What changed in this filing

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Item 1. Financial Statements

2022-08-09 compared with 2022-05-10 · 289 added, 191 removed, 470 unchanged (51% of the section changed)

2 unchanged sentences

and Subsidiaries

Condensed Consolidated Balance Sheets

Condensed Consolidated Balance Sheets (unaudited)

(in thousands, except per share and share amounts)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Current assets

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Total long-term liabilities 899,841 729,417

Total liabilities 1,415,133 974,722

Array Technologies, Inc.

and Subsidiaries

Condensed Consolidated Balance Sheets (continued)

Condensed Consolidated Balance Sheets (unaudited) (continued)

(in thousands, except per share and share amounts)

March 31, 2022 December 31, 2021

Total liabilities 1,325,511 974,722

June 30, 2022 December 31, 2021

Commitments and contingencies (Note 16)

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

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

412,606 and 350,000 shares issued as of June 30, 2022 and December 31, 2021, respectively;

liquidation preference of $ 413.0 million and $ 350.0 million as of June 30, 2022 and December 31, 2021, respectively

293,974 237,462

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

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

none issued as of June 30, 2022 and December 31, 2021

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

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

150,279,160 and 135,026,940 shares issued as of June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 401,614 202,562

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Total stockholders’ equity (deficit) 66,302 ( 69,205 )

Total liabilities, redeemable perpetual preferred stock and stockholders’ equity (deficit) $ 1,715,718 $ 1,142,979

Total liabilities, redeemable perpetual preferred stock and stockholders’ equity $ 1,775,409 $ 1,142,979

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

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Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Revenue $ 424,929 $ 196,516 $ 725,515 $ 444,756

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Other income (expense), net ( 371 ) ( 122 ) 372 ( 200 )

Foreign currency gain 3,863 —

Foreign currency gain (loss) ( 1,736 ) — 2,127 —

Interest expense ( 8,021 ) ( 6,651 ) ( 14,963 ) ( 15,660 )

Total other expense ( 10,128 ) ( 6,773 ) ( 12,464 ) ( 15,860 )

Income (loss) before income tax expense (benefit) ( 34,497 ) 6,274

Income tax expense (benefit) ( 12,443 ) 1,698

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

Loss before income tax benefit ( 16,972 ) ( 7,347 ) ( 51,469 ) ( 1,073 )

Income tax benefit ( 14,195 ) ( 1,830 ) ( 26,638 ) ( 132 )

Net loss ( 2,777 ) ( 5,517 ) ( 24,831 ) ( 941 )

Preferred dividends and accretion 12,182 — 23,788 —

Net income (loss) to common shareholders $ ( 33,660 ) $ 4,576

Earnings (loss) per share

Net loss to common shareholders $ ( 14,959 ) $ ( 5,517 ) $ ( 48,619 ) $ ( 941 )

Loss per common share

Basic $ ( 0.10 ) $ ( 0.04 ) $ ( 0.33 ) $ ( 0.01 )

Diluted $ ( 0.10 ) $ ( 0.04 ) $ ( 0.33 ) $ ( 0.01 )

Weighted average number of shares

Weighted average number of common shares

Basic 150,203 126,994 149,246 126,994

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and Subsidiaries

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

Condensed Consolidated Statements of Comprehensive Loss (unaudited)

(in thousands)

Three Months Ended

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

Foreign currency translation adjustments ( 9,011 ) —

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

June 30, Six Months Ended

2022 2021 2022 2021

Net loss $ ( 2,777 ) $ ( 5,517 ) $ ( 24,831 ) $ ( 941 )

Change in foreign currency translation adjustments ( 29,718 ) — ( 38,729 ) —

Comprehensive loss $ ( 32,495 ) $ ( 5,517 ) $ ( 63,560 ) $ ( 941 )

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

3 unchanged sentences

(in thousands)

Three Months Ended March 31, 2022

Three Months Ended June 30, 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 Accumulated Other Comprehensive Income Total Stockholders’ Equity (Deficit)

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

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

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

Equity-based compensation — — — — 105 — 2,944 — — 2,944

Issuance of Series A Redeemable Perpetual Preferred Stock, net of fees — — — — — — ( 380 ) — — ( 380 )

