What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-28 compared with 2023-03-22 · 179 added, 256 removed, 161 unchanged (73% of the section changed)

15 unchanged sentences

Our core U.S.

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

patent is on a linked-row, single-driving apparatus that rotates a plurality of tracker rows connected by an articulating drive shaft.

This patent does not expire until February 5, 2030.

With our acquisition of STI in January 2022, we added a dual-row tracker design to our product portfolio.

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During the year ended December 31, 2023, we derived 74% and 26% of our revenues from customers in the U.S.

and rest of the world, respectively.

As of December 31, 2022, we had shipped more than 58 gigawatts of trackers to customers worldwide, including STI.

STI Acquisition

On January 11, 2022, the Company completed the STI Acquisition pursuant to a purchase agreement (“the “Purchase Agreement”), dated November 10, 2021.

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

and the rest of the world, respectively.

As of December 31, 2023, we had shipped more than 73 gigawatts of trackers to customers worldwide.

Acquisition of STI Norland

On January 11, 2022, we completed our acquisition of STI for purchase consideration of $410.5 million in cash and 13,894,800 shares of our 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 including Spain, Brazil, U.S.

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.

Its dual-row tracker system is designed for irregular terrain and regions with low wind and/or snow load requirements.

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

We financed the transaction and related fees and expenses with cash on hand, proceeds from the December 2021 issuance of $425 million of our 1.00% Convertible Senior Notes and proceeds from the issuance of 50,000 shares of our Series A Shares pursuant to the Delayed Draw provision of our SPA.

For further discussion of the STI Acquisition, see Note 3 – Acquisition of STI in the accompanying consolidated financial statements.

Update on the Impact of COVID-19

We continue to closely monitor the ongoing impact of the COVID-19 pandemic in all the locations where we operate.

At this time, the extent to which the pandemic may affect our business, operations and plans, including the resulting impact on our expenditures and capital needs, remains uncertain and is subject to change, but overall, the pandemic appears to be having a lessening impact on our business and the markets in which we operate.

On January 31, 2023, the Biden administration announced its plan to let the coronavirus public health emergency expire in May 2023.

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

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 Latin America and Africa.

Reversal of Out-of-Period Adjustment Recorded during the three months ended March 31, 2023

Capped Calls and Put Option

During the three months ended December 31, 2023, the Company consulted with the staff of the Office of the Chief Accountant of the SEC, and after consultation with the staff, the Company concluded that the change from its historical accounting treatment for its Capped Calls and its Put Option that were made during the three months ended March 31, 2023, was not required.

As a result, the Company has chosen to revert to its historical accounting and reverse the initial cumulative catch-up recorded during the three months ended March 31, 2023, as well as any subsequent fair value adjusting entries recorded during the interim periods in 2023.

See Note 11 – Debt and Item 9B.

Other Information .

Factors Affecting Results Of Operations

Project Timing

Because we recognize revenue on projects as legal title to equipment is transferred from us to the customer, any delays in large projects from one quarter to another for any reason may cause our results of operations for a particular period to fall below expectations.

Our end-users’ ability to install solar energy systems has been affected by a number of factors including:

Inclement weather can affect our customers’ ability to install their systems, particularly in the northeastern United States and in Europe.

In addition, weather delays can adversely affect our logistics and operations by causing delays in the shipping and delivery of our materials.

• The interest rate environment .

As interest rates have risen, we have seen customers looking to renegotiate power purchase agreements to improve project returns.

Any unexpected or protracted negotiation can cause installation delays and delay our ability to recognize revenue relating to the relevant projects.

In addition, we have had customers delay planned installations in anticipation of interest reductions and more favorable project financing conditions later in 2024.

• Availability of necessary equipment .

We have a broad portfolio of customer relationships including presence with every Tier 1 utility in the United States.

Each utility has unique specifications for access to its grid, which is generally not consistent across the industry.

As the supply of renewables projects has increased, severe shortages and long lead-times in the supply of switches, transformers and HV breakers used in the interconnection of utility scale solar power plants to the grid, has affected the timing and completion of these projects, including for some of our customers.

• Local Permitting .

If our customers cannot receive permitting for their projects, they are unable to begin and ultimately complete them in a timely manner.

A dramatic increase in solar and battery storage sites has increased the average permitting time in many geographies in which our customers operate.

Impact of IRA

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 the timing and quantity of some customers’ orders.

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

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

After a period of uncertainty, in December the IRS published proposed regulations on 45X manufacturing credit benefits that largely confirmed our previous understanding around the eligibility of our torque tube.

In late 2023 and early 2024, we successfully negotiated agreements with key suppliers around 45X benefits associated with the torque tube.

This resulted in the accumulation of $49.9 million of 45X benefit in the fourth quarter, from volume delivered throughout 2023.

We recognized $9.3 million of that benefit as a reduction to cost of revenue during the year ended December 31, 2023, and the remaining $40.6 million is expected to be recognized during 2024.

The 45X proposed regulations published in December did not further clarify what would be considered a structural fastener;

however, we do continue to expect that there will be additional credits we can monetize for a number of our components under the existing law and proposed regulations.

