means (i) initially, 5.75 % per annum on the Liquidation Preference and (ii) increased by (a) 50 basis points on each of the fifth, sixth and seventh anniversaries of the Initial Closing and (b) 100 basis points on each of the eighth, ninth and tenth anniversaries of the Initial Closing.

The “Accrued Regular Dividend Rate” on the Series A Redeemable Perpetual Preferred Stock means 6.25 % per annum on the Liquidation Preference.

Dividends declared as of December 31, 2021 were $ 8.2 million and $ 8.1 million were paid.

The Series A preferred stock have similar characteristics of an “Increasing Rate Security” as described by SEC Staff Accounting Bulletin Topic 5Q, Increasing Rate Preferred Stock.

As a result, the discount on Series A preferred stock is considered an unstated dividend cost that is amortized over the period preceding commencement of the perpetual dividend using the effective interest method, by charging imputed dividend cost against retained earnings, or additional paid in capital in the absence of retained earnings, and increasing the carrying amount of the Series A preferred stock by a corresponding amount.

The discount of $ 120.2 million is therefore being amortized over five years using the effective yield method.

The amortization in each period is the amount which, together with the stated dividend in the period, results in a constant rate of effective cost with regard to the carrying amount of the Series A preferred stock.

The Company has presented the Series A Redeemable Perpetual Preferred Stock in temporary equity and is accreting the discount on the increasing rate dividends using the effective interest method.

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

The Company had no dividends accreted to the carrying value of the Series A Redeemable Perpetual Preferred Stock the regular cash rate of dividends of 5.75 %, as they were paid as of the year ended December 31, 2021.

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Until June 30, 2023, the Company will pay the Purchaser a cash commitment premium on the unpurchased portion of Delayed Draw Commitment as follows:

— % through the six-month anniversary of the Initial Closing;

1.5 % from the six-month anniversary of the Initial Closing through the 12-month anniversary of the Initial Closing;

3.0 % from the 12-month anniversary of the Initial Closing through June 30, 2023.

The Company may terminate some or all of the Delayed Draw Commitment, from time to time, at its sole discretion.

Ranking and Liquidation Preference

The Series A Redeemable Perpetual Preferred Stock ranks senior to the Common Stock with respect to dividend rights and rights upon the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company (a “Liquidation”).

Upon a Liquidation, each share of Series A Redeemable Perpetual Preferred Stock would be entitled to receive an amount per share (the “Liquidation, Redemption or Repurchase Amount”) equal to the greater of (i) the Liquidation Preference of such share, plus all accrued and unpaid dividends (including any Accrued Dividends) thereon and (ii) an amount in cash equal to the sum of (a) 130.0 % of the Initial Liquidation Preference (as defined below) of such share, minus (b) the cumulative amount of cash dividends paid in respect of such share prior to such payment.

As used herein, “Liquidation Preference” means, with respect to any share of the Series A Redeemable Perpetual Preferred Stock, the initial liquidation preference of $ 1,000 per share (the “Initial Liquidation Preference”) plus any Accrued Dividends of such share as of the time of determination.

Redemption Rights

The Company may redeem all or any portion of the Series A Redeemable Perpetual Preferred Stock (in increments of not less than $ 200 million based on the Liquidation Preference of such shares of Series A Redeemable Perpetual Preferred Stock to be redeemed at such time (or such lesser amount to the extent the Company chooses to redeem all of the outstanding shares of Series A Redeemable Perpetual Preferred Stock)) for an amount in cash equal to the Liquidation, Redemption or Repurchase Amount.

Upon a “Fundamental Change” (involving a change of control, bankruptcy, insolvency or liquidation of the Company as further described in the Certificate of Designations), each Holder shall have the right to require the Company to redeem all or any part of the Holder’s Series A Redeemable Perpetual Preferred Stock for an amount in cash equal to the Liquidation, Redemption or Repurchase Amount.

Voting and Consent Rights

Each Holder of Series A Redeemable Perpetual Preferred Stock will have one vote per share on any matter on which Holders of Series A Redeemable Perpetual Preferred Stock are entitled to vote separately as a class (as described below), whether at a meeting or by written consent.

The Holders of shares of Series A Redeemable Perpetual Preferred Stock do not otherwise have any voting rights.

The consent of the Holders of a majority of the outstanding shares of Series A Redeemable Perpetual Preferred Stock will be required for so long as the Threshold Amount remains outstanding for (i) amendments to the Company’s organizational documents that have an adverse effect on the Holders, (ii) issuances by the Company of securities that are senior to, or equal in priority with, the Series A Redeemable Perpetual Preferred Stock, (iii) entrance into, or amendments to, transactions with affiliates of the Company, (iv) incurrence by the Company of indebtedness, unless the Consolidated Total Leverage Ratio (as defined in the Certificate of Designations) would not exceed 8.5 -to-1 after giving effect to such incurrence (other than drawdowns by the Company under the Company’s current

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Revolving Credit Facility) or (v) any payment of dividends or making of distributions on equity securities of the Company ranking junior to the Series A Redeemable Perpetual Preferred Stock or redemptions, purchases or direct or indirect acquisitions of such equity securities ranking junior to or parity with the Series A Redeemable Perpetual Preferred Stock by the Company, unless the Consolidated Total Leverage Ratio (as defined in the Certificate of Designations) would not exceed 8.5 -to-1 after giving effect to such dividends, distributions, redemptions, purchases or acquisitions.

Related Party Loan

The Company had a senior secured promissory note, as amended, with a unit holder of Former Parent that had a balance, net of debt discount and issuance costs, as of December 31, 2019 of $ 41.8 million for which the Company paid off the balance on July 31, 2020 to settle the obligation with respect to the Senior Secured Loan.

The Company paid interest expense for the years ended December 31, 2020 and 2019 of $ 3.8 million and $ 7.3 million, respectively, which consisted of cash interest, PIK interest and amortization of the debt discount.

Common and Preferred Stock

7 unchanged sentences

Preferred Stock may be issued from time to time by the Company for such consideration as may be fixed by the Board.

The Board is authorized to provide for one or more series of Preferred Stock and to fix the designation of such series, the voting rights, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, of such series of Preferred Stock and the number of shares of such series, as may be permitted under the General Corporation Law of the State of Delaware.

The powers, preferences and relative, participating, optional and other special rights of, and the qualifications, limitations or restrictions thereof, of each series of Preferred Stock, if any, may differ from those of any and all other series at any time outstanding.

Table of C ontent s

Array Technologies, Inc.

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Notes to Consolidated Financial Statements

rights, and the qualifications, limitations or restrictions thereof, of such series of Preferred Stock and the number of shares of such series, as may be permitted under the General Corporation Law of the State of Delaware.

Based on Topic 606 provisions, the Company disaggregates its revenue from contracts with customers by those sales recorded over-time and sales recorded at a point in time.

1 unchanged sentence

Year Ended December 31,

2021 2020 2019

Over-time Revenues $ 626,057 $ 503,238 $ 493,633

Point in time Revenues 227,261 369,424 154,266

Total Revenues $ 872,662 $ 647,899

Total Revenue $ 853,318 $ 872,662 $ 647,899

As discussed in FN 22 to the consolidated financial statements, ITC-related contracts were determined to have multiple performance obligations satisfied at a point in time instead of one performance obligation satisfied over time.

