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Item 1. Financial Statements

2023-11-07 compared with 2023-08-08 · 173 added, 135 removed, 509 unchanged (38% of the section changed)

3 unchanged sentences

(in thousands, except per share and share amounts)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Current assets:

29 unchanged sentences

Long-term debt, net of current portion 658,879 720,352

Total liabilities 1,240,492 1,282,201

Array Technologies, Inc.

1 unchanged sentence

(in thousands, except per share and share amounts)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Total liabilities 1,162,363 1,282,201

Commitments and contingencies (Note 11)

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

419,259 and 406,389 shares issued as of June 30, 2023 and December 31, 2022, respectively;

425,956 and 406,389 shares issued as of September 30, 2023 and December 31, 2022, respectively;

liquidation preference of $ 493.1 million and $ 493.1 million at respective dates

14 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended

June 30, Six Months Ended

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

1 unchanged sentence

Cost of revenue:

Cost of product and service revenue 259,419 434,801 892,696 1,088,719

Amortization of developed technology 3,640 3,640 10,918 10,918

Total cost of revenue 263,059 438,441 903,614 1,099,637

Gross profit 87,379 76,583 331,322 135,838

5 unchanged sentences

Income (loss) from operations 40,205 17,194 183,904 ( 34,482 )

Other income (expense):

Other income (expense), net 125 ( 371 ) 319 372

Other (expense) income:

Other (expense), net ( 446 ) ( 1,092 ) ( 127 ) ( 2,295 )

Interest income 3,425 778 6,124 2,371

Legal settlement — 42,750 — 42,750

Foreign currency gain (loss) 207 ( 159 ) 273 1,968

1 unchanged sentence

Interest expense ( 13,064 ) ( 8,831 ) ( 35,372 ) ( 23,812 )

Total other (expense) ( 9,030 ) ( 10,128 ) ( 20,480 ) ( 12,464 )

Income (loss) before income tax (benefit) expense 87,211 ( 23,460 ) 123,219 ( 64,140 )

Income tax (benefit) expense 22,403 ( 18,436 ) 32,279 ( 33,179 )

Net income (loss) 64,808 ( 5,024 ) 90,940 ( 30,961 )

Total other (expense) income ( 9,762 ) 33,446 ( 30,242 ) 20,982

Income (loss) before taxes 30,443 50,640 153,662 ( 13,500 )

Income tax expense (benefit) 7,229 9,996 39,508 ( 23,183 )

Net income 23,214 40,644 114,154 9,683

Preferred dividends and accretion 13,091 12,257 38,359 36,045

6 unchanged sentences

Diluted 152,323 151,382 152,083 149,604

Array Technologies, Inc.

Condensed Consolidated Statements of Operations (unaudited)

(in thousands, except per share amounts)

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands)

Three Months Ended June 30, Six Months Ended

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Net income (loss) $ 64,808 $ ( 5,024 ) $ 90,940 $ ( 30,961 )

Net income $ 23,214 $ 40,644 $ 114,154 $ 9,683

Change in foreign currency translation adjustments (1)

6 unchanged sentences

(in thousands)

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Temporary Equity Permanent Equity

1 unchanged sentence

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

Balance at March 31, 2023 413 $ 312,054 — $ — 150,823 $ 150 $ 426,221 $ ( 241,338 ) $ 22,297 $ 207,330

Balance at June 30, 2023 419 $ 324,838 — $ — 151,049 $ 151 $ 417,624 $ ( 176,530 ) $ 46,209 $ 287,454

Equity-based compensation — — — — 22 — 3,383 — — 3,383

1 unchanged sentence

Net income — — — — — — — 23,214 — 23,214

Other comprehensive income — — — — — — — 23,912 23,912

Balance at June 30, 2023 419 $ 324,838 — $ — 151,049 $ 151 $ 417,624 $ ( 176,530 ) $ 46,209 $ 287,454

Other comprehensive loss — — — — — — — — ( 22,495 ) ( 22,495 )

Balance at September 30, 2023 426 $ 337,929 — $ — 151,071 $ 151 $ 407,916 $ ( 153,316 ) $ 23,714 $ 278,465

Array Technologies, Inc.