We are actively working on multiple initiatives to obtain additional clarity regarding the eligibility and in parallel are negotiating the split of the 45X benefits with our suppliers for parts we do not manufacture internally.

Structured Cost Management

We actively manage the risk from certain types of customer contracts, including, for example, multi-year contracts that require fixed pricing or pricing tied to certain commodity indices.

Depending on the totality of the circumstances and our ability to mitigate risk, we may or may not pursue such contractual arrangements.

Where we decline, this may have the effect of driving certain customers or projects to our competitors.

We believe this is the right way to manage a high quality portfolio and drive consistent margins over time.

Impact of Attacks on Shipping in the Red Sea

Houthi rebels in Yemen have significantly stepped-up attacks against commercial vessels in the Bab-el-Mandeb strait between the Arabian peninsula and the Horn of Africa since late November 2023, which has led many shipping companies are pause shipments through the Suez Canal and the Red Sea.

Many of these shipments are being redirected around the Cape of Good Hope in South Africa, adding between 3,000 to 3,500 nautical miles to routes connecting Europe with Asia.

As an additional result of the reroute, certain ports could see crowding and delays in unloading shipments.

We do not yet know the duration of these disruptions or the severity of their impact on our operations, 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 may continue to impact, at least in the near-term, and may continue to 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.

Impact of Potential Solar Module Supply Chain Disruptions

On April 1, 2022, the USDOC initiated anti-circumvention inquiries of the U.S.

Solar 1 Orders covering merchandise from Vietnam, Malaysia, Thailand, and Cambodia pursuant to Section 781 of the Tariff Act of 1930.

The USDOC issued preliminary determinations in these inquiries on December 1, 2022, affirmatively finding that certain photovoltaic solar cells and modules produced in Vietnam, Malaysia, Thailand, and Cambodia using parts and components from China from certain producers/exporters, are circumventing the Solar 1 Orders and therefore should be subject to the antidumping and countervailing duty liabilities arising from those orders.

The USDOC is expected to issue final determinations in May 2023.

As a result of the USDOC’s investigation, the Company saw a number of projects in its order book initially delayed;

however, on June 6, 2022, President Biden issued an emergency declaration delaying the imposition of any cash deposit or duty payment obligations on merchandise subject to these inquiries until the earlier of (i) the expiration of the order on June 6, 2024, or (ii) the President terminating the emergency declaration.

Merchandise from the four subject countries covered under the scope of these inquiries should therefore not be subject to any antidumping or countervailing duty liabilities under the Solar 1 Orders until the termination of the emergency declaration as long as the importer(s) and exporter(s) follow proper certification procedures that will be implemented by the USDOC.

The affirmative determinations could have an adverse effect on the global solar energy marketplace, and as such, an adverse effect on our business, financial condition, and results of operations.

While we do not sell solar modules, the degree of our exposure is dependent on, among other things, the impact of the investigation on the projects that are also intended to use our products, with such impact being largely out of our control.

To date, the Company has seen a number of projects in our order book delayed as a result of the USDOC investigation;

however, the ultimate severity or duration of the expected solar panel supply chain disruption or its effects on our clients’ solar project development and construction activities remains uncertain.

Regulatory Impacts

In June 2022, the U.S.

President authorized the U.S.

Secretary of Commerce to provide a 24-month AD/CVD tariff exemption for imported solar panels from certain Southeast Asian countries.

The USDOC previously issued regulations implementing the AD/CVD moratorium in the event that it found circumvention with respect to such Southeast Asian countries.

In August 2023, the USDOC issued final affirmative circumvention rulings, finding that solar panels completed in Cambodia, Malaysia, Thailand, and Vietnam using parts and components produced in China circumvent pre-existing AD/CVD orders on China.

At this time, it is expected that duties will apply to such solar panels unless they are imported, used, and installed by certain dates in June 2024.

While we do not sell solar modules, the degree of our exposure is dependent on, among other things,

the impact of the investigation on the projects that are also intended to use our products, with such impact being largely out of our control.

We have seen a number of projects in our order book delayed as a result of the USDOC investigation.

The repeal of the 24-month exemption, and any affirmative determinations made once the exemption expires in any event, would have an adverse effect on our business, financial condition, and results of operations.

More broadly, legislation has been proposed that would make it easier for domestic companies to obtain affirmative determinations in antidumping and countervailing duties investigations.

The proposed USICA/America COMPETES Act, if enacted, could result in future successful petitions that limit imports from Asia and other regions.

Solar panel imports to the U.S.

may also be impacted by the UFLPA that was signed into law by President Biden on December 23, 2021.

According to U.S.

Customs and Border Protection, “it establishes a rebuttable presumption that the importation of any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China, or produced by certain entities, is prohibited by Section 307 of the Tariff Act of 1930 and that such goods, wares, articles, and merchandise are not entitled to entry to the U.S.

The presumption applies unless the Commissioner of U.S.

Customs and Border Protection determines that the importer of record has complied with specified conditions and, by clear and convincing evidence, that the goods, wares, articles, or merchandise were not produced using forced labor.” There continues to be uncertainty in the market around achieving full compliance with UFLPA, whether related to sufficient traceability of materials or other factors.