Total revenue was not impacted, but the disaggregated revenue information above for 2020 and 2019 has been revised to correct this error, which resulted in $360.1 and $106.2 of revenue being reclassified from over-time revenue to point in time revenue for 2020 and 2019, respectively .

Contract Balances

Billing sometimes occurs subsequent to revenue recognition, resulting in contract assets.

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.

Earnings (Loss) per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):

The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share amounts):

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Year Ended December 31,

1 unchanged sentence

Net income (loss) $ ( 50,403 ) $ 59,073 39,745

Weighted average number of shares 121,467 119,994 119,994

Earnings per share $ 0.49 $ 0.33 $ ( 0.51 )

RSU dilutive shares 47 —

Weighted average number of shares 121,514 119,994 119,994

Preferred dividends and accretion ( 15,715 ) — —

Net income (loss) to common shareholders ( 66,118 ) 59,073 39,745

Weighted-average shares 129,984 121,467 119,994

Earnings (loss) per share $ ( 0.51 ) $ 0.49 $ 0.33

Weighted-average shares 129,984 121,467 119,994

Equity compensation dilutive securities — 47 —

Weighted average dilutive shares 129,984 121,514 119,994

Earnings (loss) per share $ ( 0.51 ) $ 0.49 $ 0.33

Potentially dilutive common shares issuable pursuant to equity-based awards of 227,253 were not included for the year ended December 31, 2021 as their potential effect was anti-dilutive as the Company generated a net loss.

There were no potentially dilutive common shares issuable pursuant to our 1% Senior Notes as the stock price is below the strike price and the Company generated a net loss.

The Company’s capped call option agreement entered into in December 2021 is not included in the calculation of the earnings per share as the impact would be anti-dilutive.

The potential shares issuable under the Company’s convertible 1% notes issued in December 2021 are not included in the earnings per share calculation as the par value of the notes is required to be paid in cash upon conversion and the stock price has not exceeded the conversion price on the notes at December 31, 2021.

There were 26,671,594 Class B units and 1,000 Class C units of Former Parent issued to certain employees or directors of the Company which were not included in the calculation of basic or diluted EPS for the years ended December 31, 2020 and 2019, as the Class B and Class C units do not represent potential units of the Company.

Commitments and Contingencies

Operating Leases

Future minimum lease payments under non-cancellable operating leases as of December 31, 2020 are as follows (in thousands):

Table of C ontent s

The Company, in the normal course of business, is subject to claims and litigation.

The Company reviews the status of each matter and assesses its potential financial exposure.

If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company would accrue a liability for the estimated loss.

On May 14, 2021, a putative class action was filed in the U.S.

District Court for the Southern District of New York against the Company and certain officers and directors alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, promulgated thereunder, and Sections 11, 12(a)(2) and 15 of the Securities Exchange Act of 1933 (“Plymouth Action”).

The Plymouth Action alleges misstatements and/or omissions in the Company’s registration statements and prospectuses related to the Company’s IPO, the Company’s December 2020 offering (the “2020 Follow-On Offering”), and the Company’s March 2021

Array Technologies, Inc.

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Notes to Consolidated Financial Statements

For the Year Ending December 31,

For the year ended December 31, 2020, the Company recorded lease expenses associated with its operating leases in cost of revenues and general and administrative within its consolidated statements of operations totaling $ 7.0 million and $ 0.4 million, respectively.

For the year ended December 31, 2019, the Company recorded lease expenses associated with its operating leases in cost of revenues and general and administrative within its consolidated statements of operations totaling $ 1.5 million and $ 0.3 million, respectively.

The Company, in the normal course of business, is subject to claims and litigation.

Management believes that there are no outstanding claims or assessments against the Company that would result in a material unfavorable outcome.

offering (the “2021 Follow-On Offering”) during the putative class period of October 14, 2020 through May 11, 2021.

On June 30, 2021, a second putative class action was filed in the Southern District of New York against the Company and certain officers and directors alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, promulgated thereunder, and Sections 11 and 15 of the Securities Exchange Act of 1933 (“Keippel Action”).

The Keippel Action similarly alleged misstatements and/or omissions in certain of the Company’s registration statements and prospectuses related to the Company’s IPO, the Company’s 2020 Follow-On Offering, and the Company’s 2021 Follow-On Offering during the putative class period of October 14, 2020 through May 11, 2021.

On July 6, 2021, the Court entered an order that the Keippel Action was in all material respects substantially similar to the Plymouth Action that both actions arise out of the same or similar operative facts, and that the parties are substantially the same parties.

The Court accordingly consolidated the Keippel Action with the Plymouth Action for all pretrial purposes and, ordered all filings to be made in the Plymouth Action.

On July 16, 2021, a verified derivative complaint was filed in the Southern District of New York against certain officers and directors of the Company (“First Derivative Action”).

The complaint alleges:

(1) violations of Section 14(a) of the Securities Exchange Act of 1934 for misleading proxy statements, (2) breach of fiduciary duty, (3) unjust enrichment, (4) abuse of control, (5) gross mismanagement, (6) corporate waste, (7) aiding and abetting breach of fiduciary duty, and (8) contribution under sections 10(b) and 21D of the Securities Exchange Act of 1934.

On July 30, 2021, a second and related verified derivative complaint was filed in the Southern District of New York against certain officers and directors of the Company (“Second Derivative Action”).

The complaint alleges:

(1) violations of Section 14(a) of the Securities Exchange Act of 1934 for causing the issuance of a false/misleading proxy statement, (2) breach of fiduciary duty, and (3) aiding and abetting breaches of fiduciary duty.

On August 24, 2021, the Second Derivative Action was consolidated with the First Derivative Action, the Court appointed co-lead counsel, and the case was temporarily stayed pending the entry of an order on all motions to dismiss directed at the pleadings filed in the Plymouth Action.

The stay shall remain in effect until the later of (a) the entry of an order on any motions to dismiss the Plymouth Action or, (b) to the extent the complaint in the Plymouth Action is amended, the entry of an order on any motions to dismiss any such amended complaints in the Plymouth Action.

On September 21, 2021, the Court appointed a group comprised of institutional investors Plymouth County Retirement Association and Carpenters Pension Trust Fund for Northern California as lead plaintiff in the Plymouth Action.

The deadline for the lead plaintiff to file an amended complaint in the Plymouth action was originally November 19, 2021 but was subsequently extended by agreement of the parties and further order of the Court.

On December 7, 2021, an amended class action complaint was filed by lead plaintiff in the Plymouth Action against the Company and certain officers and directors alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, promulgated thereunder, and Sections 11, 12(a)(2), and 15 of the Securities Exchange Act of 1933, on behalf of a putative class of persons and entities that purchased or otherwise acquired the Company’s securities during the period from October 14, 2020 through May 11, 2021 (the “Consolidated Amended Complaint”).

The Consolidated Amended Complaint alleges misstatements and/or omissions in:

(1) certain of the Company’s registration statements and prospectuses related to the Company’s IPO, the Company’s 2020 Follow-On Offering, and the Company’s 2021 Follow-On Offering;

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Company’s annual report and associated press release announcing results for the fourth quarter and full fiscal year 2020;

and (3) in the Company’s November 5, 2020 and March 9, 2021 earnings calls.