Preferred cumulative dividends plus accretion 13 12,182 — — — — ( 12,182 ) — — ( 12,182 )

Net loss — — — — — — — ( 2,777 ) — ( 2,777 )

Other comprehensive income — — — — — — — — ( 29,718 ) ( 29,718 )

Balance at June 30, 2022 413 $ 293,974 — $ — 150,279 $ 150 $ 401,614 $ ( 296,733 ) $ ( 38,729 ) $ 66,302

Array Technologies, Inc.

and Subsidiaries

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

(in thousands)

Three Months Ended June 30, 2021

Preferred Stock Common Stock

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

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

Equity-based compensation — — — — 1,523 — 1,523

Net loss — — — — — ( 5,517 ) ( 5,517 )

Balance at June 30, 2021 — $ — 126,994 $ 127 $ 149,893 $ ( 222,440 ) $ ( 72,420 )

Array Technologies, Inc.

and Subsidiaries

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

(in thousands)

Six Months Ended June 30, 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 Accumulated Other Comprehensive Loss Total Stockholders’ Equity (Deficit)

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

Equity-based compensation — — — — — — 7,357 — — 7,357

Issuance of Series A Redeemable Perpetual Preferred Stock, net of fees 50 32,724 — — 15,252 15 215,483 — — 215,498

Issuance of common stock, net — — — — — — — — — —

2 unchanged sentences

Other comprehensive income — — — — — — — — ( 38,729 ) ( 38,729 )

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

Balance at June 30, 2022 413 $ 293,974 — $ — 150,279 $ 150 $ 401,614 $ ( 296,733 ) $ ( 38,729 ) $ 66,302

Array Technologies, Inc.

and Subsidiaries

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

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

(in thousands)

Three Months Ended March 31, 2021

Six Months Ended June 30, 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 )

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

Equity-based compensation — — — — 9,420 — 9,420

Net income — — — — — 4,576 4,576

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

Net loss — — — — — ( 941 ) ( 941 )

Balance at June 30, 2021 — $ — 126,994 $ 127 $ 149,893 $ ( 222,440 ) $ ( 72,420 )

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

3 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities

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

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Net loss $ ( 24,831 ) $ ( 941 )

Adjustments to reconcile net loss to net cash used in operating activities:

Provision for (recovery of) bad debts 510 ( 551 )

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

Deferred tax expense ( 19,984 ) ( 538 )

Depreciation and amortization 47,579 12,964

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Common stock issuance costs ( 450 ) —

Proceeds from revolving credit facility 52,000 —

Payments on revolving credit facility ( 33,000 ) —

Proceeds from issuance of other debt 30,599 —

Proceeds from revolving credit facility 101,000 102,000

Principal payments on debt ( 22,377 ) ( 31,075 )

5 unchanged sentences

(in thousands)

Three Months Ended

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

Six Months Ended

Net cash provided by financing activities 122,697 56,525

Effect of exchange rate changes on cash and cash equivalent balances ( 844 ) —

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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.

On January 11, 2022 (the “Acquisition Date”), the Company acquired 100 % of the share capital of Soluciones Técnicas Integrales Norland, S.L.U., a Spanish private limited liability Company, and its subsidiaries (collectively, “STI”) with cash and common stock of the Company (the “STI Acquisition”).

The STI Acquisition was accounted for as a business combination.

See Note 3 – Acquisition of STI .

After the acquisition of STI, the Company began operating as two reportable operating segments.

The Array legacy operating segment (the “Array Legacy Operations”) and the newly acquired operations (the “STI Operations”) pertaining to 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.

The accompanying unaudited 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 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 results for the three and six months ended June 30, 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 April 6, 2022.

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, as amended by the Form 10-K/A filed with the SEC on April 6, 2022 (the “2021 Annual Report”).

Principles of Consolidation

3 unchanged sentences

Use of Estimates

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

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

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the 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, 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.

Significant estimates include evaluation for any impairment of goodwill, impairment of long-lived assets, fair value of contingent consideration, Series A Redeemable Perpetual 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;

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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 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.

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

In addition, due to global tightening of supply chain and strained logistics issues the Company has experienced an increase in unbilled revenues and in some instances incurred liquidated damages.