This has created a significant compliance burden and constrained solar panel imports.

We cannot currently predict what, if any, impact the UFLPA will have on the overall future supply of solar panels into the U.S.

and the related timing and cost of our clients’ solar project, development and construction activities.

While we do not import or sell solar panels, project delays caused by solar panel constraints may negatively impact our product delivery schedules and future sales, and therefore our business, financial condition, and results of operations.

Impact of the Ongoing Conflict in Ukraine

The ongoing conflict in Ukraine has impacted the availability of material that can be sourced in Europe and, as a result, we have experienced 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 this 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.

Uncertainty in the Banking System

On March 10, 2023, the Federal Deposit Insurance Corporation took control and was appointed receiver of Silicon Valley Bank.

If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition.

Additionally, in October 2023, a coalition of U.S.

aluminum extruders and a labor union filed AD/CVD cases on aluminum extrusions from fifteen countries.

The USDOC has initiated investigations based on the petitions.

Certain components in our trackers, including certain clamps, U-joints, and bearing housings are made using extruded aluminum.

Our operating results could be adversely impacted if the USDOC imposes duties on such imports.

We continue to monitor developments in the investigation and work to mitigate its impact on our supply chain, but if we are unable to do so, these antidumping and countervailing duties could negatively impact our business, financial condition, and results of operations.

Foreign Currency Translation

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

Translation adjustments for these subsidiaries are accumulated as a separate component of net parent investment.

subsidiaries that use a U.S.

subsidiaries that operate in a U.S.

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

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

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

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

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

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Our revenue is affected by changes in the volume and ASPs of solar tracking systems purchased by our customers.

The quarterly volume and ASP of our systems is driven by the supply of, and demand for, our products, changes in product mix between module type and wattage, geographic mix of our customers, strength of competitors’ product offerings, and availability of government incentives to the end-users of our products.

Our revenue growth is dependent on continued growth in the size and number of solar energy projects installed each year as well as our ability to increase our market share in each of the geographies where we compete, expand our global footprint to new and evolving markets, grow our production capabilities to meet demand and to continue to develop and introduce new and innovative products that address the changing technology and performance requirements of our customers.

The quarterly volume and ASP of our systems is driven by the supply of, and demand for, our products, changes in project mix between module type and wattage, geographic mix of our customers, strength of competitors’ product offerings, and availability of government incentives to the end-users of our products.

Our revenue growth is dependent on continued growth in the size and number of solar energy projects installed each year as well as our ability to maintain our market share in each of the geographies where we compete, expand our global footprint to new and evolving markets, grow our production capabilities to meet demand and to continue to develop and introduce new and innovative products that address the changing technology and performance requirements of our customers.

Cost of Revenue and Gross Profit

Cost of revenue consists primarily of product costs, including raw materials, purchased components, salaries, wages and benefits of manufacturing personnel, freight, tariffs, customer support, product warranty, and depreciation of manufacturing and testing equipment.

Cost of revenue consists primarily of product costs, including raw materials, purchased components, salaries, wages and benefits of manufacturing personnel, freight, tariffs, customer support, product warranty, amortization of developed technology, and depreciation of manufacturing and testing equipment.

Our product costs are affected by (i) the underlying cost of raw materials, including steel and aluminum, (ii) component costs, including electric motors and gearboxes, (iii) technological innovation, and (iv) economies of scale and improvements in production processes and automation.

In 2021 and to a lesser extent in 2022, our business was impacted by the COVID-19 pandemic.

We experienced disruptions to our supply chain and increased material and freight costs.

When possible, we

modified our production schedules and processes to mitigate the impact of these disruptions and cost increases on our margins.

We may experience disruptions to our supply chain and increased material and freight costs like those experienced in 2021 and 2022 during the COVID-19 pandemic.

When possible, we modify our production schedules and processes to mitigate the impact of these disruptions and cost increases on our margins.

We do not currently hedge against changes in the price of our raw materials.

Gross profit may vary from quarter to quarter and is primarily affected by our volume, ASPs, product costs, product mix, customer mix, geographical mix, shipping method, warranty costs and seasonality.

Gross profit may vary from quarter to quarter and is primarily affected by our volume, ASPs, product costs, project mix, customer mix, geographical mix, commodity prices, logistics rates, warranty costs, and seasonality.

Inflation Reduction Act Vendor Rebates

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law, which includes numerous green energy credits.

The 45X Advanced Manufacturing Production Tax Credit (“45X Credit”) was established as part of the IRA.

The 45X Credit is a per-unit tax credit that is earned over time for each clean energy component domestically produced and sold by a manufacturer.

We have, and will continue to, enter into arrangements with torque tube and structural fastener manufacturing vendors that produce 45X Credit eligible parts, in which the vendors agree to share a portion of the benefit received related to our purchases, in the form of “Vendor Rebates”.

We account for these Vendor Rebates as a reduction of the purchase prices of the vendors’ products and therefore a reduction of inventory until the inventory is sold, at which time we recognize such rebates as a reduction of cost of revenues on the consolidated statements of operations.

Rebates related to purchases that were made prior to the execution of the agreements are deferred and recognized as a reduction of the prices of future purchases.

