What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-10 compared with 2021-11-12 · 369 added, 338 removed, 292 unchanged (71% of the section changed)

2 unchanged sentences

and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

Condensed Consolidated Balance Sheets

(in thousands, except per share and share amounts)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Current assets

8 unchanged sentences

Other intangible assets, net 470,690 174,753

Deferred tax assets — 9,345

Other assets 31,314 26,429

9 unchanged sentences

Current portion of contingent consideration — 1,773

Current portion of term loan 4,300 4,313

Current portion of debt 48,180 4,300

Other current liabilities 10,886 5,909

4 unchanged sentences

Other long-term liabilities 7,102 5,557

Long-term debt, net of current portion, debt discount and issuance costs 299,212 423,970

Long-term warranty 4,743 —

Long-term debt, net of current portion 778,248 711,056

Total long-term liabilities 892,387 729,417

Array Technologies, Inc.

and Subsidiaries

Condensed Consolidated Balance Sheets (continued)

(in thousands, except per share and share amounts)

March 31, 2022 December 31, 2021

Total liabilities 1,325,511 974,722

Commitments and contingencies (Note 16)

September 30, 2021 December 31, 2020

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

350,000 and none issued as of September 30, 2021 and December 31, 2020;

liquidation preference of $ 352.8 million and zero at September 30, 2021 and December 31, 2020

400,000 and 350,000 shares issued as of March 31, 2022 and December 31, 2021;

liquidation preference of $ 400.0 million and $ 350.0 million as of March 31, 2022 and December 31, 2021

281,792 237,462

Stockholders’ equity (deficit)

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

zero issued as of September 30, 2021 and December 31, 2020

none issued as of March 31, 2022 and December 31, 2021

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

134,869,467 and 126,994,467 shares issued as of September 30, 2021 and December 31, 2020

150,173,507 and 135,026,940 shares issued as of March 31, 2022 and December 31, 2021

Additional paid-in capital 411,232 202,562

Accumulated deficit ( 293,956 ) ( 271,902 )

Accumulated other comprehensive income ( 9,011 ) —

Total stockholders’ equity (deficit) 108,415 ( 69,205 )

6 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Revenue $ 300,586 $ 248,240

8 unchanged sentences

Other expense

Other expense, net ( 297 ) ( 29 ) ( 497 ) ( 2,163 )

Other income (expense), net 743 ( 78 )

Foreign currency gain 3,863 —

Interest expense ( 6,942 ) ( 9,009 )

14 unchanged sentences

and Subsidiaries

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

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)

(in thousands)

For the Three Months Ended September 30, 2021

Temporary Equity Permanent Equity

Series A Redeemable Perpetual Preferred Stock Preferred Stock Common Stock

Shares Amount Shares Amount Shares Amount Additional paid-in capital Accumulated deficit Total Stockholders’ Equity/(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

For the Three Months Ended September 30, 2020

Units (*) Total Members’ Equity

Balance, June 30, 2020 1 $ 383,639

Equity-based compensation — 853

Net loss — ( 7,232 )

Balance, September 30, 2020 1 $ 377,260

(*) See note 2 - Summary of Significant Accounting Policies - corporate conversion and stock split.

Three Months Ended

Net income (loss) $ ( 22,054 ) $ 4,576

Foreign currency translation adjustments ( 9,011 ) —

Comprehensive income (loss) $ ( 31,065 ) $ 4,576

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

Array Technologies, Inc.

and Subsidiaries

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

Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands)

For the Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Temporary Equity Permanent Equity

Series A Redeemable Perpetual Preferred Stock Preferred Stock Common Stock

Shares Amount Shares Amount Shares Amount Additional paid-in capital Accumulated deficit Total Stockholders’ Equity/(Deficit)

Shares Amount Shares Amount Shares Amount Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders’ Equity (Deficit)

Balance, December 31, 2021 350 $ 237,462 — $ — 135,027 $ 135 $ 202,562 $ ( 271,902 ) $ — $ ( 69,205 )

Equity-based compensation — — — — — — 4,413 — — 4,413

Issuance of Series A Redeemable Perpetual Preferred Stock, net of fees 50 32,724 — — — — ( 200 ) — — ( 200 )

Issuance of common stock, net — — — — 15,147 15 216,063 — — 216,078

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

Preferred cumulative dividends plus accretion — 11,606 — — — — ( 11,606 ) — — ( 11,606 )

Net loss — — — — — — — ( 22,054 ) — ( 22,054 )

Balance, September 30, 2021 350 $ 235,278 — $ — 134,869 $ 135 $ 251,330 $ ( 244,181 ) $ 7,284

For the Nine Months Ended September 30, 2020

Units (*) Total Members’ Equity

Other comprehensive income — — — — — — — — ( 9,011 ) ( 9,011 )

Balance, March 31, 2022 400 $ 281,792 — $ — 150,174 $ 150 $ 411,232 $ ( 293,956 ) $ ( 9,011 ) $ 108,415

Array Technologies, Inc.

and Subsidiaries

Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands)

Three Months Ended March 31, 2021

Preferred Stock Common Stock

Shares Amount Shares Amount Additional paid-in capital Accumulated deficit Total Stockholders’ Equity (Deficit)

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

1 unchanged sentence

Net income — — — — — 4,576 4,576

Balance, September 30, 2020 1 $ 377,260

(*) See note 2 - Summary of Significant Accounting Policies - corporate conversion and stock split.