The Company has taken, and continues to take, mitigating steps to overcome the economic challenges and, therefore, believes the impact to be temporary, but cannot be certain the timing of when it will achieve better margins.

The extent to which the COVID-19 pandemic and recent supply chain constraints and price increases may further impact the Company’s business, results of operations, financial condition and cash flows will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

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;

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

The Company also has $ 100 million in delayed draw ability under the Series A Redeemable Perpetual Preferred Stock (as defined below) 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.

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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.

The extent to which COVID-19 may further impact the Company’s business, results of operations, financial condition and cash flows will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

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

Impact of the Ongoing Conflict in Ukraine

The ongoing conflict in Ukraine has reduced the availability of material that can be sourced in Europe and, as a result, increased logistics costs for the procurement of certain inputs and materials used in our products.

We do not know ultimate severity or duration of the conflict in Ukraine, but we are continuously monitoring the

situation and evaluating our procurement strategy and supply chain as to reduce any negative impact on our business, financial condition and results of operations.

The Company could see an impact from inflationary pressures.

Inflation has continued to accelerate in the wake of Russia’s invasion of Ukraine, driving up energy prices, freight premiums, and other operating costs.

Interest rates, notably mature market government bond yields, remain low by historical standards but are rising as central banks around the world tighten monetary policy in response to inflation pressures, while government deficits and debt remain at high levels in many major markets.

The eventual implications of higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital during our forecast period.

Business Combinations

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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.

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

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

The standard was applied to the acquisition accounting for STI.

A review of the deferred revenue of

the acquiree of $ 20.3 million was reviewed for consistency in application with the Company’s policies and U.S.

GAAP and the contract liability balance was carried over at its carrying value.

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.

On the Acquisition Date, the Company completed the STI Acquisition pursuant to the purchase agreement, dated November 10, 2021, by and among Amixa Capital, S.L.

and Aurica Trackers, S.L., each a company duly organized under the laws of the Kingdom of Spain (together, the “Sellers”) and Mr.

Javier Reclusa Etayo (the “STI Purchase Agreement”).

The STI Acquisition was funded primarily with borrowings from the Convertible Notes (as defined below) and the issuance of Series A redeemable perpetual preferred stock of the Company, par value $ 0.001 per share (the “Series A Redeemable Perpetual Preferred Stock”).

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

In accordance with the STI Purchase Agreement, the Company paid closing consideration to the Sellers 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:

The Company has performed a valuation of the acquisition assets and liabilities and determined the related accounting impact.

The purchase price consideration to acquire STI consisted of the following (in thousands):

Cash consideration for STI $ 409,647

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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 equity consideration transferred consisted of the Company’s common stock and was measured at fair value based on the closing stock price on 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.

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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:

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

Preliminary Fair Value of Net Assets Acquired and Liabilities Assumed:

Acquisition Date

Acquisition Date Measurement Adjustment June 30, 2022

Cash and cash equivalents $ 36,725 $ — $ 36,725

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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.

For assets and liabilities excluded from the scope of the intangible asset and property, plant and equipment valuation, the Company considered net book value to be a reasonable proxy as of the acquisition close date.

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

Estimated Fair Value Estimated Weighted Average Useful Life in Years

(in thousands, except useful lives)

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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).

Significant inputs using the Excess Earnings Method include estimated revenue, expenses based on actuals and forecast, and a discount rate based on a weighted average cost of capital for customer relationships of 15 % for Spain, 16.5 % for Brazil and 14.0 % for Spain foreign sourced projects and for order backlog of 8.5 % for Spain, 9.5 % for Brazil and 7.5 % for Spain foreign sourced projects.

Significant inputs to the Relief from Royalty method model include estimates of future revenue, economic life, estimated royalty rate of 1.25 %, and a discount rate based on a weighted average cost of capital 15.2 %.

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.

The amounts of revenue and net loss of STI included in the Company’s consolidated statement of operations from the Acquisition Date through June 30, 2022 are $ 122.6 million and $ 10.9 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 adjustments reflected herein include only those adjustments that are directly attributable to the STI Acquisition including amortization of intangibles, debt financing expenses and tax benefits.