In the fourth quarter of 2023, we had accumulated a total of $49.9 million in Vendor Rebates from current year activity, of which $48.4 million were outstanding and included in Prepaid expenses and other, and $40.6 million of deferred consideration was included in Other current liabilities, on our consolidated balance sheet dated December 31, 2023.

Additionally, we recognized $9.3 million of Vendor Rebate benefit as a reduction of cost of revenue, during the fourth quarter of 2023.

In December 2023, the internal revenue service (“IRS”) issued proposed regulations on the 45X Credits.

While these proposed regulations did not provide additional clarity on what would be considered a structural fastener as it relates to 45X Credit eligibility, we continue to actively negotiate potential benefit sharing arrangements

with manufacturing vendors of structural fasteners, as well as manufacturers of other of our components, that could potentially be declared eligible at a future date.

Operating Expenses

General and administrative expenses

General and administrative expense consist primarily of salaries, benefits, and equity-based compensation related to our executive, sales, engineering, finance, human resources, information technology, and legal personnel, as well as travel, facility costs, marketing, bad debt provision, and professional fees.

We expect to increase the number of sales and marketing personnel in connection with the expansion of our global sales and marketing footprint, enabling us to penetrate new markets.

The majority of our sales in 2022 were in the U.S.;

The majority of our sales in 2023, 2022, and 2021, were in the U.S.;

however, in January 2022, we expanded our international operations with the STI Acquisition.

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We intend to continue to expand our sales presence and marketing efforts to additional countries.

We also anticipate an increase in spend related to product development and innovation as we hire additional engineering resources and increase our R&D spend.

Further, as a relatively new public company, we may incur additional audit, accounting, tax, legal and other costs related to compliance with applicable securities and other regulations, as well as additional insurance, investor relations and other costs associated with being a public company.

Contingent Consideration

Contingent consideration consists of the changes in fair value of the TRA and earn-out entered into with Ron P.

Corio, a former indirect stockholder, concurrent with the acquisition of Patent LLC by Former Parent.

Contingent consideration consists of the changes in fair value of the tax receivable agreement (“TRA”) entered into with a former indirect stockholder, concurrent with the acquisition of Patent LLC by Former Parent.

The TRA liability was recorded at fair value as of July 8, 2016 (the “Patent Acquisition Date”) and subsequent changes in the fair value are recognized in earnings.

The TRA will generally provide for the payment by Array Tech, Inc.

Corio for certain federal, state, local and non-U.S.

tax benefits deemed realized in post-closing taxable periods by Array Tech, Inc.

from the use of certain deductions generated by the increase in the tax value of the developed technology.

The earn-out liability was recorded at fair value at the Patent Acquisition Date and subsequent changes in the fair value are recognized in earnings.

Fair value of the earn-out liability is measured based upon the expected return of investment of Former Parent, among other things.

The $589 million cash special distribution paid to Former Parent upon the closing of our IPO, and the Company’s December 2020 offering required the Company to make a cash payment of $9.1 million in October 2020 and $15.9 million in December 2020.

As a result of these payments, the earn-out liability has been paid in full.

Depreciation and Amortization

For discussion and analysis of the TRA see Note 16 – Commitments and Contingencies .

Depreciation expense consists of costs associated with property, plant and equipment not used in manufacturing of our products.

We expect that as we continue to grow both our revenue and our general and administrative personnel we may require some additional property, plant and equipment to support this growth resulting in additional depreciation expense.

Amortization of intangibles consists of developed technology, customer relationships, contractual backlog and the STI trade name expensed over their expected period of use.

Amortization of intangibles consists of customer relationships, contractual backlog and the STI trade name expensed over their expected period of use.

Non-Operating Expenses

Interest Expense

Interest expense consists of interest and other charges paid in connection with our Senior Secured Credit Facility, the Convertible Notes, and the credit lines assumed by us with the STI Acquisition.

Income Tax Expense

Interest expense consists of interest and other charges paid in connection with our Senior Secured Credit Facility, the Convertible Notes, and Other Debt held by our STI Operations.

We are subject to U.S.

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Subsequent to the acquisition of STI, the Company began reporting its results of operations in two segments;

Array Legacy Operations and STI Operations.

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

The segment amounts included in this Item 7.

Man a gement ’ s Discussion and Analysis are presented on a basis consistent with our internal management reporting.

Management’s Discussion and Analysis are presented on a basis consistent with our internal management reporting.

Additional information on our reportable segments is contained in Note 20 – Segment and Geographic Information in the accompanying notes to the consolidated financial statements.