1 unchanged sentence

(in thousands)

Three Months Ended June 30, 2022

Three Months Ended September 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

Balance at March 31, 2022 400 $ 281,792 — — 150,174 $ 150 $ 411,232 $ ( 297,839 ) $ 56,675 $ 170,218

Shares Amount Shares Amount Shares Amount Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss

Total Stockholders’ Equity

Balance at June 30, 2022 413 $ 293,974 — — 150,279 $ 150 $ 401,614 $ ( 302,863 ) $ 11,467 $ 110,368

Equity-based compensation — — — — 55 — 4,097 — — 4,097

1 unchanged sentence

Preferred cumulative dividends plus accretion — 12,257 — — — — ( 12,257 ) — — ( 12,257 )

Net loss — — — — — — — ( 5,024 ) — ( 5,024 )

Dividends paid ( 13 ) ( 18,670 ) — — — — — — — —

Net income — — — — — — — 40,644 — 40,644

Other comprehensive loss — — — — — — — — ( 30,807 ) ( 30,807 )

Balance at June 30, 2022 413 $ 293,974 — — 150,279 $ 150 $ 401,614 $ ( 302,863 ) $ 11,467 $ 110,368

Balance at September 30, 2022 400 $ 287,561 — — 150,334 $ 150 $ 392,862 $ ( 262,219 ) $ ( 19,340 ) $ 111,453

Array Technologies, Inc.

1 unchanged sentence

(in thousands)

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Temporary Equity Permanent Equity

7 unchanged sentences

Other comprehensive income — — — — — — — — 15,289 15,289

Balance at June 30, 2023 419 $ 324,838 — $ — 151,049 $ 151 $ 417,624 $ ( 176,530 ) $ 46,209 $ 287,454

Balance at September 30, 2023 426 $ 337,929 — $ — 151,071 $ 151 $ 407,916 $ ( 153,316 ) $ 23,714 $ 278,465

Array Technologies, Inc.

1 unchanged sentence

(in thousands)

Six Months Ended June 30, 2022

Nine Months Ended September 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

Shares Amount Shares Amount Shares Amount Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss

Total Stockholders’ Equity

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

2 unchanged sentences

Preferred cumulative dividends plus accretion 13 36,045 — — — — ( 36,045 ) — — ( 36,045 )

Net loss — — — — — — — ( 30,961 ) — ( 30,961 )

Dividends paid ( 13 ) ( 18,670 ) — — — — — — — —

Net income — — — — — — — 9,683 — 9,683

Other comprehensive income — — — — — — — — ( 19,340 ) ( 19,340 )

Balance at June 30, 2022 413 $ 293,974 — $ — 150,279 $ 150 $ 401,614 $ ( 302,863 ) $ 11,467 $ 110,368

Balance at September 30, 2022 400 $ 287,561 — $ — 150,334 $ 150 $ 392,862 $ ( 262,219 ) $ ( 19,340 ) $ 111,453

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended September 30,

Operating activities:

Net income (loss) $ 90,940 $ ( 30,961 )

Adjustments to net income (loss):

Provision for bad debts ( 141 ) 510

Deferred tax expense 816 ( 23,910 )

Net income $ 114,154 $ 9,683

Adjustments to net income:

Provision for (recovery of) bad debts ( 117 ) 660

Deferred tax expense (benefit) 284 ( 36,002 )

Depreciation and amortization 30,318 64,039

Amortization of developed technology 10,918 10,918

Amortization of debt discount and issuance costs 9,123 5,003

11 unchanged sentences

Accrued expenses and other 18,484 41,271

Warranty payments — ( 373 )

Income tax payable ( 738 ) 2,951

1 unchanged sentence

Deferred revenue ( 78,165 ) 34,772

Net cash provided by (used in) operating activities 66,356 ( 60,764 )

Net cash provided by operating activities 137,974 44,023

Investing activities:

7 unchanged sentences

Common stock issuance costs — ( 450 )

Dividends on Series A Preferred — ( 18,670 )

Payments on revolving credit facility — ( 116,000 )

2 unchanged sentences

Principal payments on term loan facility ( 73,225 ) —

Principal payments on other debt ( 38,257 ) ( 22,377 )

Contingent consideration payments ( 1,200 ) ( 1,483 )

Array Technologies, Inc.

1 unchanged sentence

(in thousands)

Six Months Ended

Nine Months Ended September 30,

Principal payments on other debt ( 69,024 ) ( 33,286 )

Contingent consideration payments ( 1,200 ) ( 1,483 )

Net cash provided by (used in) financing activities ( 84,442 ) 33,146

19 unchanged sentences

Acquisition of STI Norland

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”).

On January 11, 2022, 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.

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Additional Closing Purchased Put Option

As discussed in Note 11 – Redeemable Perpetual Preferred Stock, of the Company’s consolidated financial statements for the fiscal year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 22, 2023, in August 2021 the Company entered into a Securities Purchase Agreement (the “SPA”) with certain Purchasers (as defined below), which gives the Company the option to require the Purchasers to purchase up to an additional 150,000 shares of Series A Shares (as defined below) and up to 3,375,000 shares of common stock for $ 148.0 million until June 30, 2023 (the “Put Option”).