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, 2021.

These results are prepared in accordance with U.S.

Three Months Ended March 31,

Three Months Ended

June 30, Six Months Ended

(in millions) 2022 2021 2022 2021

$ 424.9 $ 263.1 $ 733.4 $ 536.9

Net income (loss)

$ ( 2.8 ) $ 5.0 $ ( 23.9 ) $ ( 7.3 )

1 unchanged sentence

Accounts receivable consists of the following (in thousands):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Accounts receivable $ 458,438 $ 236,149

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Inventories consist of the following (in thousands):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Raw materials $ 195,600 $ 85,470

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Property, Plant and Equipment

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

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

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

Estimated Useful Lives (Years) June 30, 2022 December 31, 2021

Land N/A $ 1,550 $ 1,340

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Property, plant and equipment, net $ 17,802 $ 10,692

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.

Depreciation expense was $ 0.6 million and $ 0.6 million for the three months ended June 30, 2022 and 2021, respectively, of which $ 0.4 million and $ 0.5 million, respectively, was allocated to cost of revenue and $ 0.2 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 June 30, 2022 and 2021.

Depreciation expense was $ 1.2 million and $ 1.2 million for the six months ended June 30, 2022 and 2021, respectively, of which $ 0.9 million and $ 1.0 million, respectively, was allocated to cost of revenue and $ 0.3 million and $ 0.2 million, respectively, was included in depreciation and amortization in the accompanying condensed consolidated statements of operations for the six months ended June 30, 2022 and 2021.

Goodwill and Other Intangible Assets

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

Prior to the STI Acquisition, goodwill, related to Former Parent’s acquisition of the Company, was recorded as $ 121.6 million and was subsequently impaired.

Total accumulated impairment as of June 30, 2022 was $ 51.9 million.

With the STI Acquisition in January 2022, the Company recorded an additional $ 335.4 million of goodwill as a result of the STI acquisition and the Company’s reporting units became Array Legacy Operations and the newly acquired STI Operations, which had goodwill of $ 69.7 million and $ 309.0 million, respectively, at June 30, 2022 and $ 69.7 million and zero , respectively, at December 31, 2021.

Goodwill is not deductible for tax purposes.

Changes in the carrying amount of goodwill by operating segment during the six months ended June 30, 2022 are shown below (in thousands):

Array Legacy Operations Segment

STI Operations Segment Total

Beginning Balance

$ 69,727 $ — $ 69,727

Acquisition of STI

— 335,359 $ 335,359

Foreign currency impact — ( 26,380 ) $ ( 26,380 )

Ending Balance

$ 69,727 $ 308,979 $ 378,706

Each quarter the Company evaluates if facts and circumstances indicate that it is more-likely-than-not that the fair value of its reporting units is less than their carrying value, which would require the Company to perform an interim goodwill impairment test.

During the quarter ended March 31, 2022, the Company determined it was necessary to perform an interim goodwill impairment test for the Array Legacy Operations reporting unit.

The Company performed a quantitative goodwill impairment test and determined the estimated fair value of the reporting unit exceeded the carrying value assigned to that reporting unit;

as a result, goodwill was not impaired.

Other Intangible Assets

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

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

Other intangible assets consisted of the following (in thousands, except useful lives):

Estimated Useful Lives (Years) June 30, 2022 December 31, 2021

Developed technology 14 $ 203,800 $ 203,800

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Total other intangible assets, net $ 421,862 $ 174,753

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):

Amortization expense related to intangible assets amounted to $ 24.1 million and $ 5.9 million for the three months ended June 30, 2022 and 2021, respectively, and $ 46.7 million and $ 11.8 million for the six months ended June 30, 2022 and 2021, respectively.

Estimated future annual amortization expense for the above amortizable intangible assets for the remaining periods through June 30, as follows (in thousands):

2022 $ 47,086

Thereafter 179,360

Long-lived assets, including intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable.

During the quarter ended March 31, 2022, the Company determined it was necessary to review long-lived assets, including intangible assets related to the Array Legacy Operations reporting unit, for impairment.

The Company determined the undiscounted cash flows expected to result from the use of the asset group and its eventual disposition were greater than the carrying amount and therefore concluded there was no impairment.