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Cost of revenue:

Cost of product and service revenue 1,146,442 1,410,270 (263,828) (19) %

Amortization of developed technology 14,558 14,558 — — %

Total cost of revenue 1,161,000 1,424,828 (263,828) (19) %

Gross profit 415,551 212,718 202,833 95 %

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General and administrative 159,535 150,777 8,758 6 %

Contingent consideration (4,507) 2,696 (7,203) (267) %

Change in fair value of contingent consideration 2,964 (4,507) (7,471) (166) %

Depreciation and amortization 38,928 84,581 (45,653) (54) %

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Income (loss) from operations 214,124 (18,133) 232,257 1281 %

Other income (expense)

Other income (expense), net 2,789 (905) 3,694 408 %

Other (expense) income, net (1,015) 2,789 (3,804) (136) %

Interest income 8,330 3,181 5,149 162 %

Legal settlement — 42,750 (42,750) (100) %

Foreign currency gain 1,155 — 1,155 100 %

Foreign currency transaction (loss) gain, net (53) 1,155 (1,208) (105) %

Interest expense (44,229) (36,694) 7,535 21 %

Total other income (expense) 13,181 (36,380) 49,561 136 %

Income (loss) before income tax benefit (4,952) (61,121) 56,169 (92) %

Income tax (benefit) expense (9,384) (10,718) 1,334 (12) %

Net income (loss) $ 4,432 $ (50,403) $ 54,835 109 %

Total other (expense) income (36,967) 13,181 (35,078) 266 %

Income (loss) before income tax expense (benefit) 177,157 (4,952) 182,109 3677 %

Income tax expense (benefit) 39,917 (9,384) 49,301 525 %

$ 137,240 $ 4,432 $ 132,808 2997 %

The following table provides details on our operating results by reportable segment for the respective periods ( in thousands ):

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STI Operations 403,724 369,663 34,061 9 %

Total Revenue $ 1,637,546 $ 853,318 $ 784,228 92 %

Total $ 1,576,551 $ 1,637,546 $ (60,995) (4) %

Gross Profit:

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STI Operations 97,946 59,106 38,840 66 %

Total Gross Profit $ 227,276 $ 82,859 $ 144,417 174 %

Fiscal Year 2022 Compared with Fiscal Year 2021

Consolidated revenue increased $784.2 million, or 92%, driven by strong organic growth in the Array Legacy Operations segment, where revenue increased $414.6 million, or 49%, resulting from a 22% increase in MWs shipped due to increased customer demand for our products and a 21% year-over-year increase in ASP, which is reflective of higher pass-through pricing to our customers.

Additionally, the STI Acquisition in January 2022 added $369.7 million in consolidated revenue over the prior year.

Total $ 415,551 $ 212,718 $ 202,833 95 %

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Consolidated revenue decreased $61.0 million, or 4%, driven by a decrease in Array Legacy Operations of $95.1 million, offset by an increase in STI Operations of $34.1 million.

The $95.1 million, or 7%, revenue decrease in Array Legacy Operations was driven by a decrease in the number of megawatts shipped, due primarily to project delays from our customers.

The $34.1 million, or 9%, revenue increase in STI Operations was driven by an increase in the number of megawatts shipped, most notably in the Brazil region, which offset lower ASP, due to a smaller percentage of construction services being offered.

Cost of Revenue and Gross Profit

Consolidated cost of revenue increased $639.8 million, or 83%, driven by the STI acquisition, increased MWs shipped, combined with higher raw material and logistics costs as compared to the prior year.

Consolidated gross profit as a percentage of revenue increased from 9.7% for the year ended December 31, 2021 to 13.9% for the year ended December 31, 2022.

Array Legacy Operations gross profit percentage increased year-over-year from 9.7% to 13.3% during the same period due primarily to improved pass through pricing of commodity costs.

Gross profit as a percent of revenue for the STI Operations was 16.0% for the year ended December 31, 2022.

General and Administrative

Consolidated cost of revenue decreased $263.8 million, or 19%, driven primarily by a reduction in revenue combined with a decrease in input costs.

As a percentage of revenue, consolidated gross profit increased to 26% for the year ended December 31, 2023, as compared to 13% during the same period in the prior year.

The increase in gross profit dollars was driven by an improvement in the gross margin percentage in both our Array Legacy Operations and our STI Operations.

As a percentage of revenue, gross profit for Array Legacy Operations increased to 27% from 12% for the year ended December 31, 2023 and 2022, respectively.

The increase in gross profit as a percent of revenue was driven by the improved pass through of commodity volatility to customers, in addition to cost savings opportunities in logistics and raw materials, as well as a higher proportion of higher margin non-tracker revenue.

As a percentage of revenue, gross profit for STI Operations increased to 24% from 16% for the year ended December 31, 2023 and 2022, respectively, driven primarily by improved pass through of commodity volatility to customers, cost saving opportunities in raw materials, and a reduced impact of lower margin construction-related services provided.

Operating Expenses

Consolidated general and administrative expense increased $8.8 million, or 6%.

As a percent of revenue, general and administrative expense was 9.2% in fiscal year 2022 versus 9.5% in 2021.

The STI Acquisition, completed in January 2022, accounted for almost $25.0 million of the total increase.

The balance was attributable to Array Legacy where payroll and related expenses rose $16.9 million, driven largely by additional headcount to support organic revenue growth, product development and Environmental, Social, Governance and digital transformation initiatives.

L egal and professional fees increased $14.6 million, driven by the integration of STI as well as higher audit and litigation costs.

An approximate $8.3 million increase was driven by additional costs for marketing, travel, contract services, insurance, rent and computer related expenses, all which were incurred to support our growth and increased capacity.