Balance, March 31, 2021 — $ — 126,994 $ 127 $ 148,370 $ ( 216,923 ) $ ( 68,426 )

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

3 unchanged sentences

(in thousands)

Nine Months Ended

September 30,

Cash flows used in operating activities

Three Months Ended

Cash flows from operating activities

Net income (loss) $ ( 22,054 ) $ 4,576

1 unchanged sentence

Provision for (recovery of) bad debts 145 ( 535 )

Deferred tax benefit ( 6,531 ) ( 3,666 )

Deferred tax benefit (expense) 6,649 ( 109 )

Depreciation and amortization 23,023 6,481

Amortization of debt discount and issuance costs 1,710 3,586

Interest paid-in-kind — 3,421

Equity-based compensation 4,508 7,911

2 unchanged sentences

Provision for inventory obsolescence 409 —

Changes in operating assets and liabilities

Changes in operating assets and liabilities, net of business acquisition

Accounts receivable ( 44,268 ) ( 5,000 )

9 unchanged sentences

Net cash used in operating activities ( 50,097 ) ( 42,148 )

Cash flows used in investing activities

Cash flows from investing activities

Purchase of property, plant and equipment ( 2,357 ) ( 570 )

Acquisition of STI, net of cash acquired ( 373,816 ) —

Investment in equity security — ( 10,000 )

1 unchanged sentence

Cash flows from financing activities

Proceeds from revolving credit facility 102,000 32

Principal payments on term loan facility ( 132,150 ) ( 57,702 )

Proceeds from Series A issuance 33,098 —

2 unchanged sentences

Common stock issuance costs ( 450 ) —

Payments on revolving credit facility ( 102,000 ) —

Payments on related party loans — ( 45,558 )

Proceeds from revolving credit facility 52,000 —

Proceeds from issuance of other debt 6,229 —

Principal payments on debt ( 4,368 ) ( 30,000 )

Contingent consideration ( 1,483 ) —

Deferred offering costs — ( 3,775 )

Debt issuance costs — ( 6,590 )

Array Technologies, Inc.

and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited) (continued)

(in thousands)

Three Months Ended

Net cash provided by (used in) financing activities 100,736 ( 36,590 )

Effect of exchange rate changes on cash and cash equivalent balances 7,355 —

Net change in cash and cash equivalents ( 318,179 ) ( 89,308 )

1 unchanged sentence

Cash and cash equivalents, end of period $ 49,491 $ 19,133

Supplemental Cash Flow Information

Stock consideration paid for acquisition of STI $ 200,224 $ —

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

7 unchanged sentences

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 subsidiary, ATI Investment Holdings, Inc.

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

Array Tech, Inc.

(collectively “AT”).

The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.

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

(“ATI Investment”) owns subsidiaries through which it conducts substantially all operations.

Acquisition of STI

On January 11, 2022, the Company acquired 100 % of the share capital of Soluciones Tecnicas Integrales Norland, S.L.

a Spanish private limited liability Company, and its subsidiaries (collectively “STI”) with cash and common stock of the Company.

The acquisition was accounted for as a business combination.

See Note 3 – Acquisition of STI .

Summary of Significant Accounting Policies

Basis of Accounting and Presentation

The accompanying condensed consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of results for the interim periods reported.

The results for the three and nine months ended September 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021 or any other interim periods, or any future year or period.

The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022 or any other interim periods, or any future year or period.

The balance sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date.

Certain disclosures have been condensed or omitted from the interim financial statements.

These financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on March 10, 2021.

Reclassifications

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

Summary of Significant Accounting Policies

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.

Corporate Conversion and Stock Split

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.

The corporate conversion and stock split representing 119,994,467 shares of common stock have been adjusted retroactively for the purposes of calculating basic and diluted earnings per share.

These financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on April 6, 2022.

Principles of Consolidation

3 unchanged sentences

Use of Estimates

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

The preparation of 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 condensed 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, allowance for doubtful accounts, 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.

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.

Actual results may differ from previously estimated amounts, and such differences may be material to the condensed consolidated financial statements;

2 unchanged sentences

Impact of COVID-19 Pandemic

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

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

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

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

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

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.

We have sufficient

liquidity and financing options available, and we expect to have sufficient liquidity to operate for the next 12 months.

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, such a draw would increase the Company’s dividend obligations and outstanding common stock and failure to draw the delayed commitments will result in interest expense payable by the company.

See Note 13 – Redeemable Perpetual Preferred .

The Revolving Credit Facility has $ 114.8 million of availability;

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

1 unchanged sentence

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.

Equity-Based Compensation

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

Under the 2020 Plan, the Company may grant (i) restricted stock units (RSU’s) to its employees and non-employee directors in connection with their service on the board of directors, and (ii) performance stock units (“PSUs”) to certain of its executive officers and members of management.

The PSUs contain performance and market conditions.

The RSUs are valued at the closing stock price on the date of grant and recognized on a straight-line basis over vesting term.

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

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

The Company accounts for forfeitures as they occur.

In the case of Class B units (the “Class B Units”) and Class C units (the “Class C Units” and, together with the Class B Units, the “Units”) of Former Parent granted to certain employees and directors of the Company, the determination of the fair value of equity awards issued to employees of the Company was based upon the underlying share price and a number of assumptions, including volatility, performance period, risk-free interest rate and expected dividends.

The Class B Units fully vested upon the completion of the Company’s follow-on offering of its common stock in March 2021 (the “2021 Follow-on Offering”) as it was considered a sale of Former Parent and the Company recognized expense of $ 8.9 million.

Temporary Equity

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

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

The Series A Redeemable Preferred Stock issued in connection with the Securities Purchase Agreement as described in Note 9 is classified as temporary equity in the accompanying condensed 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 condensed consolidated statements of changes in equity and treated similarly to a dividend on preferred stock for GAAP purposes.

New Accounting Standards

To be adopted

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 is effective for EGCs for the fiscal year beginning after December 15, 2022, or December 15, 2021 if we were to lose EGC 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.

