What changed in this filing

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Item 1. Business

2023-03-22 compared with 2022-04-06 · 81 added, 77 removed, 109 unchanged (59% of the section changed)

We are one of the world’s largest manufacturers of ground-mounting systems used in solar energy projects.

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

We are one of the world’s largest manufacturers of ground-mounting tracking systems used in solar energy projects at utility scale.

Our principal products are a portfolio of integrated solar tracking systems comprised of software and hardware, including steel supports, electric motors, gearboxes and electronic controllers commonly referred to as a single-axis “tracker.” Trackers move solar panels throughout the day to maintain an optimal orientation to the sun, which significantly increases their energy production.

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

The vast majority of ground mounted solar systems in the U.S.

use trackers.

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

The vast majority of ground mounted solar systems in the U.S., and an increasing amount outside of the U.S., use tracker technology.

Our flagship tracker, Duratrack, uses a patented design that allows one motor to drive multiple rows of solar panels through articulated driveline joints.

To avoid infringing on our U.S.

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As a result, we believe our products have greater reliability, lower installation costs, reduced maintenance requirements and competitive manufacturing costs.

Additionally, Duratrack uses a passive stow architecture that allows a fully automatic stow angle to protect modules during a weather event, all without the use of sensors.

Our core U.S.

patent on a linked-row, rotating gear drive system does not expire until February 5, 2030.

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

Demand for ground-mounting systems is driven by installations of new ground-mounted solar energy projects.

Demand for our products and our competitors’ products is a function of the percentage of those new installations that use trackers as opposed to fixed-tilt mounting systems.

Historically, we have derived the majority of our revenues from the sale of trackers used in solar energy projects located in the U.S.

During the year ended December 31, 2021, we derived 97% and 3% of our revenues from customers in the U.S.

and rest of the world, respectively.

We are a U.S.

company with our headquarters and principal manufacturing facility in Albuquerque, New Mexico.

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

As further described below, we acquired STI in January 2022 and introduced a dual-row tracker design to our product portfolio.

This tracker uses one motor to drive two connected rows, ideally suited for sites with irregular and highly angled boundaries and regions with low wind and/or snow load requirements as well as fragmented project areas.

To offer a comprehensive set of solutions to the growing market, in September 2022, we introduced a third tracker product which requires significantly less grading and civil works permitting prior to installation and accommodates uneven terrain.

This suite of products extends our target applications and bankability to deliver the best utility-scale solar tracker solutions to the market.

All of our products are protected by U.S.

and international patents.

We sell our products to engineering, procurement and construction firms (“EPCs”) that build solar energy projects.

In addition, we sell our products to large solar developers, independent power producers and utilities, often under master supply agreements or multi-year procurement contracts.

Acquisition of STI Norland

On January 11, 2022, the Company completed its acquisition of STI for purchase consideration 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 equity interests in STI.

STI was founded in 1996 and is headquartered in Pamplona, Spain.

With manufacturing facilities in both Spain and Brazil, STI generates revenue through the design, manufacture and sale of its utility-scale solar tracker systems to customers in global markets that include Spain, Brazil, U.S.

and South Africa.

The integration of STI provides us the opportunity to accelerate our international expansion and better address rising global demand for utility-scale solar projects, particularly in developing countries in South America and Africa.

Our Customers

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

Although sales to a single customer may occasionally be greater than 10%, they generally represent multiple projects for many different end customers who often directly influence or make the decision to use our products.

We sell our products to EPCs that build solar energy projects.

In addition, we sell our products to large solar developers, independent power producers and utilities, often under master supply agreements or multi-year procurement contracts.

In 2022, our sales to EPC’s represented approximately 65% of our revenue.

Our Products and Services

Our Tracker System

Our Tracker Systems

Large-scale solar energy projects are typically laid out in successive “rows” that form an “array.” An array can have dozens of rows with more than 100 solar panels in each row.

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Different tracker manufacturers use different approaches to rotate the panels in a row.

We have patented single-axis tracker systems that use one electric motor to drive the rotation of multiple

rows through articulated driveline joints, require only a single bolt clamp to attach solar panels and automatically stow in high wind conditions.

We refer to our design as the “DuraTrack” system.

We believe our DuraTrack system has significant advantages, including:

• requiring fewer motors per megawatt (“MW”) than competing products;

• creating site design flexibility;

• enabling higher power density than competing products;

• making installation easier;

• automatically stowing in high wind conditions;

• having high reliability and no scheduled maintenance;

• incorporating software and machine learning capabilities that enhance performance.

We have three tracker systems that, depending on the project site characteristics, offer customers a differentiated set of benefits.

DuraTrack ® HZ v3

Our principal product is the DuraTrack® HZ v3 tracker system, which we launched in May 2015.

Our flagship product is the DuraTrack® HZ v3 tracker system, which we launched in May 2015.