Contingent Consideration

Contingent consideration expense decreased by $7.2 million, or 267%, as a result of a decreased valuation of the TRA liability, which was driven by higher discount rates resulting from a trend in higher overall interest rates.

Depreciation and Amortization

Consolidated depreciation and amortization expense increased $75.2 million, or 314%, due primarily to the amortization of intangible assets, including developed technology, customer relationships, contractual backlog and the STI trade name acquired in the STI Acquisition.

Amortization of the contractual backlog recorded in connection with the STI Acquisition, all of which is amortized over a single year, accounted for $50.0 million of the $75.2 million increase.

The increase was primarily due to higher payroll and other personnel-related expenses, driven by an increase in headcount.

These increases were partially offset by no acquisition related expenses in 2023 compared to expenses related to the STI Acquisition in 2022.

Change in the fair value of contingent consideration resulted in a loss of $3.0 million for the year ended December 31, 2023, due to the fair value remeasurement of the TRA liability, primarily driven by a decrease in the discount rates used in the valuation.

Consolidated depreciation and amortization expense decreased $45.7 million, or 54%, due to the decrease in the amortization of intangibles, as the backlog purchased as part of the STI Acquisition had a one-year life and was fully amortized as of the first quarter of 2023.

Legal Settlement

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As part of the settlement, the parties agreed to treat the settlement terms as confidential except to the extent required or necessitated by law, regulation, or the corporate parties’ shareholder disclosure standards.

There was no similar settlement in 2021.

There were no settlements in 2023.

Foreign Currency Gain

Consolidated foreign currency gain increased $1.2 million as compared with the prior year due to the foreign currency translation gain resulting from the STI Acquisition in January 2022.

Consolidated foreign currency gain decreased $1.2 million, or 105%, as compared with the prior year due to the weakening of the U.S.

Dollar compared to the Euro and compared to the Brazilian Real during 2023.

Interest Income

Consolidated interest income increased by $5.1 million, or 162%, as compared to the prior year, due to higher cash on hand in 2023 coupled with higher interest rates.

Interest Expense

Consolidated interest expense decreased by $2.0 million, or 6%.

The decrease was the result of a $9.6 million write-off in 2021 of capitalized fees and discounts related to unscheduled Term Loan principal payoffs that occurred in February and August of 2021 that had no equivalent in 2022.

This decrease was partially offset by $4.2 million of interest expense related to the first full year of interest incurred on the Convertible Notes issued in December 2021 and $2.4 million of interest expense related to the debt obligations assumed by the Company in connection with the STI Acquisition.

Income Tax (Benefit) Expense

Income tax benefit decreased by $1.3 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.

Our effective tax rate was a benefit of 189.5% and a benefit of 17.5% for the years ended December 31, 2022 and 2021, respectively.

The decrease in the benefit is primarily related to a favorable mix of income and non-U.S.

tax incentives.

Net Income (Loss)

Consolidated net income (loss) increased $54.8 million, or 109%, driven by a $784.2 million increase in consolidated revenue, a 4% increase in consolidated gross profit margin and a $42.8 million legal settlement, which were partially offset by a $69.8 million increase in consolidated general and administrative expense and an increase of $75.2 million in consolidated depreciation and amortization.

Fiscal Year 2021 Compared with Fiscal Year 2020

A discussion and analysis covering the comparison of the year ended December 31, 2021 to the year ended December 31, 2020 is included in our annual report on Form 10-K filed with the Securities and Exchange Commission on April 6, 2022.

Restatement of Quarterly Financial Data

The Company has restated its previously issued unaudited interim financial statements for the three months ended March 31, 2022, the three and six months ended June 30, 2022 and the three and nine months ended September 30, 2022 (the “Non-Reliance Periods”).

Detailed restatements of the Company's consolidated quarterly financial statements are provided in Note 21 – Restatement (Unaudited) in the accompanying notes to the consolidated financial statements.

The following unaudited quarterly statements of operations data for each of the four quarters in the period ended December 31, 2022 have been prepared on a basis consistent with our audited annual financial statements included in this Annual Report on Form 10-K and include, in our opinion, all normal recurring adjustments necessary for the fair presentation of the financial information contained in those statements.

Our historical results are not necessarily indicative of the results that may be expected in the future.

The following should be read in conjunction with our audited financial statements and the related notes included in this Annual Report on Form 10-K.

Three Months Ended

(in thousands) March 31, 2022 As Restated June 30, 2022 As Restated September 30, 2022 As Restated December 31, 2022

Revenue $ 300,586 $ 419,865 $ 515,024 $ 402,071

Gross profit 26,587 39,946 80,223 80,520

Operating expenses 64,931 53,278 63,029 64,171

Income (loss) from operations (38,344) (13,332) 17,194 16,349

Income (loss) before income tax expense (benefit) (40,680) (23,460) 50,640 8,548

Consolidated interest expense increased by $7.5 million, or 21%, primarily due to increased variable interest rates charged on our Term Loan Facility as well as the acceleration of $4.2 million of non-cash interest expense related to unscheduled principal payments made against the outstanding Term Loan balance.