Consistent with the individual rules of practice for the Court in the Plymouth Action, on January 24, 2022, the defendants in the Plymouth Action, including the Company and certain of its officers and directors named as defendants therein, served on lead plaintiff and the Court a letter outlining why the Consolidated Amended Complaint should be dismissed in its entirety.

Lead plaintiff must respond to that letter on or before February 23, 2022, stating the extent, if any, to which lead plaintiff concurs with the defendants’ objections and the amendments, if any, to be made to the Consolidated Amended Complaint to address them, or else stating the reasons and controlling authority that lead plaintiff asserts supports the Consolidated Amended Complaint.

If, as a result of this exchange of letters, the parties have failed to resolve their dispute about the sufficiency of the Consolidated Amended Complaint, then, on or before March 21, 2022, defendants must submit a letter to the Court setting forth the reason why a motion dismiss is warranted.

At this time the Company believes that the likelihood of any material loss related to these matters is remote given the preliminary stage of the claims and strength of the Company’s defenses.

The Company has not recorded any material loss contingency in the consolidated balance sheets as of December 31, 2021.

Contingent Consideration

Concurrent with Former Parent’s acquisition of Array Technologies Patent Holdings Co., LLC (the “Patent LLC”), Array Tech, Inc.

(f/k/a Array Technologies, Inc.) entered into a TRA with the former majority shareholder of Array.

Tax Receivable Agreement

Concurrent with the Acquisition, Array Tech, Inc.

(f/k/a Array Technologies, Inc.) entered into a Taxes Receivable Agreement (“TRA”) with the former majority shareholder of Array.

The TRA is valued based on the future expected payments under the agreement.

The TRA provides for the payment by Array Tech, Inc.

(f/k/a Array Technologies, Inc.) to the former owners for certain federal, state, local and non-U.S.

to the former owners for certain federal, state, local and non-U.S.

tax benefits deemed realized in post-closing taxable periods by Array, from the use of certain deductions generated by the increase in the tax value of the developed technology.

The TRA is accounted for as contingent consideration and subsequent changes in fair value of the contingent liability are included in general and administrative in the accompanying consolidated statements of operations.

The TRA is accounted for as contingent consideration and subsequent changes in fair value of the contingent liability are recognized in contingent consideration in the accompanying consolidated statements of operations.

At December 31, 2021 and December 31, 2020, the fair value of the TRA was $ 14.6 million and $ 19.7 million, respectively.

5 unchanged sentences

The TRA will continue until all tax benefit payments have been made or the Company elects early termination under the terms described in the TRA.

Table of C ontent s

As of December 31, 2021, the undiscounted future expected payments through December 31, under the TRA are as follows (in thousands):

Array Technologies, Inc.

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Notes to Consolidated Financial Statements

As of December 31, 2020, the undiscounted future expected payments through December 31, under the TRA are as follows (in thousands):

Thereafter 11,532

Earn-Out Liability

The Company is required to pay the selling stockholders of Array future contingent consideration consisting of earn-out payments in the form of cash upon the occurrence of certain events, including the sale, transfer, assignment, pledge, encumbrance, distribution or disposition of shares held by the acquirer to a third party;

The Company had a liability to the selling stockholders of Array for contingent consideration consisting of earn-out payments in the form of cash upon the occurrence of certain events, including the sale, transfer, assignment, pledge, encumbrance, distribution or disposition of shares held by the acquirer to a third-party;

initial public offering of the equity securities of Former Parent, acquirer or the Company;

2 unchanged sentences

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

The earn-out liability was paid off in the fourth quarter of the fiscal year ended December 31, 2020.

The fair value of the earn-out liability was initially determined as of the Acquisition Date using unobservable inputs.

These inputs include the estimated amount and timing of future cash flows, the probability of a qualifying event occurring, and a risk-free rate used to adjust the probability-weighted cash flows to their present value.

Subsequent to the acquisition date, at each reporting period, the earn-out liability is re-measured to fair value with changes in fair value included in general and administrative in the accompanying consolidated statements of operations.

On October 14, 2020 and December 7, 2020, as a result of certain qualifying events, the Special Distribution (see Note 15 - Related Party Transactions) shares sold in the IPO and follow on offering by the Former Parent, a payment of $ 9.1 million and $ 15.9 million was made to holders of the earn-out.

As a result of the payments there are no further obligations related to the Earn-out.

Subsequent to the Acquisition Date, at each reporting period, the earn-out liability was re-measured to fair value with changes in fair value recorded in contingent consideration in the accompanying consolidated statements of operations.

The following table summarizes the liability related to the estimated contingent consideration (in thousands):

Table of C ontent s

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

TRA Earn-Out Liability Contingent Consideration

Balance, December 31, 2018 $ 17,168 $ 442 $ 17,610

IRS Settlement ( 2,727 ) — ( 2,727 )

Fair value adjustment 3,367 — 3,367

7 unchanged sentences

The TRA and earn-out liabilities require significant judgment and are classified as Level 3 in the fair value hierarchy.

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

The Company provides surety bonds to various parties as required for certain transactions initiated during the ordinary course of business to guarantee the Company’s performance in accordance with contractual or legal obligations.

As of December 31, 2021, the maximum potential payment obligation with regard to surety bonds was $ 160.4 million.

Fair Value of Financial Instruments

The carrying values and the estimated fair values of debt financial instruments as of December 31 are as follows:

Carrying Value Fair Value Carrying Value Fair Value

Convertible senior notes $ 411,863 $ 410,771 $ — $ —

The carrying values of the Company's revolving credit facility recorded in long-term debt on the Balance Sheet approximate fair value due to the variable interest rate.

The fair value of the Convertible senior notes is estimated using Level 2 inputs as they are not registered securities nor listed on any securities exchange but may be traded by qualified institutional buyers.

Equity-Based Compensation

On October 14, 2020, the Company’s 2020 Equity Incentive Plan (the “2020 Plan”) became effective.

The 2020 Plan authorized 6,683,919 new shares, subject to adjustments pursuant to the 2020 Plan.

During the year ended December 31, 2021, the Company granted an aggregate of 661,924 restricted stock units (“RSUs”) to employees and board of director members and 177,472 Performance Stock Units (PSUs) to certain executives.

The fair value of the RSUs is determined using the market value of common stock on the grant date.

The PSUs cliff vest after three years and upon meeting certain revenue and adjusted EPS targets.

The PSUs also contain a modifier based on the total stock return (TSR) compared to a certain Index which modifies the number of PSUs that vest.

The PSUs were valued using a Monte-Carlo simulation method with a volatility assumption of 66 %, risk free interest rate of 0.28 % based on the United States Treasury Constant Maturity rates and no dividends paid assumption.

Based on results achieved in 2021 and the forecasted amounts over the remainder of the performance period, the Company does not expect the units to vest and therefore has recognized no expense in 2021.