Upon issuance of the Put Option, the Company recorded a reduction to additional paid-in-capital of approximately $ 12.4 million because the Company originally concluded that the Put Option should be classified as equity.

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GAAP”), pursuant to the rules and regulations of the SEC.

The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the

opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of results for the interim periods reported.

The results for the three and six months ended June 30, 2023, are not necessarily indicative of results to be expected for the year ending December 31, 2023, or any other interim periods, or any future year or period.

The unaudited interim financial

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

The results for the three and nine months ended September 30, 2023, are not necessarily indicative of results to be expected for the year ending December 31, 2023, or any other interim periods, or any future year or period.

The balance sheet as of December 31, 2022, included herein was derived from the audited financial statements as of that date.

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and its consolidated subsidiaries, and the term “condensed consolidated financial statements” refers to the accompanying unaudited condensed consolidated financial statements contained in this Quarterly Report.

Reclassifications

Beginning in the third quarter of 2023, the Company reclassified amounts recorded for amortization of certain acquired intangible assets in prior presentations from Total operating expenses under the caption "Depreciation and amortization" to Total cost of revenue under the caption "Amortization of developed technology" in the condensed consolidated statements of operations.

The Company believes this presentation enhances the comparability of the Company’s financial statements to industry peers.

These reclassifications resulted in $ 3.6 million and $ 10.9 million recorded to Amortization of developed technology within Total cost of revenue and a $ 3.6 million and $ 10.9 million decrease to Depreciation and amortization within Total operating expenses during the three and nine months ended September 30, 2022, respectively.

These reclassifications did not impact the Company’s operating income (loss), net income (loss) or earnings (loss) per share for any current or historical periods.

These reclassifications also did not impact the condensed consolidated balance sheets or condensed consolidated statements of cash flows.

Beginning in the third quarter of 2023, revenue excludes a $ 20.1 million Brazil value-added tax benefit, Imposto sobre Circulação de Mercadorias e Servicos (“ICMS”), that has been reclassified and included in cost of revenues in the current year.

This reclassification was determined to be appropriate after we evaluated the expected accounting treatment related to future governmental incentives under the Inflation Reduction Act.

For the nine months ended September 30, 2022, an ICMS benefit of $ 8.2 million was included in revenues.

This reclassification had no impact on the Company’s gross profit, income (loss) from operations, net income or income (loss) per common share in the current period.

These reclassifications also did not impact the condensed consolidated balance sheets or condensed consolidated statements of cash flows.

Principles of Consolidation

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

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 the ultimate severity or duration of the conflict in Ukraine, but we continue to monitor the situation and evaluate our procurement strategy and supply chain as to reduce any negative impact on our business, financial condition and results of operations.

Inflationary pressures, while somewhat moderating recently, are expected to persist, at least in the near-term, and may negatively impact our results of operations.

Impact of the Ongoing Russian-Ukraine Conflict

The ongoing Russian-Ukraine conflict 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 the ultimate severity or duration of the conflict, but we continue to monitor the situation and evaluate our procurement strategy and supply chain as to reduce any negative impact on our business, financial condition and results of operations.

Inflationary pressures are expected to persist, at least in the near-term, and may negatively impact our results of operations.

To mitigate the inflationary pressures on our business, we have implemented selective price increases in certain markets, accelerated productivity initiatives and expanded our supplier base, while continuing to execute on overhead cost containment practices.

Business Combinations

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

805 Business Combinations (“ASC 805”).

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

6 unchanged sentences

When translating from the local currency to the functional currency, monetary assets and liabilities are translated at the current exchange rate resulting in foreign exchange gains or losses, and non-monetary assets are translated at historical exchange rates.

Changes in the exchange rates between the functional currencies of our subsidiaries and the currencies in which monetary financial assets and liabilities are denominated in, will create fluctuations in our reported condensed consolidated statements of operations and cash flows.

Changes in the exchange rates between the functional

currencies of our subsidiaries and the currencies in which monetary financial assets and liabilities are denominated, will create fluctuations in our reported condensed consolidated statements of operations and cash flows.

Derivative Financial Instruments

2 unchanged sentences

See Note 1 – Organization, Business and Out-of-Period Adjustments , for further information.

As of June 30, 2023, the Put Option has expired and as a result, the fair value of the Put Option is $ 0 .

Recent Accounting Pronouncements

9 unchanged sentences

There was no significant impact to the Company’s condensed consolidated financial statements related to the adoption of ASU 2020-04 and ASU 2022-06.

continues to evaluate the impact of the ASU 2020-04 guidance and may apply other elections, as applicable, as additional changes in the market occur.

The Company continues to evaluate the impact of the ASU 2020-04 guidance and may apply other elections, as applicable, as additional changes in the market occur.