Investment in Equity Security

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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 investment balance as of June 30, 2022 was $ 12.0 million and is recorded in other assets on the condensed consolidated balance sheets.

There is no impairment recorded for the six months ended June 30, 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).

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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 $( 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 recorded income tax benefit of $ 14.2 million and $ 1.8 million for the three months ended June 30, 2022 and 2021, respectively, and income tax benefit of $ 26.6 million and $ 0.1 million for the six months ended June 30, 2022 and 2021, respectively.

The tax benefit in the three months ended June 30, 2022 was favorably impacted by non-taxable contingent income, lower transaction costs and mix of income.

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

The tax benefit in the six months ended June 30, 2022 was favorably impacted by mix of earnings in foreign jurisdictions offset by non-deductible amounts for officers’ compensation and transaction costs.

The tax benefit in the six months ended June 30, 2021 was unfavorably impacted by non-deductible equity based compensation as well as initial public offering and secondary offering costs.

For the three and six months ended June 30, 2022 and 2021, no reserves for uncertain tax positions have been recorded.

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

Senior Secured Facility

Senior Secured Credit Facility

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Term loan facility $ 324,625 $ 326,775

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Senior Secured 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.

On October 14, 2020, the Company entered into a senior secured credit facility, which was amended on February 23, 2021 (the “First Amendment”) and again on February 26, 2021 (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 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.

The First Amendment, in the case of Eurocurrency borrowings, lowered the London interbank offered rate floor to 50 basis points from 100 basis points and lowered 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 Second Amendment increased the $ 150.0 million Revolving Credit Facility from $ 150.0 million to $ 200.0 million.

Revolving Credit Facility

Under the Revolving Credit Facility, the Company had $ 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.

Under the Revolving Credit Facility, the Company had $ 68.0 million and no outstanding balance as of June 30, 2022 and December 31, 2021, respectively, $ 35.3 million and $ 13.6 million in standby letters of credit at June 30, 2022 and December 31, 2021, respectively, and availability of $ 96.7 million and $ 186.4 million at June 30, 2022 and December 31, 2021, respectively.

The Revolving Credit Facility pays interest depending on the contracted rate for the loan which is either for the Eurocurrency Rate Loans at LIBOR plus 3.25 % and for Base Rate Loans at the higher of the Prime Rate, 1/2 of 1 % above the Federal Funds Rate or the Eurocurrency rate for the Dollar deposits for one month Interest Period, after giving effect to any floor plus 1 %, plus 2.25 %.

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.

The Term Loan Facility had a balance of $ 324.6 million and $ 326.8 million as of June 30, 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 $ 21.2 million and $ 23.3 million as of June 30, 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 June 30, 2022 is 6.03 %.

Convertible Debt

Convertible debt consisted of the following (in thousands):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

1.00 % Senior unsecured convertible notes

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$ 412,808 $ 411,863

(1) Effective interest rate for the Convertible Notes as of March 31, 2022 was 1.5 %.

(1) Effective interest rate for the Convertible Notes as of June 30, 2022 and December 31, 2021 was 1.5 %.

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

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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”), 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”).

The Convertible Notes were not convertible during the six months ended June 30, 2022 and none have been converted to date.

Also, given that the average market price of the Company’s common stock has not exceeded the exercise price since inception, there was no dilutive impact for the six months ended June 30, 2022.

In connection with the issuances of the Convertible Notes, the Company paid $ 52.9 million, in aggregate, to enter into capped call option agreements to reduce the potential dilution to holders of the Company’s common stock after a conversion of the Convertible Notes.

Specifically, upon the exercise of the capped call instruments issued pursuant to the agreements (the “Capped Calls”), the Company would receive shares of its common stock equal to approximately 17.8 million shares (a) multiplied by (i) the lower of $ 36.0200 or the then-current market price of its common stock, less (ii) the applicable exercise price, and (b) divided by the then-current market price of its common stock.

The results of this formula are that the Company would receive more shares as the market price of its common stock exceeds the exercise price and approaches the cap, which was initially $ 36.0200 per share.