Business Combinations

The Company accounts for its business acquisitions under the acquisition method of accounting in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 805 Business Combinations (“ASC 805”).

The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and

assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives, and market multiples, amongst other items.

Foreign Currency Translation

subsidiaries that operate in a local currency environment, assets and liabilities are translated into the U.S.

dollar at period end exchange rates.

Income, expense and cash flow items are translated at average exchange rates prevailing during the period.

Translation adjustments for these subsidiaries are accumulated as a separate component of accumulated other comprehensive income in equity.

subsidiaries that use a U.S.

dollar functional currency, local currency inventories and property, plant and equipment are translated into U.S.

dollars at rates prevailing when acquired, and all other assets and liabilities are translated at period end exchange rates.

Inventories charged to cost of sales and depreciation are remeasured at historical rates, and all other income and expense items are translated at average exchange rates prevailing during the period.

Gains and losses which result from remeasurement are included in earnings.

Recent Accounting Pronouncements

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ ASU 2021-08”).

ASU 2021-08 requires the company acquiring contract assets and contract liabilities obtained in a business combination to recognize and measure them in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ ASC 606”).

At the Acquisition Date, the company acquiring the business should record related revenue, as if it had originated the contract.

Before the recent update, such amounts were recognized by the acquiring company at fair value.

The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued.

The Company early adopted ASU 2021-08 as of January 1, 2022.

See Note 3 – Acquisition of STI for further information and disclosures related to the STI Acquisition.

Acquisition of STI

On January 11, 2022 (the “Closing Date”) the Company completed the acquisition of 100 % of the share capital of STI (the “STI Acquisition”).

The STI Acquisition was funded primarily with borrowings from Senior unsecured convertible notes and the issuance of Series A Redeemable Perpetual Preferred Stock.

The STI Acquisition provided the Company with an immediate presence in Brazil and Western Europe.

Transaction expenses incurred in connection with the acquisition are $ 5.6 million recorded in the General and administrative line item on the condensed consolidated statement of operations for the three months ended March 31, 2022.

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

The fair value of the purchase consideration was $ 610.8 million and resulted in the Company owning 100 % of the interests in STI.

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

The purchase price consideration to acquire STI consisted of the following:

Cash consideration for STI $ 409,647

Cash consideration for transaction expenses of STI 896

Total cash consideration 410,543

Non-cash equity consideration 200,224

Total consideration transferred 610,767

Total purchase price consideration $ 610,767

The STI Acquisition was accounted for as a business combination applying ASC 805.

The equity consideration transferred consisted of the Company’s common stock and was measured at fair value based on the closing stock price on the date the STI Acquisition was consummated (the “Acquisition Date”).

The purchase price was allocated to the assets acquired and liabilities assumed based on management’s estimate of the respective fair values at the Acquisition Date.

Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

The factors contributing to the recognition of goodwill were the expected synergies of the combined entities that are expected to be realized from the STI Acquisition.

None of the goodwill is expected to be deductible for income tax purposes.

The following table summarizes the preliminary estimates of fair values of the assets acquired and liabilities assumed as of the Acquisition Date:

Preliminary fair value of net assets acquired and liabilities assumed:

Acquisition Date

Cash and cash equivalents $ 36,725

Accounts receivable 110,789

Inventories 47,517

Prepaid expenses and other 23,399

Property, plant and equipment 4,434

Other intangible assets 318,365

Other assets 325

Total assets acquired $ 541,554

Accounts payable 65,761

Deferred revenue 20,345

Short-term debt 44,338

Other liabilities 10,115

Income tax payable 7,576

Deferred tax liability 93,823

Other long-term liabilities 4,524

Long-term debt 12,053

Total liabilities assumed $ 258,535

Preliminary fair value of net assets acquired 283,019

Preliminary allocation to goodwill $ 327,768

The preliminary purchase price allocation was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement period (defined as the twelve months following the Acquisition Date).

The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the valuation of identifiable intangible assets acquired, the fair value of certain tangible assets acquired and liabilities assumed as well as the tax impact.

The Company expects to continue to obtain information for the purpose of determining the fair value of the assets acquired and liabilities assumed on the Acquisition Date throughout the remainder of the measurement period.

The purchase price allocation is subject to further adjustment until all pertinent information regarding the assets acquired is fully evaluated by the Company, including but not limited to, the fair value accounting.

The preliminary purchase price allocation includes $ 318.4 million of acquired identifiable intangible assets.

Estimated Fair Value

(in USD) Estimated Weighted Average Useful Life in Years

(in thousands, except useful lives)

Backlog $ 51,165 1

Customer relationships 238,770 10

Trade name 28,430 20

Total $ 318,365

The preliminary fair value of the identifiable intangible assets has been estimated using the Excess Earnings Method (Customer relationships and Backlog) and Relief from Royalty Method (Trade name).

The intangible assets are being amortized over their estimated useful lives on a straight-line basis that reflects the economic benefit of the asset.

The determination of the useful lives is based upon various industry studies, historical acquisition experience, economic factors, and future forecasted cash flows of the Company following the STI Acquisition.

The amounts of revenue and net loss of STI included in the Company’s consolidated statement of operations from the Acquisition Date of January 11, 2022 through March 31, 2022 are $ 49.9 million and a loss of $ 0.8 million, respectively.

Pro Forma Financial Information (Unaudited)

The following unaudited pro forma financial information presents the combined results of operations of the Company and STI as if the acquisition had occurred on January 1, 2021, after giving effect to certain unaudited pro forma adjustments.

The unaudited pro forma adjustments reflected herein include only those adjustments that are directly attributable to the STI Acquisition and factually supportable.