DuraTrack HZ v3 is our third-generation single axis tracker and incorporates unique features such as a patented single-bolt per module mounting system that reduces installation time, a passive wind load mitigation system and a low number of motors and controls per MW.

Array STI H250

The Array STI H250 is designed to deliver a favorable LCOE with a robust, dual-row tracker system.

The design enables one motor to move up to 120 photovoltaic modules making this an efficient utility-scale solar tracking system ideally suited for sites with irregular boundaries, highly angled blocks, or fragmented project areas.

Array OmniTrack

The Array OmniTrack delivers all the benefits of our flagship product DuraTrack — high reliability, durability and performance — with the added benefits of enhanced North/South terrain flexibility and minimized grading.

OmniTrack’s flexible design allows for installation on unlevel site terrain, accommodating a greater slope.

Requiring significantly less grading and civil works permitting, OmniTrack reduces project costs and time to construct.

SmarTrack Software

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Our sales and marketing strategy is to educate all influencers and stakeholders involved in building, owning and maintaining a solar energy project on the merits of our products generally and their low lifetime cost of ownership specifically.

With the objective of making DuraTrack the preferred tracker system globally, we educate customers and influencers through a combination of direct sales efforts;

With the objective of making our products the preferred tracker systems globally, we educate customers and influencers through a combination of direct sales efforts;

commissioning independent, third-party studies;

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and sponsoring industry conferences and events.

We take a “360-degree” approach to selling, working with developers, independent power producers, EPCs, utilities, independent engineering firms, insurers and mechanical subcontractors in each of the countries where

In the United States, Europe, the Middle East and Africa (“EMEA”), Latin America and Australia our products are actively sold by employees in seven different countries.

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We support all of our customers with design consulting throughout the sales process.

Our technical support organization includes applications engineering, geotechnical and civil engineering in each region where we operate.

Our technical support organization includes applications, geotechnical and civil engineering expertise in each region where we operate.

To support projects around the globe, we have resources available to work on solutions 24/7.

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The unique expertise required to design trackers and customers’ reluctance to try unproven products has confined the number of firms that produce trackers to a relatively small number.

Our principal tracker competitors include NEXTracker Inc., a subsidiary of Flex Ltd., PV Hardware and Artech Solar.

Our principal tracker competitors include Nextracker Inc., PV

Hardware, GameChange Solar and Artech Solar.

We also compete indirectly with manufacturers of fixed tilt mounting systems, including UNIRAC, Inc., and RBI Solar Inc., a subsidiary of Gibraltar Industries, Inc.

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Manufacturing

We operate a fifty-seven thousand square foot manufacturing facility in Albuquerque, New Mexico.

In the U.S., we operate an approximately 57,900 square foot manufacturing facility in Albuquerque, New Mexico.

Our manufacturing process is designed to meet four objectives:

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and minimize material movement both from vendors to us and inside our factory.

With the acquisition of STI, we gained approximately 122,000 and 632,000 square feet of manufacturing and warehouse facilities in Spain and Brazil, respectively, where we manufacture and assemble component parts for local and international markets.

We produce module clamps, center structures, spring dampers and motor controller assemblies at our Albuquerque facility.

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By using vendors, we are able to drop ship products directly to our customers’ sites, which improves working capital turnover, quality and inventory management.

While we maintain certain levels of supplies and inventories, have the capability to in source some of the products manufactured by outside vendors to our principal manufacturing facility and have identified alternative vendors for contingency purposes, we depend upon a small number of vendors to manufacture certain components used in our products.

While we maintain certain levels of supplies and inventories, we have the capability to insource some of the products manufactured by outside vendors to our principal manufacturing facility and have identified alternative vendors for contingency purposes, where we depend upon a small number of vendors to manufacture certain components used in our tracking systems.

We have implemented a policy that no component be single-sourced and that second-source suppliers be located domestically where possible.

We believe our status as a U.S.

company with U.S.

manufacturing reduces the potential impact of U.S.

We believe our Array Legacy Operation’s status as a U.S.-based company with products manufactured in the U.S.

reduces the potential impact of U.S.

government tariffs placed on, or other U.S.

government regulatory actions taken against, products manufactured in foreign countries.

government regulatory actions taken against, products manufactured in foreign countries and imported into the U.S.

Research and Development

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The success of our business depends, in part, on our ability to maintain and protect our proprietary technologies, information, processes and know-how.

We rely primarily on patent, trademark, copyright and trade secret laws in the United States and similar laws in other countries, confidentiality agreements and procedures and other contractual arrangements to protect our technology.

As of December 31, 2021, we had two U.S.

trademark registrations, eleven issued U.S.

We rely primarily on patent, trademark, copyright and trade secret laws in the U.S.

and similar laws in other countries, confidentiality agreements and procedures and other contractual arrangements to protect our technology.