In March 2023, the Company amended an existing debt agreement to replace the London Interbank Offered Rate (“LIBOR”) interest rate provisions with interest rate provisions based on a forward-looking term rate based on the secured overnight funding rate (“SOFR”) (see Note 7 – Debt ).

2 unchanged sentences

Inventories consisted of the following (in thousands):

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Raw materials $ 133,726 $ 66,574

Finished goods 82,292 166,585

Total $ 206,857 $ 233,159

Inventories $ 216,018 $ 233,159

Property, Plant and Equipment, Net

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

Estimated Useful Lives (Years) June 30, 2023 December 31, 2022

Estimated Useful Lives (Years) September 30, 2023 December 31, 2022

Land N/A $ 1,612 $ 1,583

8 unchanged sentences

Property, plant and equipment, net $ 29,521 $ 23,174

Depreciation expense was $ 0.8 million and $ 0.6 million for the three months ended June 30, 2023 and 2022, respectively, of which $ 0.3 million and $ 0.4 million was allocated to cost of revenue and $ 0.5 million and $ 0.2 million was included in depreciation and amortization, on the accompanying condensed consolidated statements of operations for the three months ended June 30, 2023 and 2022.

Depreciation expense was $ 1.5 million and $ 1.2 million for the six months ended June 30, 2023 and 2022, respectively, of which $ 0.6 million and $ 0.9 million was allocated to cost of revenue and $ 0.9 million and $ 0.3 million was included in depreciation and amortization on the accompanying condensed consolidated statements of operations for the six months ended June 30, 2023 and 2022.

Depreciation expense was $ 0.9 million and $ 0.7 million for the three months ended September 30, 2023 and 2022, respectively, of which $ 0.4 million was included in cost of revenue in both periods and $ 0.5 million and $ 0.3 million, respectively, was included in depreciation and amortization, on the accompanying condensed consolidated statements of operations.

Depreciation expense was $ 2.4 million and $ 1.9 million for the nine months ended September 30, 2023 and 2022, respectively, of which $ 1.0 million and $ 1.2 million, respectively, was included in cost of revenue and $ 1.4 million and $ 0.6 million, respectively, was included in depreciation and amortization on the accompanying condensed consolidated statements of operations.

Goodwill and Other Intangible Assets, Net

Changes in the carrying amount of goodwill by operating segment during the six months ended June 30, 2023, consisted of the following (in thousands):

Changes in the carrying amount of goodwill by operating segment during the nine months ended September 30, 2023, consisted of the following (in thousands):

Array Legacy Operations (1)

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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 our most recent evaluation, we concluded there were no indicators of impairment as of June 30, 2023.

During our most recent evaluation, we concluded there were no indicators of impairment as of September 30, 2023.

Other Intangible Assets, Net

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

Estimated Useful Lives (Years) June 30, 2023 December 31, 2022

Estimated Useful Lives (Years) September 30, 2023 December 31, 2022

Developed technology 14 $ 203,800 $ 203,800

10 unchanged sentences

Total amortizable intangibles, net 343,623 376,064

Non-amortizable costs:

Non-amortizable:

Trade name 10,300 10,300

Total other intangible assets, net $ 353,923 $ 386,364

Amortization expense related to intangible assets was $ 12.4 million and $ 25.8 million for the three months ended June 30, 2023 and 2022, respectively, and $ 26.2 million and $ 48.9 million for the six months ended June 30, 2023 and 2022, respectively.

Estimated future amortization expense of intangible assets as of June 30, 2023, is as follows (in thousands):

Amortization expense related to intangible assets was $ 12.6 million and $ 24.6 million for the three months ended September 30, 2023 and 2022, respectively, of which $ 3.6 million was included in amortization of developed technology, a component of cost of revenue, in both periods and $ 9.0 million and $ 21.0 million, respectively, was included in depreciation and amortization, on the accompanying condensed consolidated statements of operations.

Amortization expense related to intangible assets was $ 38.8 million and $ 73.5 million for the nine months ended September 30, 2023 and 2022, respectively, of which $ 10.9 million was included in amortization of developed technology, a component of cost of revenue, in both periods and $ 27.9 million and $ 62.6 million, respectively, was included in depreciation and amortization, on the accompanying condensed consolidated statements of operations.

Estimated future amortization expense of intangible assets as of September 30, 2023, is as follows (in thousands):

Remainder of 2023 $ 12,384

Thereafter 146,343

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

As of June 30, 2023, no events or circumstances were noted that would indicate the carrying amount of any of our asset groups may not be recoverable.

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

As of September 30, 2023, no events or circumstances were noted that would indicate the carrying amount of any of our asset groups may not be recoverable.

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 of $ 22.4 million and a benefit of $ 18.4 million for the three months ended June 30, 2023 and 2022, respectively, and an expense of $ 32.3 million and a benefit of $ 33.2 million for the six months ended June 30, 2023 and 2022, respectively.