The unaudited pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the STI Acquisition and is not necessarily indicative of the operating results that would have actually occurred had the STI Acquisition been consummated on January 1, 2022.

These results are prepared in accordance with U.S.

Three Months Ended March 31,

$ 308,936 $ 273,803

$ ( 23,562 ) $ ( 12,283 )

Accounts Receivable

Accounts receivable consists of the following (in thousands):

March 31, 2022 December 31, 2021

Accounts receivable $ 391,196 $ 236,149

allowance for doubtful accounts ( 275 ) ( 140 )

Accounts receivable, net $ 390,921 $ 236,009

Inventories consist of the following (in thousands):

September 30, December 31,

March 31, 2022 December 31, 2021

Raw materials $ 155,561 $ 85,470

4 unchanged sentences

Property, plant and equipment consisted of the following (in thousands):

Estimated Useful Lives (Years) September 30, December 31,

Estimated Useful Lives (Years) March 31, 2022 December 31, 2021

Land N/A $ 1,567 $ 1,340

4 unchanged sentences

Hardware and software 3 - 5

Machinery in progress 951 —

Assets in progress 3,576 1,880

Total 28,774 21,915

1 unchanged sentence

Property, plant and equipment, net $ 16,878 $ 10,692

Depreciation expense was $ 0.6 million and $ 0.6 million for the three months ended September 30, 2021 and 2020, respectively, of which $ 0.5 million and $ 0.5 million, respectively, has been allocated to cost of revenue and $ 0.1 million and $ 0.1 million, respectively, is included in depreciation and amortization in the accompanying condensed consolidated statements of operations for the three months ended September 30, 2021 and 2020.

Depreciation expense was $ 1.8 million and $ 1.8 million for the nine months ended September 30, 2021 and 2020, respectively, of which $ 1.5 million and $ 1.5 million, respectively, has been allocated to cost of revenue and $ 0.3 million and $ 0.3 million, respectively, is included in depreciation and amortization in the accompanying consolidated statements of operations for the nine months ended September 30, 2021 and 2020.

Depreciation expense was $ 0.6 million and $ 0.6 million for the three months ended March 31, 2022 and 2021, respectively, of which $ 0.5 million and $ 0.5 million, respectively, was allocated to cost of revenue and $ 0.1 million and $ 0.1 million, respectively, was included in depreciation and amortization in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021.

Goodwill and Other Intangible Assets

Goodwill relates to Former Parent’s acquisition of AT (the “Acquisition”) in 2016.

As of July 8, 2016 (the “Acquisition Date”), goodwill was $ 121.6 million.

As of September 30, 2021 and December 31, 2020 goodwill totaled $ 69.7 million, net of accumulated impairment of $ 51.9 million and is not deductible for tax purposes.

Prior to the STI Acquisition, goodwill related to Former Parent’s acquisition of the Company.

At the Acquisition Date, goodwill was recorded as $ 121.6 million and was subsequently impaired.

Total accumulated impairment as of March 31, 2022 was $ 51.9 million.

During 2022, the Company recorded an additional $ 327.8 million of goodwill as a result of the STI Acquisition.

As of March 31, 2022 and December 31, 2021 goodwill totaled $ 379.8 million and $ 69.7 million, net of

accumulated impairment of $ 51.9 million and is not deductible for tax purposes.

Changes in the carrying amount of goodwill during the three months ended March 31, 2022 are shown below (in thousands):

Goodwill as of March 31, 2022

Beginning Balance

Acquisition of STI

Foreign currency impact ( 17,655 )

Ending Balance

Other Intangible Assets

Other intangible assets consisted of the following (in thousands):

Estimated Useful Lives (Years) September 30, December 31,

Estimated Useful Lives (Years) March 31, 2022 December 31, 2021

Developed technology 14 $ 203,800 $ 203,800

Customer relationships 10 328,270 89,500

Internal-use software modification 2.5 4,356 4,356

Backlog 1 51,165 —

Trade name 20 28,430 —

Total amortizable intangibles 611,665 293,300

2 unchanged sentences

Customer relationships 56,254 49,057

Internal-use software modification costs 4,356 4,356

Backlog 11,278 —

Trade name 313 —

Total accumulated amortization 151,275 128,847

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Total other intangible assets, net $ 470,690 $ 174,753

Amortization expense related to intangible assets amounted to $ 5.9 million for the three months ended September 30, 2021 and 2020, and $ 17.6 million for the nine months ended September 30, 2021 and 2020, respectively.

Amortization expense related to intangible assets amounted to $ 22.5 million and $ 5.9 million for the three months ended March 31, 2022 and 2021.

Estimated future annual amortization expense for the above amortizable intangible assets for the remaining periods through March 31, as follows (in thousands):

2022 $ 75,291

Thereafter 192,672

Investment in Equity Security

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 September 30, 2021 is $ 12.0 million and is recorded in other assets on the condensed consolidated balance sheet.

There is no impairment recorded for the three and nine months ended September 30, 2021.

The Company follows guidance under ASC Topic 740-270, Interim Reporting, which requires that an estimated annual effective tax rate is applied to year-to-date ordinary income.

The investment is accounted for in accordance with ASC Topic 321 Investments—Equity Securities at its cost, less any impairment.

The investment balance as of March 31, 2022 was $ 12.0 million and is recorded in other assets on the condensed consolidated balance sheets.

There is no impairment recorded for the three months ended March 31, 2022.

The Company follows guidance under ASC Topic 740-270 Income Taxes , which requires that an estimated annual effective tax rate is applied to year-to-date ordinary income (loss).

At the end of each interim period, the Company estimates the effective tax rate expected to be applicable for the full fiscal year.