Consequently, if the Convertible Notes are converted, then the number of shares to be issued by the Company would be effectively partially offset by the shares of common stock received by the Company under the Capped Calls as they are exercised.

The formula above would be adjusted in the event of certain specified extraordinary events affecting the Company, including a merger;

a tender offer;

nationalization, insolvency or delisting of the Company’s common stock;

changes in law;

failure to deliver;

insolvency filing;

stock splits, combinations, dividends, repurchases or similar events;

or an announcement of certain of the preceding actions.

The Company can also elect to receive the equivalent value of cash in lieu of shares of common stock upon settlement, except in certain circumstances.

The Capped Calls expire on December 1, 2028 and terminate upon the occurrence of certain extraordinary events such as a merger, tender offer, nationalization, insolvency, delisting, event of default, a change in law, failure to deliver, an announcement of certain of these events, or an early conversion of the Convertible Notes.

Although intended to reduce the net number of shares of common stock issued after a conversion of the Convertible Notes, the Capped Calls were separately negotiated transactions, are not a part of the terms of the Convertible Notes, and do not affect the rights of the holders of the Convertible Notes.

The Capped Calls meet the criteria for equity classification because they are indexed to the Company’s common stock and the Company has discretion to settle the Capped Calls in shares or cash.

As a result, the amount paid for the Capped Calls was recorded as a reduction to additional paid-in capital.

The Capped Calls are excluded from the calculation of diluted net income (loss) per share attributable to common stockholders as their effect is antidilutive.

In connection with the STI Acquisition, the Company assumed debt obligations of STI.

As of June 30, 2022, related debt balances were $ 47.0 million in short-term debt and $ 13.6 million in long-term debt.

Interest rates on the acquired debt 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 $ 5.2 million due in 2024 and $ 8.4 million due in March 2027.

Redeemable Perpetual Preferred Stock

Series A Redeemable Perpetual Preferred Stock

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 its newly designated Series A Redeemable Perpetual Preferred Stock and 7,098,765 shares of the Company’s common stock for an aggregate purchase price of $ 346.0 million (the “Initial Closing”).

Further, pursuant to the Securities Purchase Agreement, on September 27, 2021, the Company issued and sold to the 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 the entire $ 102.0 million amount outstanding under its existing Revolving Credit Facility and prepay $ 100 million under the Company’s Term Loan.

Additionally, the Securities Purchase Agreement entitles the Purchasers to designate one representative to be appointed to the Company’s board of directors (the “Board”) 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 A Redeemable 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 the Company’s common stock in an additional closing for an aggregate purchase price of $ 49.4 million (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 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”).

The Securities Purchase Agreement gives the Company the option to require the Purchasers 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 $ 148.0 million (the “Delayed Draw Commitment”).

This commitment has been reduced by the Additional Closing.

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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.

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 to the 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

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.

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 (as defined below) of 6.25 % (the “Permitted Accrued Dividends”) or a combination thereof.

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

In the event there are Default Accrued Dividends outstanding for six consecutive quarters, the Company, at the option of the holders of the Series A Redeemable Perpetual Preferred Stock, will pay 100 % of the amount of Default Accrued Dividends by delivering to such holder a number of shares of the Company’s 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 Company’s common stock.

As used herein, “Liquidation Preference” means, with respect to any shares of the Series A Redeemable Perpetual Preferred Stock, the initial liquidation preference of $ 1000 per share plus any Accrued Dividends of such share as the time of the determination.

tenth anniversaries of the Initial Closing.

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

Dividends 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 .

Permitted Accrued Dividends accrued as of June 30, 2022 are $ 12.2 million with no dividends paid for the six months ended June 30, 2022 as dividends are accruing to the Liquidation Preference.

Permitted Accrued Dividends resulted in 13 shares of the Series A Redeemable Perpetual Preferred being issued as of June 30, 2022.

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

The shares of 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.

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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 $ 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:

Such accretion totaled $ 11.1 million for the six months ended June 30, 2022.

The Company had $ 12.2 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 June 30, 2022.

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

0 % through the six-month anniversary of the Initial Closing;

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Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Over-time revenue $ 329,915 $ 114,548 $ 537,986 $ 232,398

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Total revenue $ 424,929 $ 196,516 $ 725,515 $ 444,756

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.