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Activity under the 2020 Plan was as follows:

Number of Shares Weighted Average Grant Date Fair Value

Unvested, December 31, 2019 — —

Granted 500,006 $ 22.00

Forfeited — —

Unvested, December 31, 2020 500,006 $ 22.00

Granted 661,924 $ 23.17

Vested ( 157,473 ) $ 22.00

Forfeited ( 74,048 ) $ 27.51

Unvested, December 31, 2021 930,409 $ 22.39

Number of Shares Weighted Average Grant Date Fair Value

Unvested, December 31, 2020 — —

Granted 177,472 $ 28.25

Forfeited ( 29,785 ) 30.74

Unvested, December 31, 2021 147,687 $ 27.75

Class B Units and Class C Units of Former Parent

The Company accounts for equity grants to employees (Class B units and Class C units, “the Units”, of Former Parent) as equity-based compensation under ASC 718, Compensation-Stock Compensation .

The Company accounted for equity grants to employees (Class B units and Class C units, “the Units”, of Former Parent) as equity-based compensation under ASC 718, Compensation-Stock Compensation .

The Units contain vesting provisions as defined in the agreement.

8 unchanged sentences

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

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

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.

Table of C ontent s

On March 23, 2021, in connection with the closing of the 2021 Follow-on Offering, all of the outstanding Class B Units of Former Parent were immediately vested per the terms of the equity awards, resulting in the Company accelerating the recognition of expense of $ 8.9 million.

For the years ended December 31, 2021, 2020 and 2019, the Company recognized $ 16.3 million, $ 4.8 million and $ 0.8 million, respectively, in equity-based compensation.

At December 31, 2021, the Company had $ 16.8 million of unrecognized compensation costs related to RSU’s which is expected to be recognized over approximately 2.1 years.

There were 103,833 forfeitures during the year ended December 31, 2021, and no forfeitures during 2020 and 2019.

Effective January 1, 2021, the Company adopted ASC 842 Leases using the modified retrospective approach.

The Company elected the use of the package of practical expedients permitted under the transition guidance which allows the Company not to reassess whether a contract contains a lease, carry forward the historical lease classification and not reassess initial direct lease costs.

The Company also elected to apply the short-term measurement and recognition exemption in which the right-of-use (“ROU”) assets and lease liabilities are not recognized for short-term leases.

Adoption of this standard resulted in recording of net operating lease ROU assets and corresponding operating lease liabilities of $ 13.2 million and $ 13.5 million, respectively.

The standard did not materially affect the consolidated statements of income and had no impact on the consolidated statements of cash flows.

The following table summarizes the balances as it relates to leases at the end of the period (in thousands):

Location on the

consolidated balance sheet December 31, 2021

ROU Asset Other assets $ 11,245

Lease liability, current portion Other current liabilities $ 5,909

Lease liability, long-term portion Other long-term liabilities 5,359

Total lease liability $ 11,268

The Company determines if an arrangement is a lease at its inception.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

Operating lease ROU assets also include any initial direct costs and prepayments less lease incentives.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

As the Company’s leases generally do not provide an implicit rate, the Company uses its collateralized incremental borrowing rate based on the information available at the lease commencement date, including lease term, in determining the present value of lease payments.

Lease expense for these leases is recognized on a straight-line basis over the lease term.

Array Technologies, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

On October 14, 2020, the Company’s 2020 Equity Incentive Plan (the “2020 Plan”) became effective.

The 2020 Plan authorized 6,683,919 new shares, subject to adjustments pursuant to the 2020 Plan.

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.

Activity under the 2020 Plan was as follows:

Number of Shares Weighted Average Grant Date Fair Value

Unvested, December 31, 2019 — $ —

Granted 500,006 22.00

Forfeited — —

Unvested, December 31, 2020 500,006 $ 22.00

For the year 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 RSU’s which is expected to be recognized over approximately 3 years.

There were no forfeitures during 2020 or 2019.

Operating lease arrangements are comprised primarily of real estate and equipment agreements for which the right-of-use assets are included in other assets and the corresponding lease liabilities, depending on their maturity, are included in accrued liabilities or other long-term liabilities in the consolidated balance sheets.

The details of the Company’s operating leases are as follows (in thousands):

December 31, 2021

Operating lease expense $ 6,635

Variable lease expense 106

Short-term lease expense —

Total lease expense $ 6,741

The following table presents the maturities of lease liabilities as of December 31, 2021 (in thousands):

Operating Leases

Thereafter 3,197

Total lease payments 13,024

Imputed lease interest ( 1,756 )

Total lease liabilities $ 11,268

The following table represents future minimum lease obligations under non-cancelable operating leases as of December 31, 2020 (in thousands):

Operating Leases

Total $ 14,435

The Company’s weighted-average remaining lease-term and weighted-average discount rate are as follows:

December 31, 2021

Weighted average remaining lease-term 3.8 years

Weighted average discount rate 5 %

Supplemental cash flow and other information related to operating leases are as follows (in thousands):

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Operating cash flows from operating leases $ 6,644

Non cash investing activities:

Lease liabilities arising from obtaining right-of-use assets $ 17,363

Related Party Transactions

Accounts Payable-Related Party

The Company had $ 2.2 million and $ 5.9 million at December 31, 2020 and 2019, respectively, of accounts payable - related party with the former shareholders of Array and current unit holder of Former Parent.

The Company had $ 0.6 million and $ 2.2 million at December 31, 2021 and 2020, respectively, of accounts payable-related party with the former shareholders of Array.

The payables relate to a federal tax refund related to the pre-Acquisition periods, restricted cash at Acquisition Date which were due to the sellers of Array upon release of the restriction offset by a receivable related to a sales/use tax audit from the pre-Acquisition period for which the seller provided the Company with indemnification.

Special Distribution to Former Parent

On October 14, 2020, the Company issued a special distribution of $ 589 million to Former Parent (the “Special Distribution”).

Consent Fees-Related Party

1 unchanged sentence

The consent fee is included in accounts payable – related party and other expense, net in the accompanying consolidated financial statements at December 31, 2020.

Special Distribution to Former Parent

On October 14, 2020, the Company issued a special distribution of $ 589 million to Former Parent (the “Special Distribution”).

Related Party Loans - see Note 12

Table of C ontent s

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Contingent Consideration - see Note 16

6 unchanged sentences

Revenues within geographic areas based upon Customers’ project location (in thousands):

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Year Ended December 31,

3 unchanged sentences

Rest of the world 21,170 22,376 33,211

Total Revenues $ 872,662 $ 647,899 $ 290,783

Total Revenue $ 853,318 $ 872,662 $ 647,899

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Restatement (Unaudited)

Restatement of Previously Issued Unaudited Interim Condensed Consolidated Financial Statements

During the preparation of the consolidated financial statements as of and for the year ended December 31, 2021, the Company identified errors in the accounting for certain contracts under ASC 606.

Specifically, certain contracts were inappropriately combined with other contracts and ITC related contracts were determined to have multiple performance obligations satisfied at a point in time instead of one performance obligation satisfied over time.

The Company’s management and the audit committee of the Company’s Board of Directors concluded that it is appropriate to restate the quarterly unaudited condensed consolidated financial statements for the quarterly periods ended March 31, 2021, June 30, 2021 and September 30, 2021.

The following presents the restated quarterly unaudited financial statements as of March 31, 2021, June 30, 2021 and September 30, 2021, as well as the statements for the three month period ended March 31, 2021, the three and six month periods ended June 30, 2021 and the three and nine month periods ended September 30, 2021.