The tax expense for the six months ended June 30, 2023 was unfavorably impacted by higher income reported in non-U.S.

jurisdictions and an increase in income tax expense related to the Put Option (see Note 1 – Organization, Business and Out-of-Period Adjustments ), partially offset by benefits related to excess equity-based compensation deductions recorded discretely during the quarter.

The tax benefit for the six months ended June 30, 2022 was favorably impacted by losses in non-U.S.

The Company recorded income tax expense of $ 7.2 million and $ 10.0 million for the three months ended September 30, 2023 and 2022, respectively, and an expense of $ 39.5 million and a benefit of $ 23.2 million for the nine months ended September 30, 2023 and 2022, respectively.

The income tax expense for the nine months ended September 30, 2023, was unfavorably impacted by higher income in non-U.S.

The tax expense for the nine months ended September 30, 2022, was favorably impacted by losses in non-U.S.

jurisdictions which have higher tax rates than the U.S., partially offset by non-deductible expenses.

For the six months ended June 30, 2023 and 2022, no reserves for uncertain tax positions have been recorded.

For the nine months ended September 30, 2023 and 2022, no reserves for uncertain tax positions have been recorded.

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

The following table summarizes the Company’s total debt (in thousands):

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Senior Secured Credit Facility:

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Revolving Credit Facility

Under the Revolving Credit Facility, the Company had no outstanding balance as of both June 30, 2023 and December 31, 2022, $ 26.7 million and $ 38.8 million in standby letters of credit at June 30, 2023 and December 31, 2022, respectively, and availability of $ 173.3 million and $ 161.2 million at June 30, 2023 and December 31, 2022, respectively.

Under the Revolving Credit Facility, the Company had no outstanding balance as of both September 30, 2023 and December 31, 2022, $ 24.9 million and $ 38.8 million in standby letters of credit at September 30, 2023 and December 31, 2022, respectively, and availability of $ 175.1 million and $ 161.2 million at September 30, 2023 and December 31, 2022, respectively.

In accordance with the Third Amendment, the Revolving Credit Facility pays interest at the Company’s election, at either (x) for SOFR Loans at Adjusted Term SOFR (as defined in the Credit Agreement) plus 3.25 % or (y) for Base Rate Loans at the higher of the Prime Rate, one half of 1.00 % above the Federal Funds Rate or the Adjusted Term SOFR for one month interest period, after giving effect to any floor plus 1.00 %, plus 2.25 %.

Term Loan Facility

The Term Loan Facility had a balance of $ 290.3 million and $ 312.5 million as of June 30, 2023 and December 31, 2022, 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 $ 15.5 million and $ 19.1 million as of June 30, 2023 and December 31, 2022, respectively.

In accordance with the Third Amendment, the Term Loan Facility pays interest at the Company’s election, at either (x) for SOFR Loans at Adjusted Term SOFR (subject to a floor of 0.50 %) plus 3.25 % or (y) for Base Rate Loans at the higher of the Prime Rate, one half of 1.00 %

above the Federal Funds Rate or the Adjusted Term SOFR for one-month interest period, after giving effect to any floor plus 1.00 %, plus 2.25 %.

The debt discount and issuance costs are being amortized using the effective interest method and the effective interest rate of the Term Loan Facility as of June 30, 2023, was 9.41 %.

The Term Loan Facility had a balance of $ 239.3 million and $ 312.5 million as of September 30, 2023 and December 31, 2022, 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 $ 12.0 million and $ 19.1 million as of September 30, 2023 and December 31, 2022, respectively.

Prime Rate, one half of 1.00 % above the Federal Funds Rate or the Adjusted Term SOFR for one-month interest period, after giving effect to any floor plus 1.00 %, plus 2.25 %.

The debt discount and issuance costs are being amortized using the effective interest method and the effective interest rate of the Term Loan Facility as of September 30, 2023, was 9.95 %.

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 an advance principal payment for the year ended December 31, 2022.

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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.

As of September 30, 2023 and December 31, 2022, the principal balance of the Convertible Notes was $ 425.0 million with unamortized discount and issuance costs of $ 9.8 million and $ 11.3 million, respectively, for a net carrying amount of $ 415.2 million and $ 413.8 million, respectively.

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

The Convertible Notes were not convertible during the six months ended June 30, 2023, 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 three and six months ended June 30, 2023.

The Convertible Notes were not convertible during the nine months ended September 30, 2023, 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 three and nine months ended September 30, 2023.

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.

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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;

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

a tender offer;

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The Company has classified the Series A Shares as temporary equity and is accreting the carrying amount to its full redemption amount from the date of issuance to the earliest redemption date using the effective interest method.