As discussed in the consolidated financial statements included in the 2021 Annual Report, contracts related to the Company’s federal investment tax credit (“ITC”) 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 six months ended June 30, 2021 has been restated to correct this error, which resulted in $ 185.1 million of revenue being reclassified from over-time revenue to point in time revenue for the six months ended June 30, 2021.

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

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

In certain situations, the Company recognizes revenue under a bill-and-hold arrangement with its customers.

When this occurs, the customers purchase material prior to the start of construction of a solar project in order to meet the Five Percent Safe Harbor test to qualify for the ITC.

Because the customers lack sufficient storage capacity to accept a large amount of material prior to the start of construction, they request that the Company keep the product in its custody.

The material is bundled or palletized in the Company’s warehouses, identified separately as belonging to the respective customer and is ready for immediate transport to the customer project upon customer request.

Additionally, title and risk of loss has passed to the customer and the Company does not have the ability to use the product or direct it to another customer.

As of June 30, 2022, the Company had no contracts with customers for the sale of goods and services that contained bill-and-hold obligations such as storage, handling and other custodial duties for the three and six months ended June 30, 2022.

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

Contract Balances

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

The changes in contract assets (i.e.

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

The changes in contract assets (i.e., unbilled receivables) and the corresponding amounts recorded in revenue relate to fluctuations in the timing and volume of billings for the Company’s revenue recognized over-time.

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):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Unbilled receivables $ 111,908 $ 111,224

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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):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Deferred revenue $ 167,556 $ 99,575

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.

During the six months ended June 30, 2022, the Company converted $ 61.8 million in deferred revenue to revenue, which represented 62 % of the prior year’s deferred revenue balance.

Remaining Performance Obligations

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

As of June 30, 2022, the Company had $ 477 million of remaining performance obligations.

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

Earnings (Loss) Per Share

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

Loss Per Share

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

Three Months Ended

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

June 30, Six Months Ended

2022 2021 2022 2021

Net loss $ ( 2,777 ) $ ( 5,517 ) $ ( 24,831 ) $ ( 941 )

Preferred dividends and accretion 12,182 — 23,788 —

Net income (loss) to common shareholders $ ( 33,660 ) $ 4,576

Net loss to common shareholders $ ( 14,959 ) $ ( 5,517 ) $ ( 48,619 ) $ ( 941 )

Weighted average shares 150,203 126,994 149,246 126,994

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

Loss per share $ ( 0.10 ) $ ( 0.04 ) $ ( 0.33 ) $ ( 0.01 )

Weighted average shares 150,203 126,994 149,246 126,994

Equity compensation dilutive securities — 304

Weighted average dilutive shares 148,288 127,298

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

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.

Loss per share $ ( 0.10 ) $ ( 0.04 ) $ ( 0.33 ) $ ( 0.01 )

Potentially dilutive common shares issuable pursuant to equity-based awards of 2,413,230 and 970,424 were not included as of June 30, 2022 and 2021, respectively, 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.

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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 August 30, 2017, the Company filed its first amended complaint in the U.S.

District Court for the District of New Mexico against Nextracker LLC, Daniel S.

Shugar, Marco Garcia, Flextronics International U.S.A., Inc., Scott Graybeal and Colin Mitchell (collectively, the “Defendants”) asserting (among other claims) trade secret misappropriation, tortious interference with contract, fraud, and breach of contract (the “Nextracker Litigation”).

On July 15, 2022, the Company settled its claims against Defendants for $ 42.8 million and received payment on August 4, 2022.

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

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The complaint alleges:

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

(1) violations of Section 14(a) of the Securities Exchange Act of 1934 for causing the issuance of a false/

misleading proxy statement, (2) breach of fiduciary duty, and (3) aiding and abetting breaches of fiduciary duty.

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

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(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;

(2) in the Company’s Annual Report on Form 10-K 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.

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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 March 31, 2022 or December 31, 2021.

The Company has not recorded any material loss contingency in the condensed consolidated balance sheets as of June 30, 2022 or December 31, 2021.

Contingent Consideration

Tax Receivable Agreement

Concurrent with the Acquisition, Array Tech, Inc.