Income Tax Expense (Benefit)

Net income (loss) (25,937) (5,024) 40,644 (5,251)

Preferred dividends and accretion 11,606 12,182 12,257 12,009

Net income (loss) to common stockholders $ (37,543) $ (17,206) $ 28,387 $ (17,260)

Income (loss) per common share

Basic $ (0.25) $ (0.11) $ 0.19 $ (0.11)

Diluted $ (0.25) $ (0.11) $ 0.19 $ (0.11)

Consolidated Income tax expense (benefit) decreased by $49.3 million, or 525%, We recorded income tax expense of $39.9 million and a benefit of $9.4 million for the years ended December 31, 2023 and 2022, respectively.

The income tax expense for the year ended December 31, 2023, was unfavorably impacted by higher income in non-U.S.

jurisdictions, partially offset by benefits related to excess equity-based compensation deductions.

The tax expense for the year ended December 31, 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.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

A discussion and analysis covering the comparison of the year ended December 31, 2022, to the year ended December 31, 2021, is included in our annual report on Form 10-K filed with the Securities and Exchange Commission on March 22, 2023.

Liquidity and Capital Resources

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Series A Shares

On August 10, 2021, the Company entered into a SPA with BCP Helios Aggregator L.P., a Delaware limited partnership (the “Investor”), an investment vehicle of funds affiliated with Blackstone Inc.

Pursuant to the SPA,

on August 11, 2021, the Company issued and sold to certain investors (the “Purchasers”) 350,000 shares of the Series A Shares, par value $0.001 per share, having the powers, designations, preferences, and other rights set forth in the Certificate of Designations, and 7,098,765 shares of the Company’s common stock, par value $0.001 per share, for an aggregate purchase price of $346.0 million (the “Initial Closing”).

Further, pursuant to the SPA, on September 27, 2021, the Company issued and sold to the Purchasers 776,235 shares of common stock for an aggregate purchase price of $0.01 million.

The Company used the net proceeds from the Initial Closing to repay the entire $102.0 million amount outstanding under its existing Revolving Credit Facility and prepay $100.0 million under the Company’s Term Loan Facility (as defined below).

The SPA gives the Company the option to require the Purchasers to purchase up to an additional 150,000 shares of the Series A Shares 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”).

In January 2022, we issued 50,000 Series A Shares, and 1,125,000 shares of our common stock in an Additional Closing for an aggregate purchase price of $49.4 million.

Registration Rights Agreement

In connection with the SPA, the Company and the Investor entered into a Registration Rights Agreement pursuant to which, the Company granted the Investor certain registration rights with respect to Common Stock purchased, including customary shelf registration rights and “piggyback” registration rights.

For more information related to the Series A Shares, see Note 11 – Redeemable Perpetual Preferred Stock , to the accompanying consolidated financial statements.

1.00% Convertible Senior Notes due 2028

On December 3, 2021 and December 9, 2021, the Company completed a $425.0 million private offering (the “Convertible Notes Offering”) ($375 million and $50 million, respectively), of its 1.00% Convertible Senior Notes due 2028 (the “Convertible Notes”), resulting in proceeds of $413.3 million ($364.7 million and $48.6 million, respectively) after deducting the original issue discount of 2.75%.

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

Bank National Association, as trustee.

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

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

The Convertible Notes were not convertible as of December 31, 2022 and as such have no dilutive impact to earnings per share.

Senior Secured Credit Facility

On October 14, 2020, we entered into a Senior Secured Credit Facility consisting of (i) a $575 million senior secured seven-year term loan facility (the “Term Loan Facility”) and (ii) a $150 million senior secured five-year revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Secured Credit Facility”).

On February 23, 2021, we entered into the First Amendment to our Senior Secured Credit Facility.

The First Amendment lowered the London interbank offered rate floor on Eurocurrency borrowings to 50 basis points from 100 basis points and lowered the applicable margin to 325 basis points from 400 basis points per annum.

On February 26, 2021, we entered into a Second Amendment to the Senior

Secured Credit Facility pursuant to which the Revolving Credit Facility was increased from $150 million to $200 million.

At December 31, 2022, the outstanding balance of the Term Loan Facility was $312.5 million and we were in compliance with all covenants.

At December 31, 2022, under the Revolving Credit Facility, the Company had:

(i) no outstanding balance, (ii) issued $38.8 million in standby letters of credit and (iii) availability of $161.2 million.

For more information related to our Senior Secured Credit Facility, see Note 10 – Debt , in the accompanying notes to the consolidated financial statements.

We 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.

For more information related to the 2022 and 2021 Series A Share issuances, see Note 12 – Redeemable Perpetual Preferred Stock , to the accompanying consolidated financial statements.

Debt Obligations

For a discussion of our debt obligations see Note 11 – Debt , in the accompanying notes to the consolidated financial statements.

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 our liquidity or capital resources.

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Year Ended December 31,

Net cash provided by (used in) operating activities $ 141,493 $ (263,187)

Net cash provided by operating activities

$ 231,955 $ 141,493

Net cash used in investing activities (16,821) (384,437)

Net cash provided by financing activities 8,440 537,748

Net cash (used in) provided by financing activities (101,761) 8,440

Effect of exchange rate changes on cash and cash equivalent balances 1,806 735

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Our ability to generate positive cash flow from operations is dependent on the strength of our gross margins as well as our ability to quickly turn our working capital.