Such accretion totaled $ 12.4 million and $ 11.1 million for the six months ended June 30, 2023 and 2022, respectively.

Such accretion totaled $ 18.8 million and $ 17.2 million for the nine months ended September 30, 2023 and 2022, respectively.

Refer to Note 2 – Summary of Significant Accounting Policies for information regarding the accounting for the Put Option.

6 unchanged sentences

As used herein, “Liquidation Preference” means, with respect to the Series A Shares, the initial liquidation preference of $ 1,000 per share, plus accrued dividends of such share at the time of the determination.

During the six months ended June 30, 2023, the Company accrued dividends on the Series A Shares at the Accrued Regular Dividend rate of 6.25 % totaling $ 12.9 million.

As of June 30, 2023, the Company has accrued and unpaid dividends of $ 19.3 million.

During the nine months ended September 30, 2023, the Company accrued dividends on the Series A Shares at the Accrued Regular Dividend rate of 6.25 % totaling $ 19.6 million.

As of September 30, 2023, total accrued and unpaid dividends were $ 26.0 million.

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

1 unchanged sentence

Accordingly, the discount is amortized over five years using the effective yield method.

During the six months ended June 30, 2023, the Company paid the Purchasers a 3 % per annum cash commitment fee totaling $ 1,508 on the unpurchased portion of Put Option.

During the six months ended June 30, 2023, the Company paid the Purchasers a per annum cash commitment fee totaling $ 1.5 million on the unpurchased portion of Put Option.

The Put Option expired effective June 30, 2023.

The Company disaggregates its revenue from contracts with customers by sales recorded over time and sales recorded at a point in time.

The following table presents the Company’s disaggregated revenues (in thousands):

Three Months Ended

June 30, Six Months Ended

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

7 unchanged sentences

The changes in contract assets and the corresponding amounts recorded in revenue relate to fluctuations in the timing and volume of billings.

C ontract assets are recorded within accounts receivable, net on the condensed consolidated balance sheets on a contract-by-contract basis and consisted of the following at the end of each reporting period (in thousands):

June 30, 2023 December 31, 2022

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

September 30, 2023 December 31, 2022

Unbilled receivables $ 74,076 $ 101,513

2 unchanged sentences

Contract liabilities are recorded on a contract-by-contract basis and consisted of the following at the end of each reporting period (in thousands):

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Deferred revenue $ 100,757 $ 178,922

During the six months ended June 30, 2023, the Company converted $ 160.0 million in deferred revenue to revenue, which represented 89 % of the prior year’s deferred revenue balance.

During the nine months ended September 30, 2023, the Company converted $ 153.9 million in deferred revenue to revenue, which represented 86 % of the prior year’s deferred revenue balance.

Bill-and-Hold Arrangements

6 unchanged sentences

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.

During the three and six months ended June 30, 2023, the Company recognized $ 3.5 million and $ 22.8 million, respectively, in revenue from a single customer for the sale of goods and services that contained bill-and-hold obligations such as storage, handling and other custodial duties.

During the three and nine months ended September 30, 2023, the Company recognized zero and $ 22.8 million, respectively, in revenue from a single customer for the sale of goods and services that also contained bill-and-hold obligations such as storage, handling and other custodial duties.

Remaining Performance Obligations

As of June 30, 2023, the Company had $ 452.7 million of remaining performance obligations.

As of September 30, 2023, the Company had $ 336.2 million of remaining performance obligations.

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

1 unchanged sentence

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

Three Months Ended

June 30, Six Months Ended

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Net income (loss) $ 64,808 $ ( 5,024 ) $ 90,940 $ ( 30,961 )

Net income $ 23,214 $ 40,644 $ 114,154 $ 9,683

preferred dividends and accretion 13,091 12,257 38,359 36,045

5 unchanged sentences

Income (loss) per share $ 0.07 $ 0.19 $ 0.50 $ ( 0.18 )

Potentially dilutive common shares issuable pursuant to equity-based awards of 2,413 were not included for the six months ended June 30, 2022, as their potential effect was anti-dilutive given the Company generated a net loss to common shareholders.

There were no potentially dilutive common shares issuable pursuant to the Convertible Notes for both the six months ended June 30, 2023 and 2022, as the average market price of the Company’s common stock has not exceeded the exercise price since their issuance.

Potentially dilutive common shares issuable pursuant to equity-based awards of 108,111 were not included for the nine months ended September 30, 2022, as their potential effect was anti-dilutive given the Company generated a net loss to common shareholders.

There were no potentially dilutive common shares issuable pursuant to the Convertible Notes for both the nine months ended September 30, 2023 and 2022, as the average market price of the Company’s common stock has not exceeded the exercise price since their issuance.