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2021

(in thousands, except per share and share amounts)

(unaudited) As Previously Reported Restatement Adjustments As Restated

Current assets

Cash and cash equivalents $ 19,133 $ 19,133

Accounts receivable, net 121,921 2,308 124,229

Inventories, net 124,705 124,705

Income tax receivables 4,155 4,155

Prepaid expenses and other 15,639 15,639

Total current assets 285,553 2,308 287,861

Property, plant and equipment, net 9,740 9,740

Goodwill 69,727 69,727

Other intangible assets, net 192,383 192,383

Other assets 25,873 25,873

Total assets $ 583,276 $ 2,308 $ 585,584

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

Accounts payable $ 71,823 $ 71,823

Accounts payable - related party 2,608 2,608

Accrued expenses and other 34,551 34,551

Accrued warranty reserve 3,098 3,098

Income tax payable 10,224 657 10,881

Deferred revenue 89,880 89,880

Current portion of contingent consideration 9,567 9,567

Current portion of term loan 4,300 4,300

Other current liabilities 6,288 6,288

Total current liabilities 232,339 657 232,996

Long-term liabilities

Deferred tax liability 13,043 ( 38 ) 13,005

Contingent consideration, net of current portion 10,272 10,272

Other long-term liabilities 6,055 6,055

Long-term debt, net of current portion, debt discount and issuance costs 391,682 391,682

Total long-term liabilities 421,052 ( 38 ) 421,014

Total liabilities 653,391 619 654,010

Commitments and contingencies (Note 12)

Preferred stock of 0.001 par value - 5,000,000 shares authorized;

none issued as of March 31, 2021

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Common stock of $ 0.001 par value - 1,000,000,000 shares authorized;

126,994,467 shares issued as of March 31, 2021

Additional paid-in capital 148,370 148,370

Accumulated deficit ( 218,612 ) 1,689 ( 216,923 )

Total stockholders’ deficit ( 70,115 ) 1,689 ( 68,426 )

Total liabilities and stockholders’ deficit $ 583,276 $ 2,308 $ 585,584

June 30, 2021

As Previously Reported Restatement Adjustments As Reported

Current assets

Cash and cash equivalents $ 17,682 $ 17,682

Accounts receivable, net 153,610 ( 3,972 ) 149,638

Inventories, net 137,666 137,666

Income tax receivables 9,657 ( 1,735 ) 7,922

Prepaid expenses and other 11,597 11,597

Total current assets 330,212 ( 5,707 ) 324,505

Property, plant and equipment, net 9,763 9,763

Goodwill 69,727 69,727

Other intangible assets, net 186,507 186,507

Other assets 26,109 26,109

Total assets $ 622,318 $ ( 5,707 ) $ 616,611

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

Accounts payable $ 81,377 81,377

Accounts payable - related party 610 610

Accrued expenses and other 19,129 19,129

Accrued warranty reserve 2,968 2,968

Income tax payable — —

Deferred revenue 51,458 51,458

Current portion of contingent consideration 1,908 1,908

Current portion of term loan 4,300 4,300

Other current liabilities 6,379 6,379

Total current liabilities 168,129 — 168,129

Long-term liabilities

Deferred tax liability 14,472 ( 1,896 ) 12,576

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Contingent consideration, net of current portion 10,108 10,108

Other long-term liabilities 4,273 4,273

Long-term debt, net of current portion, debt discount and issuance costs 493,945 493,945

Total long-term liabilities 522,798 ( 1,896 ) 520,902

Total liabilities 690,927 ( 1,896 ) 689,031

Commitments and contingencies (Note 12)

Preferred stock of 0.001 par value - 5,000,000 shares authorized;

none issued as of June 30, 2021

Common stock of $ 0.001 par value - 1,000,000,000 shares authorized;

126,994,467 shares issued as of June 30, 2021

Additional paid-in capital 149,893 149,893

Accumulated deficit ( 218,629 ) ( 3,811 ) ( 222,440 )

Total stockholders’ deficit ( 68,609 ) ( 3,811 ) ( 72,420 )

Total liabilities and stockholders’ deficit $ 622,318 $ ( 5,707 ) $ 616,611

September 30, 2021

As Previously Reported Restatement Adjustments As Restated

Current assets

Cash and cash equivalents $ 116,391 $ 116,391

Restricted cash — —

Accounts receivable, net 177,462 ( 7,354 ) 170,108

Inventories, net 173,126 173,126

Income tax receivables 6,453 1,029 7,482

Prepaid expenses and other 18,193 18,193

Total current assets 491,625 ( 6,325 ) 485,300

Property, plant and equipment, net 10,202 10,202

Goodwill 69,727 69,727

Other intangible assets, net 180,630 180,630

Other assets 24,405 24,405

Total assets $ 776,589 $ ( 6,325 ) $ 770,264

LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)

Current Liabilities

Accounts payable $ 84,703 84,703

Accounts payable - related party 610 610

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Accrued expenses and other 31,256 31,256

Accrued warranty reserve 3,025 3,025

Income tax payable 629 629

Deferred revenue 81,347 81,347

Current portion of contingent consideration 2,168 2,168

Current portion of term loan 4,300 4,300

Other current liabilities 6,457 6,457

Total current liabilities 214,495 — 214,495

Long-term liabilities

Deferred tax liability 6,583 ( 505 ) 6,078

Contingent consideration, net of current portion 10,784 10,784

Other long-term liabilities 2,953 2,953

Long-term debt, net of current portion, debt discount and issuance costs 299,212 299,212

Total long-term liabilities 319,532 ( 505 ) 319,027

Total liabilities 534,027 ( 505 ) 533,522

Commitments and contingencies (Note 13)

Series A Redeemable Perpetual Preferred Stock of $ 0.001 par value - 500,000 authorized;

350,000 issued as of September 30, 2021;

liquidation preference of $ 352.8 million at September 30, 2021

235,278 235,278

Stockholders’ equity/(deficit) —

Preferred stock of $ 0.001 par value - 4,500,000 shares authorized;

zero issued as of September 30, 2021

Common stock of $ 0.001 par value - 1,000,000,000 shares authorized;

134,869,467 shares issued as of September 30, 2021

Additional paid-in capital 251,330 251,330

Accumulated deficit ( 244,181 ) ( 5,820 ) ( 250,001 )

Total stockholders’ equity/(deficit) 7,284 ( 5,820 ) 1,464

Total liabilities, redeemable perpetual preferred stock and stockholders’ equity/(deficit) $ 776,589 $ ( 6,325 ) $ 770,264

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Three Months Ended

March 31, 2021

(in thousands, expect per share and share amounts)

As Previously Reported Restatement Adjustment As Restated

Revenue 245,932 $ 2,308 $ 248,240

Cost of revenue 202,074 202,074

Gross profit 43,858 2,308 46,166

Operating expenses

General and administrative 24,673 24,673

Contingent consideration 148 148

Depreciation and amortization 5,984 5,984

Total operating expenses 30,805 — 30,805

Income from operations 13,053 2,308 15,361

Other expense

Other expense, net ( 78 ) ( 78 )

Interest expense ( 9,009 ) ( 9,009 )