The tax effect of discrete items is recorded in the quarter in which the discrete events occur.

The Company recorded income tax expense (benefit) of $( 4.0 ) million and $ 1.4 million for the three months ended September 30, 2021 and 2020, respectively, and income tax expense (benefit) of $( 4.0 ) million and $ 18.1 million for the nine months ended September 30, 2021 and 2020.

The tax benefit in the three months ended September 30, 2021 is unfavorably impacted by non-deductible amounts for equity-based compensation

and Follow-on Offering costs.

The tax benefit in the three months ended September 30, 2020 was favorably impacted by a tax benefit related to an NOL carryback as a result of the CARES Act.

The tax benefit in the nine months ended September 30, 2021 was unfavorably impacted by non-deductible amounts for equity-based compensation and Follow-on Offering costs.

The tax expense in the nine months ended September 30, 2020 was favorably impacted by a tax benefit related to an NOL carryback as a result of the CARES Act.

For the three and nine ended September 30, 2021 and 2020, no reserves for uncertain tax positions have been recorded.

The Company recorded income tax expense (benefit) of $( 12.4 ) million and $ 1.7 million for the three months ended March 31, 2022 and 2021, respectively.

The tax (benefit) in the three months ended March 31, 2022 was favorably impacted by mix of earnings in foreign jurisdictions offset by non-deductible amounts for officers’ compensation and transaction costs.

The tax expense in the three months ended March 31, 2021 was unfavorably impacted by non-deductible equity based compensation as well as initial public offering and secondary offering costs.

For the three months ended March 31, 2022 and 2021, no reserves for uncertain tax positions have been recorded.

The Company will continue to monitor this position each interim period.

Long-Term Debt

September 30, December 31,

Senior Secured Facility

Long-term senior secured credit facility consisted of the following (in thousands):

March 31, 2022 December 31, 2021

Term loan facility $ 325,700 $ 326,775

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( 22,247 ) ( 23,291 )

Long term debt, net of debt discount and issuance costs 303,512 428,283

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

Long-term debt, net of current portion, debt discount and issuance costs $ 299,212 $ 423,970

Long-term portion, net of debt discount and issuance costs 355,453 303,484

Less current portion of credit facility ( 4,300 ) ( 4,300 )

Long-term senior secured facility debt, net of current portion, debt discount and issuance costs $ 351,153 $ 299,184

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 September 30, 2021, the Term Loan Facility had a balance of $ 327.9 million.

On August 11, 2021, in connection with the sale of the Series A, the Company used the proceeds to repay $ 100.0 million of the outstanding Term Loan Facility and $ 102.0 million of 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 7-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 its Senior Secured Credit Facility.

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

This resulted in the current rate on the Term Loan Facility of 3.75 %.

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

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 resulted in the 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.

The balance of the Term Loan Facility is presented in the accompanying condensed consolidated balance sheets net of debt discount and issuance costs of $ 24.3 million at September 30, 2021.

The debt discount and issuance costs are being amortized using the effective interest method and the rate as of September 30, 2021 is 5.01 %.

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

Revolving Credit Facility

Under the Revolving Credit Facility, the Company had a zero outstanding balance, $ 14.5 million in standby letters of credit and availability of $ 185.5 million as of September 30, 2021.

Under the Revolving Credit Facility, the Company had $ 52.0 million and no outstanding balance as of March 31, 2022 and December 31, 2021, respectively, $ 33.2 million and $ 13.6 million in standby letters of credit at March 31, 2022 and December 31, 2021, respectively, and availability of $ 114.8 million and $ 186.4 million at March 31, 2022 and December 31, 2021, respectively.

Term Loan Facility

The Term Loan Facility had a balance of $ 325.7 million and $ 326.8 million as of March 31, 2022 and December 31, 2021, respectively.

The balance of the Term Loan Facility is presented in the accompanying condensed consolidated balance sheets, net of debt discount and issuance costs of $ 22.2 million and $ 23.3 million as of March 31, 2022 and December 31, 2021, respectively.

The debt discount and issuance costs are being amortized using the effective interest method and the rate as of March 31, 2022 is 5.03 %.

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 three months ended March 31, 2022 and 2021.

Convertible Debt

Convertible debt consisted of the following (in thousands):

March 31, 2022 December 31, 2021

1.00 % Senior unsecured convertible notes

$ 425,000 $ 425,000

unamortized discount and issuance costs ( 12,689 ) ( 13,137 )

1.00 % Senior unsecured convertible notes, net (1)

$ 412,311 $ 411,863

(1) Effective interest rate for the Convertible Notes as of March 31, 2022 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 “Convertible Notes”) resulting in proceeds of $ 364.7 million and $ 48.6 million, respectively, after deducting the original issue discount of 2.75 %.

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

Bank National Association, as trustee.

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

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

The Convertible Notes were not convertible during the three months ended March 31, 2022 and none have been converted to date.

Also, given that the average market price of the common stock has not exceeded the exercise price since inception, there was no dilutive impact for the three months ended March 31, 2022.

In connection with the acquisition of STI, the Company assumed debt obligations of STI consisting of $ 43.9 million in short-term debt and $ 14.8 million in long-term debt.

Interest rates range from 0.55 % to 2.76 % annually and maturities for the short term portion of loans range from April 2022 to March 2023.

Maturities for the long term portion of loans are $ 5.3 million Euros ($ 5.9 million USD) due in 2024 and $ 8 million Euros ($ 8.9 million USD) due in March 2027.

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” or “Series A”), 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, the Company issued and sold to the Purchaser 776,235 shares of Common Stock for an aggregate purchase price of $ 776 .