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

Concurrent with the Former Parent’s acquisition of Array Technologies Patent Holdings Co., LLC on July 8, 2016, Array Tech, Inc.

entered into a Tax Receivable Agreement (the “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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to the former owners for certain federal, state, local and non-U.S.

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

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 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.

As of June 30, 2022 and December 31, 2021, the fair value of the TRA was $ 7.7 million and $ 14.6 million, respectively.

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

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Beginning balance $ 9,364 $ 19,839 $ 14,577 $ 19,691

3 unchanged sentences

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.

As of June 30, 2022, the Company posted surety bonds in the total amount of approximately $ 189.8 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.

1 unchanged sentence

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

The carrying values and the estimated fair values of debt financial instruments were as follows (in thousands):

June 30, 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.

Convertible Notes $ 412,808 $ 299,506 $ 411,863 $ 410,771

The carrying values of the 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.

2 unchanged sentences

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

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.

During the six months ended June 30, 2022, the Company granted an aggregate of 1,378,851 restricted stock units (“RSUs”) to employees and board of director members and 451,671 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.

9 unchanged sentences

Forfeited ( 99,040 ) $ 19.89

Unvested, March 31, 2022

Unvested, June 30, 2022

1,961,559 $ 14.05

4 unchanged sentences

Forfeited ( 20,027 ) $ 30.74

Unvested, March 31, 2022

Unvested, June 30, 2022

579,331 $ 14.30

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 Company accounted for equity grants to employees of 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.

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.

7 unchanged sentences

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.

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 equity-based compensation of $ 8.9 million for the six months ended June 30, 2021.

For the three months ended June 30, 2022 and 2021, the Company recognized $ 3.0 million and $ 4.1 million in equity-based compensation, respectively.

For the six months ended June 30, 2022 and 2021, the Company recognized $ 7.5 million and $ 12.0 million in equity-based compensation, respectively.

As of June 30, 2022, the Company had $ 25.4 million of unrecognized compensation costs related to RSUs which is expected to be recognized over a period of 2.4 years.

There were 119,067 forfeitures during the three and six months ended June 30, 2022 and 57,424 forfeitures during both the three and six months ended June 30, 2021.

Related Party Transactions

Accounts Payable-Related Party

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.

The Company had $ 0.5 million and $ 0.6 million as of June 30, 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 and restricted cash related to Former Parent’s acquisition of the Company 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.

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

20 Segment Reporting

3 unchanged sentences

and reportable segment.

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

During the six months ended June 30, 2022, the Company changed its 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

Array Legacy Operations and STI Operations.

The following table provides a reconciliation of certain financial information for the Company’s reportable segments to information presented in its condensed consolidated financial statements for the three and six months ended June 30, 2022 and 2021 and as of June 30, 2022 and December 31, 2021 (in thousands):

Three Months Ended June 30, 2022 Three Months Ended June 30, 2021

Array Legacy Operations STI Operations Total Array Legacy Operations

Revenue $ 352,241 $ 72,688 $ 424,929 $ 196,516

Gross Profit $ 38,904 $ 8,472 $ 47,376 $ 20,507

March 31, 2022

Array STI Total

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

Six Months Ended June 30, 2022 Six Months Ended June 30, 2021

Array Legacy Operations STI Operations Total Array Legacy Operations

Revenue $ 602,893 $ 122,622 $ 725,515 $ 444,756

Gross Profit $ 60,172 $ 13,791 $ 73,963 $ 66,673

21 Subsequent Events

On July 15, 2022, the Company and Nextracker LLC, Daniel S.

Shugar, Marco Garcia, Flextronics International U.S.A., Inc., Scott Graybeal and Colin Mitchell entered into a monetary settlement agreement (the “Settlement”) to resolve the Nextracker Litigation.

The Company’s claims in the lawsuit included misappropriation of the Company’s trade secrets, tortious interference of contract, and breach of contract.

The Settlement provides for, among other things, a payment of $ 42.8 million which was made by Defendants and received by the Company on August 4, 2022, in resolution of the Company’s claims and a mutual limited release of all claims asserted, or that could have been asserted, in connection with the Nextracker Litigation.

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