Commitments and Contingencies

3 unchanged sentences

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.

10 unchanged sentences

The complaint alleges:

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

On August 24, 2021, the Second SDNY Derivative Action was consolidated with the First SDNY 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.

(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 SDNY Derivative Action was consolidated with the First SDNY Derivative Action (the “Consolidated SDNY Derivative Action”), the Court appointed co-lead counsel, and the case was temporarily stayed pending the entry of an order on all motions to dismiss directed at the pleadings filed in the Plymouth Action.

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

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

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

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

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

2 unchanged sentences

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

On August 17, 2022, the Court in the Plymouth Action set a briefing schedule for any motion to dismiss with the opening motion and supporting memorandum to be filed on or before October 17, 2022, any opposition to be filed on or before December 16, 2022, and any reply in support of the motion to be filed on or before January 16, 2023.

The Company and other defendants in the Plymouth Action filed a joint motion to dismiss (the “Motion to Dismiss”) the Consolidated Amended Complaint on October 17, 2022.

On October 17, 2022, the Company and other defendants in the Plymouth Action filed a joint motion to dismiss (the “Motion to Dismiss”) the Consolidated Amended Complaint.

The lead plaintiff filed a motion opposing the Motion to Dismiss on December 16, 2022, and the Company and other defendants filed a reply in support of the motion to dismiss on January 17, 2023.

1 unchanged sentence

On July 5, 2023, the Court denied the lead plaintiffs’ request for leave to amend the Consolidated Amended Complaint and dismissed the Plymouth Action with prejudice.

On August 4, 2023, the lead plaintiffs filed a notice of appeal of the Court’s dismissal of the Consolidated Amended Complaint.

On August 4, 2023, the lead plaintiffs filed a notice of appeal of the Court’s dismissal of the Consolidated Amended Complaint (the “Second Circuit Appeal”).

On September 11, 2023, pursuant to a scheduling request filed by lead plaintiffs, the United States Court of Appeals for the Second Circuit ordered lead plaintiffs to file their opening brief in the Second Circuit Appeal by November 17, 2023.

On August 3, 2022, a verified derivative complaint was filed in the Court of Chancery of the State of Delaware (the “Court of Chancery”) against certain officers and directors of the Company, asserting claims for:

2 unchanged sentences

(1) breach of fiduciary duty;

(2) aiding and abetting breaches of fiduciary duty;

(2) aiding and abetting

breaches of fiduciary duty;

(3) waste of corporate assets;

2 unchanged sentences

and (6) aiding and abetting insider selling (“Second Delaware Derivative Action”).

On September 2, 2022, the Second Delaware Derivative Action was consolidated with the First Delaware Derivative Action, the Court of Chancery appointed co-lead counsel, and the case was temporarily stayed pending the entry of an order on all motions to dismiss directed at the pleadings filed in the Plymouth Action.

The stay shall remain in effect until the later of (a) the entry of an order on the pending motion to dismiss the Consolidated Amended Complaint in the Plymouth Action, (b) to the extent the Consolidated Amended Complaint in the Plymouth Action is further amended, the entry of an order on any motions to dismiss any such

amended complaints in the Plymouth Action, or (c) the public announcement of a settlement of the Plymouth Action.

On September 2, 2022, the Second Delaware Derivative Action was consolidated with the First Delaware Derivative Action (the “Consolidated Delaware Derivative Action”), the Court of Chancery appointed co-lead counsel, and the case was temporarily stayed pending the entry of an order on all motions to dismiss directed at the pleadings filed in the Plymouth Action.

The stays in both the Consolidated SDNY Derivative Action and the Consolidated Delaware Derivative Action remain in place following the dismissal of the Plymouth Action during the pendency of the Second Circuit Appeal.

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 June 30, 2023.

The Company has not recorded any material loss contingency in the condensed consolidated balance sheets as of September 30, 2023.

Contingent Consideration

6 unchanged sentences

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

As of June 30, 2023 and December 31, 2022, the fair value of the TRA was $ 9.4 million and $ 8.6 million, respectively.

As of September 30, 2023 and December 31, 2022, the fair value of the TRA was $ 9.6 million and $ 8.6 million, respectively.

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

5 unchanged sentences

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

Three Months Ended

June 30, Six Months Ended

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

4 unchanged sentences

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

As of June 30, 2023, the Company posted surety bonds in the total amount of $ 220.9 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.

As of September 30, 2023, the Company posted surety bonds in the total amount of $ 217.6 million.

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

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

1 unchanged sentence

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Carrying Value Fair Value Carrying Value Fair Value

1 unchanged sentence

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.