The Company used net proceeds from the Initial Closing to repay all of the outstanding amounts under the Company’s existing revolving credit facility and prepaid $ 100 million under the Company’s term loan and for general corporate purposes.

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 have no maturity date.

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 andz sold to the Purchasers 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 Purchasers are 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 Purchasers 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 Perpetual Preferred Stock has no maturity date.

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, par value $ 0.001 per share, in an additional closing for an aggregate purchase price of $ 49,376,125 (the “Additional Closing”).

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.

This represents a committed financing put right with an initial fair value of $ 12.4 million.

The Series A preferred stock was recorded as temporary equity, net of issuance costs, on the condensed consolidated balance sheets as it has redemption features upon certain triggering events that are outside the Company’s control, such as a fundamental change.

The net proceeds of the Series A offering of $ 334.6 million have been allocated on the balance sheet by each instruments relative fair values, net of fees, to the Series A Redeemable Perpetual Preferred Stock of $ 229.8 million, Common Stock of $ 105.4 million, a debit to additional paid-in capital of $ 12.4 million for the committed financing put right and $ 11.7 million for a prepaid forward contract on the issuance of 776,235 shares of Common Stock which was settled on September 27, 2021.

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 of Series A Redeemable Perpetual Preferred Stock, until June 30, 2023, 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”).

This commitment has been reduced by the Additional Closing.

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 condensed consolidated balance sheets as it has redemption features upon certain triggering events that are outside the Company’s control, such as a fundamental change.

The proceeds of the Series A Redeemable Perpetual Preferred Stock, transactions costs and discount of $ 334.6 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.

The Additional Closing carried issuance and original issuance discount costs of $ 1.3 million.

The net proceeds were allocated amongst the Series A Redeemable Perpetual Preferred Stock and Common Stock based on the proceeds of $ 33.1 million and $ 15.9 million, respectively.

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.

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”).

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.

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.

Dividends accrued as of March 31, 2022 were $ 6.3 million and dividends declared and paid as of December 31, 2021 were $ 8.2 million and $ 8.1 million, respectively.

The Series A Redeemable Perpetual 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 Redeemable Perpetual 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 Redeemable Perpetual 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 $ 2.7 million for the three and nine months ended September 30, 2021.

The Company accreted to the carrying value of the Series A Preferred the regular cash rate of dividends of 5.75 %, or $ 2.8 million in dividends for the three and nine months ended September 30, 2021.

Such accretion totaled $ 5.4 million for the three months ended March 31, 2022.

The Company had $ 6.3 million in dividends accreted on the carrying value of the Series A Redeemable Perpetual Preferred Stock at an accrual rate of 6.25 % as of March 31, 2022.

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

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

Customary Covenants

The Securities Purchase Agreement, Certificate of Designations and Registration Rights Agreement (as defined below) contain other customary covenants and agreements, including certain standstill provisions and customary preemptive rights.

The Delayed Draw Commitment is subject to certain customary anti-dilution adjustments provided under the Securities Purchase Agreement and Certificate of Designations, including for stock splits, reclassifications, combinations and dividends or distributions made by the Company on the Common Stock.

Transfer Restrictions

After the Initial Closing, subject to certain customary exceptions including transfers to Permitted Transferees (as defined in the Securities Purchase Agreement), the Purchaser will be restricted from transferring the Series

A Redeemable Perpetual Preferred Stock and Common Stock until the one-year anniversary of the Initial Closing.

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 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.

Registration Rights

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

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 June 30, 2020 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 three and nine months ended September 30, 2020 of $ 0.3 million and $ 3.8 million, which consisted of cash interest, PIK interest and amortization of the debt discount.

The note was no longer outstanding as of June 30, 2021 and had no balance or interest expense for the three months ended September 30, 2021.

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.

Based on ASC 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.

The following table presents the Company’s revenue disaggregated by sales recorded over-time and sales recorded at a point in time (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Over-time revenue $ 208,071 $ 117,850

1 unchanged sentence

Total revenue $ 300,586 $ 248,240

As discussed in the consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2021, filed with the SEC on April 6, 2022, 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 disaggregated revenue information above for the three months ended March 31, 2021 has been restated to correct this error, which resulted in $ 78.5 million of revenue being reclassified from over-time revenue to point in time revenue for the three months ended March 31, 2021.

Contract Balances

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Contract assets consisting of unbilled receivables are recorded within accounts receivable on the condensed consolidated balance sheets on a contract-by-contract basis at the end of the reporting period and consisted of the following (in thousands):

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Unbilled receivables $ 135,997 $ 111,224

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.

The changes in contract liabilities (i.e., deferred revenue) relate to advanced orders and payments received by the Company.

Contract liabilities consisting of deferred revenue recorded on a contract-by-contract basis at the end of each reporting period were as follows (in thousands):

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Deferred revenue $ 121,624 $ 99,575

During the nine months ended September 30, 2021, the Company converted $ 149.8 million deferred revenue to revenue which represented 100.0 % of the prior years deferred revenue balance.

During the three months ended March 31, 2022, the Company converted $ 60.0 million deferred revenue to revenue which represented 60 % of the prior years deferred revenue balance.

Remaining Performance Obligations

As of September 30, 2021, the Company had $ 591.0 million of remaining performance obligations.

As of March 31, 2022, the Company had $ 301.3 million of remaining performance obligations.

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

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net (loss) income $ ( 25,552 ) $ ( 7,232 ) $ ( 22,682 ) $ 68,845

Net income (loss) $ ( 22,054 ) $ 4,576

Preferred dividends and accretion 11,606 —

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Earnings (loss) per share $ ( 0.23 ) $ 0.04

Potentially dilutive common shares issuable pursuant to equity-based awards were not included for the three months ended September 30, 2021 as their potential effect was anti-dilutive as the Company generated a net loss.