As of February 24, 2023, we had 27 issued U.S.

patents, 197 issued non-U.S.

patents, eighteen patent applications pending for examination in the United States, fourteen U.S.

provisional patent applications pending, 94 patent applications pending for examination in other countries and eight domain name registrations.

Many of our patents relate to mounting assemblies, solar trackers and related methods.

patents and 130 U.S.

patent applications pending.

Similarly, we have 48 registered U.S.

and foreign trademarks and 96 U.S.

and foreign pending trademark applications.

issued patents are scheduled to expire between 2030 and 2037.

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We believe that many elements of our manufacturing processes involve proprietary know-how, technology or data that are not covered by patents or patent applications, including technical processes, test equipment designs, algorithms, and procedures.

Our policy is for our research and development employees to enter into confidentiality and proprietary information agreements with us to address intellectual property protection issues and require our employees to assign to us all the inventions, designs and technologies they develop during the course of employment with us.

Our policy is for our R&D employees to enter into confidentiality and proprietary information agreements with us to address intellectual property protection issues and require our employees to assign to us all the inventions, designs and technologies they develop during the course of employment with us.

However, we might not have entered into such agreements with all applicable personnel, and such agreements might not be self-executing.

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Government Contracts

Our revenue is impacted by seasonality related to federal investment tax credit (“ITC”) step-downs for solar energy projects and construction activity.

Our revenue has been impacted by seasonality related to federal investment tax credit (“ITC”) step-downs for solar energy projects and seasonal construction activity.

ITC Step-Downs

While solar power is cost-competitive with conventional forms of generation in many U.S.

states even without the ITC, we believe step-downs in the ITC have influenced, and will continue to influence, the timing and quantity of some customers’ orders.

states even without the ITC, we believe step-downs in the ITC have influenced the timing and quantity of some customers’ orders.

During the fourth quarter of 2019, we received approximately $400 million of orders that were structured to maintain our customers’ eligibility for the 30% ITC available for projects for which construction began before 2020.

We shipped and recorded the associated revenues on approximately $100 million and $300 million of those orders in the fourth quarter of 2019 and first half of 2020, respectively.

During the fourth quarter of 2020, we received approximately $80 million of orders that were structured to maintain our customers’ eligibility for the 26% ITC that is available for projects for which construction began before 2021, respectively.

We shipped and recorded the associated revenues on approximately $40 million and $40 million of those orders in the fourth quarter of 2020 and the first half of 2021, respectively.

The current 26% ITC phases down to 22% for projects that begin construction in 2023, and then phases down to a permanent 10% level for projects that begin construction in 2024 or later.

We cannot predict our customers’ behavior;

however, should the step-downs remain intact we expect to see a similar order pattern to what was experienced in prior years.

We shipped and recorded the associated revenues on approximately $40 million and $40 million of those orders during the fourth quarter of 2020 and the first half of 2021, respectively.

With the passage of the Inflation Reduction Act (“IRA”) in August 2022, the ITC was raised to 30% with no step downs until 2032.

Accordingly, we do not anticipate the ITC rate to impact our seasonality during that timeframe.

Construction Activity

Project construction activity in North America is lower in colder months.

Project construction activity in North America and Europe tends to be lower in colder months.

The installation of a solar tracker requires setting foundations in the ground which is more costly when the ground is frozen.

Accordingly, we typically expect to see higher revenues in the second and third quarters when the weather is warmer in North America and lower in the first and fourth quarters when the weather is colder absent other factors.

While we expect this seasonality will continue to impact us in the near term as a large portion of our business is in North America, we expect to see less pronounced seasonal variations as we expand into new global markets in the southern hemisphere.

Accordingly, we typically expect to see higher revenues in the second and third quarters when the weather is warmer in the northern hemisphere and lower in the first and fourth quarters when the weather is colder absent other factors.

While we expect this seasonality will continue to impact us in the near term as a large portion of our business is in North America and Europe, we expect to see less pronounced seasonal variations as we grow our business in Brazil and further expand into new markets in the southern hemisphere.

Government Regulation

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The range and duration of these incentives varies widely by geographic market.

The market for grid-connected applications, where solar power is sold into organized electric markets or pursuant to power purchase agreements, often depends in large part on the availability and size of these government subsidies and

economic incentives.

The following is a summary of the major current government subsidies and economic incentives in the key jurisdictions where our customers operate.

United States.

federal government provides an ITC that allows a taxpayer to offset its federal income tax liability by a percentage of its cost basis in a solar energy system put to commercial use.

The value of the tax credit varies depending on the year in which construction is deemed to begin.

Under the current legislative framework, solar projects that were under construction by the end of 2019 qualify for a tax credit equal to 30% of the project’s cost.

The value dropped to 26% for projects starting construction in 2020 through 2022, and 22% for projects starting construction in 2023.