Total other expense ( 9,087 ) — ( 9,087 )

Income before income tax expense 3,966 2,308 6,274

Income tax expense 1,079 619 1,698

Net income $ 2,887 $ 1,689 $ 4,576

Earnings per share

Basic $ 0.02 $ 0.01 $ 0.04

Diluted $ 0.02 $ 0.01 $ 0.04

Weighted average number of shares

Basic 126,994 126,994 126,994

Diluted 127,298 127,298 127,298

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Three Months Ended

June 30, 2021

(in thousands, expect per share and share amounts)

As Previously Reported Restatement Adjustment As Restated

Revenue 202,796 $ ( 6,280 ) $ 196,516

Cost of revenue 176,009 176,009

Gross profit 26,787 ( 6,280 ) 20,507

Operating expenses

General and administrative 15,113 15,113

Contingent consideration ( 13 ) ( 13 )

Depreciation and amortization 5,981 5,981

Total operating expenses 21,081 — 21,081

Income (loss) from operations 5,706 ( 6,280 ) ( 574 )

Other expense

Other expense, net ( 122 ) ( 122 )

Interest expense ( 6,651 ) ( 6,651 )

Total other expense ( 6,773 ) — ( 6,773 )

Loss before income tax expense ( 1,067 ) ( 6,280 ) ( 7,347 )

Income tax benefit ( 1,050 ) ( 780 ) ( 1,830 )

Net loss $ ( 17 ) $ ( 5,500 ) $ ( 5,517 )

Loss per share

Basic $ — $ ( 0.04 ) $ ( 0.04 )

Diluted $ — $ ( 0.04 ) $ ( 0.04 )

Weighted average number of shares

Basic 126,994 126,994 126,994

Diluted 126,994 126,994 126,994

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Three Months Ended

September 30, 2021

(in thousands, expect per share and share amounts)

As Previously Reported Restatement Adjustments As Restated

Revenue $ 192,068 $ ( 3,382 ) $ 188,686

Cost of revenue 182,789 182,789

Gross profit 9,279 ( 3,382 ) 5,897

Operating expenses

General and administrative 18,493 18,493

Contingent consideration 936 936

Depreciation and amortization 5,984 5,984

Total operating expenses 25,413 — 25,413

Loss from operations ( 16,134 ) ( 3,382 ) ( 19,516 )

Other expense

Other expense, net ( 297 ) ( 297 )

Interest expense ( 13,109 ) ( 13,109 )

Total other expense ( 13,406 ) — ( 13,406 )

Loss before income tax benefit ( 29,540 ) ( 3,382 ) ( 32,922 )

Income tax benefit ( 3,988 ) ( 1,373 ) ( 5,361 )

Net loss $ ( 25,552 ) $ ( 2,009 ) $ ( 27,561 )

Preferred dividends and accretion ( 5,479 ) ( 5,479 )

Net loss to common shareholders $ ( 31,031 ) $ ( 2,009 ) $ ( 33,040 )

Loss per share

Basic $ ( 0.24 ) $ ( 0.02 ) $ ( 0.25 )

Diluted $ ( 0.24 ) $ ( 0.02 ) $ ( 0.25 )

Weighted average number of shares

Basic 130,955 130,955 130,955

Diluted 130,955 130,955 130,955

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Six Months Ended

June 30, 2021

(in thousands, expect per share and share amounts)

As Previously Reported Restatement Adjustments As Restated

Revenue $ 448,728 $ ( 3,972 ) $ 444,756

Cost of revenue 378,083 378,083

Gross profit 70,645 ( 3,972 ) 66,673

Operating expenses

General and administrative 39,786 39,786

Contingent consideration 135 135

Depreciation and amortization 11,965 11,965

Total operating expenses 51,886 — 51,886

Income (loss) from operations 18,759 ( 3,972 ) 14,787

Other expense

Other expense, net ( 200 ) ( 200 )

Interest expense ( 15,660 ) ( 15,660 )

Total other expense ( 15,860 ) — ( 15,860 )

Income (loss) before income tax expense 2,899 ( 3,972 ) ( 1,073 )

Income tax expense (benefit) 29 ( 161 ) ( 132 )

Net income (loss) $ 2,870 $ ( 3,811 ) $ ( 941 )

Earnings (loss) per share

Basic $ 0.02 $ ( 0.03 ) $ ( 0.01 )

Diluted $ 0.02 $ ( 0.03 ) $ ( 0.01 )

Weighted average number of shares

Basic 126,994 126,994 126,994

Diluted 127,203 127,203 127,203

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Nine Months Ended

September 30,

(in thousands, expect per share and share amounts)

As Previously Reported Restatement Adjustments As Restated

Revenue $ 640,796 $ ( 7,354 ) $ 633,442

Cost of revenue 560,872 560,872

Gross profit 79,924 ( 7,354 ) 72,570

Operating expenses

General and administrative 58,279 58,279

Contingent consideration 1,071 1,071

Depreciation and amortization 17,949 17,949

Total operating expenses 77,299 — 77,299

Income (loss) from operations 2,625 ( 7,354 ) ( 4,729 )

Other expense

Other expense, net ( 497 ) ( 497 )

Interest expense ( 28,769 ) ( 28,769 )

Total other expense ( 29,266 ) — ( 29,266 )

Loss before income tax benefit ( 26,641 ) ( 7,354 ) ( 33,995 )

Income tax benefit ( 3,959 ) ( 1,534 ) ( 5,493 )

Net loss $ ( 22,682 ) $ ( 5,820 ) $ ( 28,502 )

Preferred dividends and accretion ( 5,479 ) ( 5,479 )

Net loss to common shareholders $ ( 28,161 ) $ ( 5,820 ) $ ( 33,981 )

Loss per share

Basic $ ( 0.22 ) $ ( 0.05 ) $ ( 0.26 )

Diluted $ ( 0.22 ) $ ( 0.05 ) $ ( 0.26 )

Weighted average number of shares

Basic 128,315 128,315 128,315

Diluted 128,315 128,315 128,315

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Statement of Changes in Shareholders' Deficit- Three Months Ended March 31, 2021

(in thousands, share amounts)

Preferred Stock Common Stock Additional

As Previously Reported Shares Amount Shares Amount paid-in capital Retained earnings Total Stockholders’ Deficit

Balance, December 31, 2020 — $ — 126,994 $ 127 $ 140,473 $ ( 221,499 ) $ ( 80,899 )

Equity based compensation — — — — 7,897 — 7,897

Net Income — — — — — 2,887 2,887

Balance, March 31, 2021 — $ — 126,994 $ 127 $ 148,370 $ ( 218,612 ) $ ( 70,115 )

Balance, December 31, 2020 — $ — — $ — $ — $ — —

Net Income — — — — — 1,689 1,689

Total Adjustments — $ — — $ — $ — $ 1,689 1,689

Balance, December 31, 2020 — $ — 126,994 $ 127 $ 140,473 $ ( 221,499 ) $ ( 80,899 )

Equity based compensation — — — — 7,897 — 7,897

Net Income — — — — — 4,576 4,576

Balance, March 31, 2021 - As Restated — — 126,994 $ 127 $ 148,370 $ ( 216,923 ) $ ( 68,426 )