The following table summarizes the activity related to the Capped Calls (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Beginning balance $ 64,014 $ — $ — $ —

Change in fair value gain and loss

116 — ( 1,140 ) —

Change due to correction of errors (see Note 1) — — 65,270 —

Ending balance $ 64,130 $ — $ 64,130 $ —

The Capped Calls are valued using a Black-Scholes model, with the most judgmental unobservable input being the volatility measure.

The value of the Capped Call is determined using unobservable inputs and is considered to be a Level 3 value in the fair value hierarchy.

The fair value of the Capped Call was $ 64.0 million at June 30, 2023.

The fair value of the Term Loans and Other Debt is estimated using Level 2 inputs.

2 unchanged sentences

Of the $ 15.3 million fixed rate obligations, $ 3.3 million mature in 2023 and $ 11.9 million mature in 2024.

Due to the relative short-term maturity of these obligations, the Company believes current carrying value approximates fair value.

Due to the relative short-term maturity of the fixed rate obligations, the Company believes current carrying value approximates fair value.

The carrying value of the $ 40.0 million variable rate obligations approximate fair value due to the variable nature of the interest rates.

6 unchanged sentences

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

RSU activity under the 2020 Plan during the six months ended June 30, 2023, was as follows:

RSU activity under the 2020 Plan during the nine months ended September 30, 2023, was as follows:

Number of Shares Weighted Average Grant Date Fair Value

3 unchanged sentences

Shares forfeited ( 135,313 ) 18.57

Outstanding non-vested, June 30, 2023 1,827,995 $ 15.57

Outstanding non-vested, September 30, 2023 1,847,712 $ 15.73

Performance Stock Units

4 unchanged sentences

Treasury Constant Maturity rates.

The following assumptions were used in the Monte Carlo simulation for computing the grant date fair value of the PSUs issued during the six months ended June 30, 2023 and 2022:

The following assumptions were used in the Monte Carlo simulation for computing the grant date fair value of the PSUs issued during the nine months ended September 30, 2023 and 2022:

Volatility 90 % 60 %

1 unchanged sentence

Dividend yield — % — %

PSU activity under the 2020 Plan during the six months ended June 30, 2023, was as follows:

PSU activity under the 2020 Plan during the nine months ended September 30, 2023, was as follows:

Number of Shares Weighted Average Grant Date Fair Value

3 unchanged sentences

Shares forfeited ( 33,176 ) 15.15

Outstanding non-vested, June 30, 2023 726,522 $ 14.62

For the three months ended June 30, 2023 and 2022, the Company recognized $ 5.2 million and $ 3.0 million, respectively, in equity-based compensation expense.

For the six months ended June 30, 2023 and 2022, the Company recognized $ 8.6 million and $ 7.5 million, respectively, in equity-based compensation.

At June 30, 2023, the Company had $ 28.2 million of unrecognized compensation costs related to RSUs and PSUs, which are expected to be recognized over approximately 2.2 years and 2.4 years, respectively.

Outstanding non-vested, September 30, 2023 694,811 $ 14.56

For the three months ended September 30, 2023 and 2022, the Company recognized $ 3.4 million and $ 4.2 million, respectively, in equity-based compensation expense.

For the nine months ended September 30, 2023 and 2022, the Company recognized $ 11.9 million and $ 11.7 million, respectively, in equity-based compensation.

At September 30, 2023, the Company had $ 24.7 million of unrecognized compensation costs related to RSUs and PSUs, which are expected to be recognized over approximately 2.0 years and 2.2 years, respectively.

14 Segment Reporting

1 unchanged sentence

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

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

and reportable segment.

Historically, the Company managed its business on the basis of one operating and reportable segment.

Concurrent with the acquisition of STI in January 2022, the Company began operating as two segments;

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, 2023 and 2022 (in thousands):

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

Array Legacy Operations STI Operations Total Array Legacy Operations STI Operations Total

Revenue $ 345,261 $ 162,464 $ 507,725 $ 347,177 $ 72,688 $ 419,865

Gross Profit $ 106,590 $ 43,452 $ 150,042 $ 33,840 $ 6,106 $ 39,946

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Array Legacy Operations STI Operations Total Array Legacy Operations STI Operations Total

Revenue $ 650,465 $ 234,033 $ 884,498 $ 597,829 $ 122,622 $ 720,451

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 nine months ended September 30, 2023 and 2022 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Array Legacy Operations $ 244,857 $ 400,463 $ 895,322 $ 998,292

STI Operations 105,581 114,561 339,614 237,183

Total $ 350,438 $ 515,024 $ 1,234,936 $ 1,235,475

Gross Profit:

Array Legacy Operations $ 58,233 $ 60,281 $ 241,019 $ 108,111

STI Operations 29,146 16,302 90,303 27,727

Total $ 87,379 $ 76,583 $ 331,322 $ 135,838

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