The credit drops to a permanent 10% level for projects that begin construction in 2024 or later.

Projects that begin construction before 2024 but are not placed in service until 2026 or later, are also limited to the 10% credit.

The federal government also permits accelerated depreciation, and in some cases 100% “bonus” depreciation, for certain equipment, including solar energy systems.

In addition, some U.S.

states offer an additional corporate investment or production tax credit for solar that is additive to the ITC.

Additionally, many U.S.

states and local jurisdictions have established various property tax abatement incentives for renewable energy systems.

The recently-enacted IRA in the U.S.

makes significant changes to the tax credit regime that applies to solar facilities.

As a result of changes made by the IRA, U.S.

taxpayers generally will be entitled to a 30% ITC for projects placed in service after 2021, increased to 40% if certain “domestic content” requirements are satisfied, subject, in each case, to an 80% reduction if certain wage and apprenticeship requirements are not satisfied or deemed satisfied in accordance with the requirements of the IRA (either because the project has a net output of less than 1 megawatt or because construction begins before January 29, 2023, the date that is 60 days after the IRS released guidance relating to the prevailing wage and apprenticeship requirements).

In order to meet the domestic content requirements a qualified facility must show that the project incorporates domestically sourced iron, steel, and manufactured products.

In addition, certain other incremental credits are potentially available for facilities located in “energy communities” or “low-income communities” or that are part of “low-income benefit projects” or “low-income residential building projects.”

As a result of changes made by the IRA, U.S.

taxpayers will generally also be allowed to elect to receive a production tax credit (“PTC”) in lieu of the ITC for qualified solar facilities if the construction begins before January 1, 2025 and that are placed in service after 2021.

The PTC is available for electricity produced and

sold to unrelated persons in the ten years following a project’s placement in service and is equal to an inflation-adjusted amount (currently 2.6 cents per kilowatt hour, assuming the prevailing wage requirements described above are satisfied or deemed satisfied, reduced by 80% if those requirements are not satisfied) for every kilowatt-hour of electricity produced by a facility.

The available credit amount is increased by 10% if the domestic content requirements described above are satisfied.

Certain additional incremental PTCs are also available similar to the incremental ITCs described above.

In the case of projects placed in service after 2024, each of the ITC and PTC will be replaced by similar “technology neutral” tax credit incentives that mimic the ITC and PTC but also require that projects satisfy a “zero greenhouse gas emissions” standard (which solar does) in order to qualify for the credits.

This new credit regime will continue to apply to projects that begin construction prior to the end of 2033 (and possibly later), at which point the credits will become subject to a phase-out schedule.

Human Capital

We believe our success depends on our ability to attract and retain outstanding employees at all levels of our business.

As of December 31, 2021, we had 471 full-time employees, of which approximately 93% are located in the United States, with the balance located in Europe, Latin America, Australia, and Asia.

As of December 31, 2022, we had 1,082 full-time employees, of which approximately 51% are located in the U.S., with the balance located in Europe, South America, Latin America, Africa, Australia, and Asia.

None of our employees are represented by a labor union.

We have not experienced any employment-related work stoppages, and we consider relations with our employees to be good.

During the COVID-19 pandemic, we have implemented procedures to reduce the risk of spreading the virus and have implemented an hourly incentive for employees that work in our manufacturing facilities.

We have a team-oriented culture, which we believe helps us to succeed and drive operational excellence.

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We drive high levels of performance and improvement by prioritizing training and development to ensure our team members are equipped with the knowledge, skills, and tools to succeed.

We motivate and develop our employees by providing them with opportunities for advancement, and we invest in both on-the-job training and on-line training and development tools because we believe our people are the ultimate drivers of our success.

We motivate and develop our employees by providing them with opportunities for advancement, and we invest in both on-the-job training and online training and development tools because we believe our people are the ultimate drivers of our success.

These initiatives include multiple compliance trainings as well as various leadership development courses.

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Our employees’ health and safety is important to us.

During the COVID-19 pandemic, we took measures to ensure the safety of our employees by complying with federal, state and local health guidelines, and we have implemented procedures to reduce the risk of spreading the virus, such as work from home measures,

restricting the number of attendees at events or in-person meetings, limiting the number of people in our buildings and factories at a given time, further restricting access to our facilities and suspending employee travel, and we have also implemented an hourly incentive for employees that work in our manufacturing facilities.

During the COVID-19 pandemic, we implemented procedures to reduce the risk of spreading the virus.

In addition, we believe that all accidents and injuries at work are preventable and we aim to ensure a zero-injury culture across our offices and operations.

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Information on our website is not incorporated by reference herein.

We will make available on our website, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

We will make available on our website, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

The SEC maintains an Internet site (http://www.sec.gov) containing reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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

What changed 10-K

Item 1. Business