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Statement of Changes in Shareholders' Deficit- Three Months Ended June 30, 2021

(in thousands, share amounts)

Preferred Stock Common Stock Additional

As Previously Reported Shares Amount Shares Amount paid-in capital Retained earnings Total Stockholders’ Deficit

Balance, March 31, 2021 — $ — 126,994 127 148,370 ( 218,612 ) $ ( 70,115 )

Equity-based compensation — — — — 1,523 — 1,523

Net loss — — — — — ( 17 ) ( 17 )

Balance, June 30, 2021 — $ — 126,994 $ 127 $ 149,893 $ ( 218,629 ) $ ( 68,609 )

Balance, March 31, 2021 — $ — — $ — $ — $ 1,689 1,689

Net loss — — — — — ( 5,500 ) ( 5,500 )

Total Adjustments — $ — — $ — $ — $ ( 3,811 ) ( 3,811 )

Balance, March 31, 2021 — $ — 126,994 $ 127 $ 148,370 $ ( 216,923 ) $ ( 68,426 )

Equity based compensation — — — — 1,523 — 1,523

Net loss — — — — — ( 5,517 ) ( 5,517 )

Balance, June 30, 2021 - As Restated — — 126,994 $ 127 $ 149,893 $ ( 222,440 ) $ ( 72,420 )

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Statement of Changes in Shareholders' Equity/(Deficit) - Three Months Ended September 30, 2021

Temporary Equity Permanent Equity

(in thousands, share amounts)

Series A Redeemable Perpetual Preferred Stock Preferred Stock Common Stock Additional

As Previously Reported Shares Amount Shares Amount Shares Amount paid-in capital Retained earnings Total Stockholders’ Deficit

Balance, June 30, 2021 — $ — — $ — 126,994 127 149,893 ( 218,629 ) $ ( 68,609 )

Equity-based compensation — — — — — — 2,160 — 2,160

Issuance of Series A Preferred, net of fees 350 229,799 — — — — — — —

Issuance of common stock, net — — — — 7,875 8 104,756 — 104,764

Preferred cumulative dividends plus accretion — 5,479 — — — — ( 5,479 ) — ( 5,479 )

Net loss — — — — — — — ( 25,552 ) ( 25,552 )

Balance, September 30, 2021 350 235,278 — $ — 134,869 $ 135 $ 251,330 $ ( 244,181 ) $ 7,284

Balance, June 30, 2021 — — — $ — — $ — $ — $ ( 3,811 ) ( 3,811 )

Net loss — — — — — — — ( 2,009 ) ( 2,009 )

Total Adjustments — — — $ — — $ — $ — $ ( 5,820 ) ( 5,820 )

Balance, June 30, 2021 — — — $ — 126,994 $ 127 $ 149,893 $ ( 222,440 ) $ ( 72,420 )

Equity based compensation — — — — — — 2,160 — 2,160

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Issuance of Series A Preferred, net of fees 350 229,799 — — — — — — —

Issuance of common stock, net — — — — 7,875 8 104,756 — 104,764

Preferred cumulative dividends plus accretion — 5,479 — — — — ( 5,479 ) — ( 5,479 )

Net loss — — — — — — — ( 27,561 ) ( 27,561 )

Balance, September 30, 2021 - As Restated 350 235,278 — — 134,869 $ — $ 251,330 $ ( 250,001 ) $ 1,464

Statement of Changes in Shareholders' Deficit- Six Months Ended June 30, 2021

(in thousands, share amounts)

Preferred Stock Common Stock Additional

As Previously Reported Shares Amount Shares Amount paid-in capital Retained earnings Total Stockholders’ Deficit

Balance, December 31, 2020 — $ — 126,994 $ 127 $ 140,473 $ ( 221,499 ) $ ( 80,899 )

Equity-based compensation — — — — 9,420 — 9,420

Net loss — — — — — 2,870 2,870

Balance, June 30, 2021 — $ — 126,994 $ 127 $ 149,893 $ ( 218,629 ) $ ( 68,609 )

Balance, December 31, 2020 — $ — — $ — $ — $ — $ —

Net loss — — — — — ( 3,811 ) ( 3,811 )

Total Adjustments — $ — — $ — $ — $ ( 3,811 ) $ ( 3,811 )

Balance, December 31, 2020 — $ — 126,994 $ 127 $ 140,473 $ ( 221,499 ) $ ( 80,899 )

Equity based compensation — — — — 9,420 — 9,420

Net loss — — — — — ( 941 ) ( 941 )

Balance, June 30, 2021 - As Restated — — 126,994 $ 127 $ 149,893 $ ( 222,440 ) $ ( 72,420 )

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Statement of Changes in Shareholders' Equity/(Deficit) - Nine Months Ended September 30, 2021

Temporary Equity Permanent Equity

(in thousands, share amounts)

Series A Redeemable Perpetual Preferred Stock Preferred Stock Common Stock Additional

As Previously Reported Shares Amount Shares Amount Shares Amount paid-in capital Retained earnings Total Stockholders’ Deficit

Balance, December 31, 2020 — $ — — $ — 126,994 127 140,473 $ ( 221,499 ) $ ( 80,899 )

Equity-based compensation — — — — — — 11,580 — 11,580

Issuance of Series A Preferred, net of fees 350 229,799 — — — — — — —

Issuance of common stock, net — — — — 7,875 8 104,756 — 104,764

Preferred cumulative dividends plus accretion — 5,479 — — — — ( 5,479 ) — ( 5,479 )

Net loss — — — — — — — ( 22,682 ) ( 22,682 )

Balance, September 30, 2021 350 235,278 — $ — 134,869 $ 135 $ 251,330 $ ( 244,181 ) $ 7,284

Balance, December 31, 2020 — — — $ — — $ — $ — $ — $ —

Net loss — — — — — — — ( 5,820 ) ( 5,820 )

Total Adjustments — — — $ — — $ — $ — $ ( 5,820 ) $ ( 5,820 )

Balance, December 31, 2020 — — — $ — 126,994 $ 127 $ 140,473 $ ( 221,499 ) $ ( 80,899 )

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Equity based compensation — — — — — — 11,580 — 11,580

Issuance of Series A Preferred, net of fees 350 229,799 — — — — — — —

Issuance of common stock, net — — — — 7,875 8 104,756 — 104,764

Preferred cumulative dividends plus accretion — 5,479 — — — — ( 5,479 ) — ( 5,479 )

Net loss — — — — — — — ( 28,502 ) ( 28,502 )

Balance, September 30, 2021 - As Restated 350 235,278 — — 134,869 $ — $ 251,330 $ ( 250,001 ) $ — $ 1,464

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Statement of Cash Flows

Three Months Ended

March 31, 2021

(in thousands)

As Previously Reported Restatement Adjustments As Restated

Cash flows used in operating activities

Net income $ 2,887 $ 1,689 $ 4,576

Adjustments to reconcile net income to net cash used in operating activities:

Recovery of bad debts ( 535 ) ( 535 )

Deferred tax benefit ( 71 ) ( 38 ) ( 109 )

Depreciation and amortization 6,481 6,481

Amortization of debt discount and issuance costs 3,586 3,586

Interest paid-in-kind — —

Equity-based compensation 7,911 7,911

Contingent consideration 148 148

Warranty provision 302 302

Changes in operating assets and liabilities —

Accounts receivable ( 2,692 ) ( 2,308 ) ( 5,000 )