Potentially dilutive common shares issuable pursuant to equity-based awards of 654,277 were not included for the three months ended March 31, 2022 as their potential effect was anti-dilutive as the Company generated a net loss.

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

Commitments and Contingencies

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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 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 October 2020 initial public offering, the Company’s December 2020 offering, and the Company’s March 2021 offering during the putative class period of October 14, 2020 through May 11, 2021.

The Court appointed the Array Institutional Investor Group as lead plaintiff and the deadline for an amended complaint is November 19, 2021.

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

District Court for the Southern District of New York (the “Southern District of New York” or the “Court”) 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 October 2020 initial public offering (“IPO”), the Company’s December 2020 offering (the “2020 Follow-On Offering”), and the Company’s March 2021 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 October 2020 initial public offering, the Company’s December 2020 offering, and the Company’s March 2021 offering during the putative class period of October 14, 2020 through May 11, 2021.

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 against certain officers and directors of the Company (“First Derivative 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 August 24, 2021, the case was consolidated with the Second 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 July 30, 2021, a second and related verified derivative complaint was filed against certain officers and directors of the Company (“Second Derivative Action”).

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:

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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 is November 19, 2021

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

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;

(2) in the 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 responded to that letter on February 23, 2022 disagreeing with the ground for dismissal outlined in the defendants’ initial letter and contending that its Consolidated Amended Complaint should not be dismissed.

Because the parties could not agree that the Consolidated Amended Complaint was deficient in any respect, the defendants, including the Company, submitted a letter to the Court on March 21, 2022 setting forth the reasons why the Consolidated Amended Complaint should be dismissed and requesting the Court’s leave to file a motion to dismiss.

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 condensed consolidated balance sheets as of September 30, 2021.

The Company has not recorded any material loss contingency in the condensed consolidated balance sheets as of March 31, 2022 or December 31, 2021.

Contingent Consideration

Taxes Receivable Agreement

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.

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

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

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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 recognized in contingent consideration in the accompanying condensed consolidated statements of operations.

As of September 30, 2021 and December 31, 2020, the fair value of the TRA was $ 13.0 million and $ 19.7 million, respectively.

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 condensed consolidated statements of operations.

As of March 31, 2022 and December 31, 2021, the fair value of the TRA was $ 9.4 million and $ 14.6 million, respectively.

Estimating the amount of payments that may be made under the TRA is by nature imprecise.

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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.

Earn-Out Liability

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;

the sale of equity securities or assets of Former Parent, acquirer or the Company to a third-party;

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

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 was re-measured to fair value with changes in fair value recorded in contingent consideration in the accompanying condensed consolidated statements of operations.

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

TRA Earn-Out Liability Contingent Consideration

Balance, June 30, 2021 $ 12,016 $ — $ 12,016

Payments — — —

Fair value adjustment 936 — 936

Balance, September 30, 2021 $ 12,952 $ — $ 12,952

Balance, June 30, 2020 $ 18,845 $ 1,822 $ 20,667

Fair value adjustment ( 521 ) 14,112 13,591

Balance, September 30, 2020 $ 18,324 $ 15,934 $ 34,258

TRA Earn-Out Liability Contingent Consideration

Balance, December 31, 2020 $ 19,691 $ — $ 19,691

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

Three Months Ended

Beginning balance $ 14,577 $ 19,691

Payments ( 1,483 ) —

Fair value adjustment ( 3,731 ) 148

Balance, September 30, 2021 $ 12,952 $ — $ 12,952

Balance, December 31, 2019 $ 17,808 $ 442 $ 18,250

Fair value adjustment 516 15,492 16,008

Balance, September 30, 2020 $ 18,324 $ 15,934 $ 34,258

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

Ending balance $ 9,363 $ 19,839

The TRA liability requires significant judgment and is classified as Level 3 in the fair value hierarchy.

As of March 31, 2022, the Company posted surety bonds in the total amount of approximately $ 168.5 million.

The Company is required to provide 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.

These off-balance sheet arrangements do not adversely impact the Company’s liquidity or capital resources.

Fair Value of Financial Instruments

The carrying values and the estimated fair values of debt financial instruments were as follows:

March 31, 2022 December 31, 2021

Carrying Value Fair Value Carrying Value Fair Value

Notes $ 412,311 $ 329,375 $ 411,863 $ 410,771

The carrying values of the Company's Revolving Credit Facility recorded in long-term debt on the condensed consolidated balance sheets approximate fair value due to the variable interest rate.

The fair value of the Convertible 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

Equity Incentive Plan

On October 14, 2020, the Company’s 2020 Plan became effective.

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.

In the nine months ended September 30, 2021, the Company granted an aggregate of 605,319 RSUs to employees and board of director members and 177,472 Performance Stock Units (PSUs) to certain executives.

During the three months ended March 31, 2022, the Company granted an aggregate of 1,000,503 restricted stock units (“RSUs”) to employees and board of director members and 290,598 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.

Activity under the 2020 Plan was as follows:

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Unvested, December 31, 2021

930,409 $ 22.39

Granted 1,000,503 $ 10.61

Vested ( 138,466 ) $ 21.91

Forfeited ( 39,600 ) $ 22.10

Unvested, September 30, 2021 1,043,508 $ 22.77

PSU Number of Shares Weighted Average Grant Date Fair Value

Unvested, March 31, 2022

1,752,846 $ 15.43

Number of Shares Weighted Average Grant Date Fair Value

Unvested, December 31, 2021

147,687 $ 27.75

Granted 290,598 $ 11.54

Forfeited ( 20,027 ) $ 30.74

Unvested, September 30, 2021 160,012 $ 27.98

Class B Units

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

The Units contained vesting provisions as defined in the agreement.