Inventories ( 6,246 ) ( 6,246 )

Income tax receivables 13,003 13,003

Prepaid expenses and other ( 3,216 ) ( 3,216 )

Accounts payable ( 10,556 ) ( 10,556 )

Accounts payable - related party — —

Accrued expenses and other 5,134 5,134

Income tax payable 1,410 657 2,067

Lease liabilities 247 247

Deferred revenue ( 59,941 ) — ( 59,941 )

Net cash used in operating activities ( 42,148 ) — ( 42,148 )

Cash flows used in investing activities

Purchase of property, plant and equipment ( 570 ) ( 570 )

Investment in equity security ( 10,000 ) ( 10,000 )

Net cash used in investing activities ( 10,570 ) — ( 10,570 )

Cash flows used in financing activities

Proceeds from revolving credit facility —

Principal payments on term loan facility ( 30,000 ) ( 30,000 )

Debt issuance costs ( 6,590 ) ( 6,590 )

Net cash used in financing activities ( 36,590 ) — ( 36,590 )

Net decrease in cash, cash equivalents and restricted cash ( 89,308 ) — ( 89,308 )

Cash, cash equivalents and restricted cash, beginning of period 108,441 108,441

Cash, cash equivalents, and restricted cash, end of period $ 19,133 $ — $ 19,133

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Statement of Cash Flows

Six Months Ended

(in thousands)

As Previously Reported Restatement Adjustments As Restated

Cash flows used in operating activities

Net income $ 2,870 $ ( 3,811 ) $ ( 941 )

Adjustments to reconcile net income to net cash used in operating activities:

Recovery of bad debts ( 551 ) ( 551 )

Deferred tax benefit 1,358 ( 1,896 ) ( 538 )

Depreciation and amortization 12,964 12,964

Amortization of debt discount and issuance costs 5,118 5,118

Interest paid-in-kind — —

Equity-based compensation 9,467 9,467

Contingent consideration 135 135

Warranty provision 425 425

Provision for inventory obsolescence 1,236 1,236

Changes in operating assets and liabilities —

Accounts receivable ( 34,365 ) 3,972 ( 30,393 )

Inventories ( 20,443 ) ( 20,443 )

Income tax receivables 7,501 1,735 9,236

Prepaid expenses and other 826 826

Accounts payable ( 1,378 ) ( 1,378 )

Accounts payable - related party ( 1,622 ) ( 1,622 )

Accrued expenses and other ( 10,541 ) ( 10,541 )

Income tax payable ( 8,814 ) ( 8,814 )

Lease liabilities 68 68

Deferred revenue ( 98,363 ) — ( 98,363 )

Net cash used in operating activities ( 134,109 ) — ( 134,109 )

Cash flows used in investing activities

Purchase of property, plant and equipment ( 1,200 ) ( 1,200 )

Investment in equity security ( 11,975 ) — ( 11,975 )

Net cash used in investing activities ( 13,175 ) — ( 13,175 )

Cash flows from financing activities

Proceeds from revolving credit facility 102,000 102,000

Principal payments on term loan facility ( 31,075 ) ( 31,075 )

Payments on related party loans — —

Contingent consideration ( 7,810 ) — ( 7,810 )

Debt issuance costs ( 6,590 ) — ( 6,590 )

Net cash provided by financing activities 56,525 — 56,525

Net decrease in cash, cash equivalents and restricted cash ( 90,759 ) — ( 90,759 )

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Cash, cash equivalents and restricted cash, beginning of period 108,441 108,441

Cash, cash equivalents, and restricted cash, end of period $ 17,682 $ — $ 17,682

Statement of Cash Flows

Nine Months Ended

September 30,

(in thousands)

As Previously Reported Restatement Adjustments As Restated

Cash flows used in operating activities

Net loss $ ( 22,682 ) $ ( 5,820 ) $ ( 28,502 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Recovery of bad debts ( 574 ) ( 574 )

Deferred tax benefit ( 6,531 ) ( 505 ) ( 7,036 )

Depreciation and amortization 19,454 19,454

Amortization of debt discount and issuance costs 13,653 13,653

Interest paid-in-kind — —

Equity-based compensation 11,706 11,706

Contingent consideration 1,071 1,071

Warranty provision 305 305

Provision for inventory obsolescence 654 654

Changes in operating assets and liabilities —

Accounts receivable ( 58,194 ) 7,354 ( 50,840 )

Inventories ( 55,321 ) ( 55,321 )

Income tax receivables 10,705 ( 1,029 ) 9,676

Prepaid expenses and other ( 5,770 ) ( 5,770 )

Accounts payable 1,948 1,948

Accounts payable - related party ( 1,622 ) ( 1,622 )

Accrued expenses and other 1,683 1,683

Income tax payable ( 8,185 ) ( 8,185 )

Lease liabilities 337 337

Deferred revenue ( 68,474 ) — ( 68,474 )

Net cash used in operating activities ( 165,837 ) — ( 165,837 )

Cash flows used in investing activities

Purchase of property, plant and equipment ( 2,252 ) ( 2,252 )

Investment in equity security ( 11,975 ) ( 11,975 )

Net cash used in investing activities ( 14,227 ) — ( 14,227 )

Cash flows from financing activities

Proceeds from revolving credit facility 102,000 102,000

Principal payments on term loan facility ( 132,150 ) ( 132,150 )

Proceeds from Series A issuance 224,987 224,987

Proceeds from common stock issuance 120,645 120,645

Series A equity issuance costs ( 7,195 ) ( 7,195 )

Array Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Common stock issuance costs ( 3,873 ) ( 3,873 )

Payments on revolving credit facility ( 102,000 ) ( 102,000 )

Payments on related party loans — —

Contingent consideration ( 7,810 ) ( 7,810 )

Deferred offering costs — —

Debt issuance costs ( 6,590 ) — ( 6,590 )

Net cash provided by financing activities 188,014 — 188,014

Net change in cash and cash equivalents 7,950 — 7,950

Cash and cash equivalents, beginning of period 108,441 108,441

Cash and cash equivalents, end of period $ 116,391 $ — $ 116,391

Subsequent Events

On February 26, 2021, the Company executed that certain incremental facility amendment No.

2 (the “Second Amendment”) to its Senior Secured Credit Facility entered into on October 14, 2020.

The Second Amendment increases the revolving credit commitments under the original Senior Credit Facility by $ 50.0 million from $ 150.0 million to $ 200.0 million.

STI Acquisition

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 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 determining 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).

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

The acquisition of STI will provide the Company with an immediate presence in Brazil as well as Western Europe.

Transaction expenses incurred in connection with the acquisition are estimated to be $ 5.3 million.

Series A Redeemable Preferred Issuance

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 .

Employee Stock Purchase Plan

The Company’s Compensation Committee approved the Employee Stock Purchase Plan in December 2021.

The Plan allows employees to purchase shares at 15 % off the lower of the stock price at the beginning or ending of the six months window through payroll deductions.

The plan is considered compensatory in nature and the Company will record stock compensation expense on the plan beginning in 2022.

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 9A. Controls and Procedures