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

Unvested, March 31, 2022

418,258 $ 16.34

Class B Units and Class C Units of Former Parent

The Company accounted for equity grants to employees (Class B Units and Class C Units, collectively, “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.

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

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

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

The Units issued to employees were measured at fair value on the grant date using an option pricing model.

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

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

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

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 three and nine months ended September 30, 2021, the Company recognized $ 2.2 million and $ 14.3 million in equity-based compensation, respectively.

For the three and nine months ended September 30, 2020, the Company recognized $ 0.9 million and $ 3.3 million in equity-based compensation, respectively.

As of September 30, 2021, the Company had $ 18.4 million of unrecognized compensation costs which is expected to be recognized over a period of 2.3 years.

There were 18,772 and 79,277 forfeitures during the three and nine months ended September 30, 2021 and no forfeitures during the three and nine month ended September 30, 2020.

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 condensed consolidated statements of income and had no impact on the condensed consolidated statements of cash flows.

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

(*) September 30, 2021

ROU Asset Other assets $ 9,008

Lease liability, current portion Other current liabilities $ 6,447

Lease liability, long-term portion Other long-term liabilities 2,817

Total lease liability $ 9,264

(*) Location on the condensed consolidated balance sheet

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.

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 condensed consolidated balance sheets.

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

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2021

Operating lease expense $ 1,651 $ 4,955

Variable lease expense 27 79

Short-term lease expense —

Total lease expense $ 1,678 $ 5,034

The following table presents the maturities of lease liabilities as of September 30, 2021 (in thousands):

Fiscal year ending September 30, Operating Leases

Total lease payments 9,648

Imputed lease interest ( 384 )

Total lease liabilities $ 9,264

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

Fiscal year ending December 31, Operating Leases

Total $ 14,435

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

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2021

Weighted average remaining lease-term 1.7 years 1.7 years

Weighted average discount rate 5 % 5 %

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

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2021

Operating cash flows from operating leases $ 1,465 $ 4,794

As of January 1, 2021

Non cash investing activities:

Lease liabilities arising from obtaining right-of-use assets $ 13,464

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.

Company accelerating the recognition of equity-based compensation of $ 8.9 million for the three months ended March 31, 2021.

For the three months ended March 31, 2022 and 2021, the Company recognized $ 4.4 million and $ 7.9 million in equity-based compensation, respectively.

As of March 31, 2022, the Company had $ 24.7 million of unrecognized compensation costs related to RSUs which is expected to be recognized over a period of 2.4 years.

There were 59,627 forfeitures during the three months ended March 31, 2022 and no forfeitures during the three months ended March 31, 2021.

Related Party Transactions

Accounts Payable-Related Party

The Company had $ 0.6 million and $ 2.2 million as of September 30, 2021 and December 31, 2020, respectively, of accounts payable-related party with the former shareholders of Array.

The Company had $ 0.5 million and $ 0.6 million as of March 31, 2022 and December 31, 2021, 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.

Related Party Loan - see Note 10

Contingent Consideration - see Note 13

Subsequent Events

On November 11, 2021, the Company entered into a definitive agreement with Amixa Capital, S.L.

and Aurica Trackers, S.L.

to acquire 100 % of the share capital of Soluciones Técnicas Integrales Norland, S.L.

and its subsidiaries (collectively, “STI”), for a purchase price of € 579.0 million ($ 662.7 million at current exchange rates), € 228.0 million ($ 264.0 million at current exchange rates), of which will be paid at closing in common stock of the Company with the remaining € 351.0 million in cash ($ 401.7 million at current exchange rates) to be paid in cash.

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 € 55.0 million ($ 63.0 million at current exchange rates).

The transaction is expected to close in the first quarter of 2022, following receipt of required regulatory approvals and satisfaction of other customary closing conditions.

Bridge Loan Commitment

In connection with the entry into the Purchase Agreement, the Company entered into a debt commitment letter dated November 11, 2021 pursuant to which third party financial institutions have committed, subject to the satisfaction of standard conditions, to provide the Company with a bridge loan facility in aggregate principal amount of up to $ 300 million.

The Company currently intends to finance the transaction and related fees and expenses with cash on hand, borrowings under its senior credit facilities and through one or more debt capital markets transactions, subject to market conditions and other factors, and, only to the extent necessary, borrowings under the bridge loan facility.

Tax Receivable Agreement

See Note 16 – Commitments and Contingencies – Tax Receivable Agreement.

Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in accumulated other comprehensive income (loss), net of tax for the three months ended March 31, 2022 and 2021 (in thousands):

Foreign Currency Translation Adjustment

Balance as of December 31, 2021 $ —

Change in foreign currency translation adjustment 9,011

Net other comprehensive income (loss) 9,011

Balance as of March 31, 2022 $ 9,011

Segment Reporting

ASC 280 Segment Reporting establishes standards for reporting information about operating segments.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

Historically, the Company managed its business on the basis of one operating

and reportable segment.

During the three months ended March 31, 2022, we changed our reportable segments as a result of the STI Acquisition;

the Company now operates as two segments;

Array and STI.

The following table provides a reconciliation of certain financial information for our reportable segments to information presented in our condensed consolidated financial statements for the three months ended three months ended March 31, 2022 and 2021 and as of March 31, 2022 and December 31, 2021 (in thousands):

Three months ended March 31,

Array STI Total

Revenue $ 250,652 $ 49,934 $ 300,586

Gross Profit $ 21,268 $ 5,319 $ 26,587

March 31, 2022

Array STI Total

Total assets $ 1,491,149 $ 224,569 $ 1,715,718

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-Q

Item 1. Financial Statements