Due to recent macroeconomic conditions, our industry has seen rapid changes in commodity prices, global tightening of supply chains, and strained logistics.

These factors can adversely impact our business and can put pressure on our margins.

We have taken steps to overcome the economic challenges but cannot be certain of the timing of when we will achieve better margins.

Furthermore, high volatility and uncertainty in the capital markets resulting from macroeconomic conditions, including rising inflation rates and interest rates, and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures, has had, and could continue to have, a negative impact on the price of our common stock and could adversely impact our ability to raise additional funds.

High volatility and uncertainty in the capital markets resulting from macroeconomic conditions, including fluctuating inflation data and heightened interest rates, has had, and could continue to have, a negative impact on the price of our common stock and could adversely impact our ability to raise additional funds.

In response to the recent challenging environment, we continuously evaluate our ability to meet our obligations over the next 12 months.

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We had outstanding borrowings of $238.2 million under our $575 million Term Loan Facility and $175.2 million available to us under our $200.0 million Revolving Credit Facility.

Also, through June 30, 2023, we have the option to require our Series A Shares investors to purchase

an additional 100,000 shares of our Series A Shares and 2,250,000 shares of our common stock for an aggregate purchase price of approximately $100.0 million.

The Company continually monitors and reviews its liquidity position and funding needs.

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The Company generated $232.0 million in cash from operating activities during the year ended December 31, 2023, of which, $224.4 million was generated from net income as adjusted for the impact of non-cash expenses, primarily consisting of depreciation and amortization and equity-based compensation.

For the year ended December 31, 2022, the Company generated $141.5 million in cash from operating activities, of which, $97.2 million was generated from net income as adjusted for the impact of non-cash expenses, primarily consisting of depreciation and amortization and equity-based compensation.

The remaining $44.3 million was generated by changes in net working capital, including a $59.0 million increase in deferred revenue from deposits received from customers in 2022 for projects due in the first half of 2023, a $13.7 million increase in accounts payable and accrued expenses resulting from improved payables management, and a $20.9 million decrease in inventory levels as we burned down historically high raw material quantities from prior year, all of which were partially offset by a $77.0 million increase in accounts receivable driven primarily by a year-over-year increase in revenue.

For the year ended December 31, 2021, cash used in operating activities was $263.2 million primarily due to lower gross profit on projects delivered due to rapid increases in commodity and logistic costs which we were not able to fully pass on to our customers.

Additionally, cash used in operating activities reflects $96.6 million in cash used to build inventory due to growth in demand coupled with longer shipping lead-times leading the Company to carry more strategic inventory.

Finally, the increase in accounts receivable used $118.4 million in cash during 2021 driven by increased sales coupled with a number of large projects not reaching billing milestones at the end of the year.

Cash Flows from Investing Activities

For the year ended December 31, 2023, cash used in investing activities was $16.8 million, all of which was related to the purchase of property, plant and equipment.

For the year ended December 31, 2022, cash used in investing activities was $384.4 million primarily related to the STI Acquisition;

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Additionally, the Company utilized $10.6 million for the purchase of property, plant and equipment.

For the year ended December 31, 2021, the Company utilized $15.3 million in investing activities including $12.0 million for investment in equity securities and $3.4 million for the purchase of property, plant and equipment.

Cash Flows from Financing Activities

For the year ended December 31, 2023, net cash used in financing activities was $101.8 million, driven primarily by $74.3 million in payments on our Term Loan and a $24.8 million reduction of Other debt.

For the year ended December 31, 2022, net cash provided by financing activities was $8.4 million, which included $49.0 million related to proceeds from the sale of Series A Shares and common shares in January 2022 offset by a dividend payment of $18.7 million on the Series A Shares.

For the year ended December 31, 2021, net cash provided by financing activities was $537.7 million of which $225.0 million was proceeds from the offering of our Series A Shares and $120.6 million from the proceeds of the sale of common stock, each of which that closed on August 11, 2021, $413.3 million in proceeds from the issuance of the Convertible Notes, $126.0 million was from proceeds under the Revolving Facility, offset by a $133.2 million payment on the Term Loan Facility, a $126.0 million payment of the Revolving Credit Facility, $11.1 million in equity issuance costs associated with the Series A Shares and $6.6 million in fees paid on the Senior Secured Credit Facility and to increase the limit on the Revolving Facility by $50.0 million.

Discussion of 2020 Historical Cash Flows

A discussion and analysis covering historical cash flows for the year ended December 31, 2020 is included in our annual report on Form 10-K filed with the Securities and Exchange Commission on April 6, 2022.

Discussion of Historical Cash Flows for Year Ended December 31, 2022 and 2021

A discussion and analysis covering historical cash flows for the year ended December 31, 2022 and 2021, is included in our annual report on Form 10-K filed with the Securities and Exchange Commission on March 22, 2023.

Critical Accounting Estimates

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

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

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

We have made estimates and assumptions taking into consideration certain possible impacts due to COVID-19.

These estimates may change, as new events occur, and additional information is obtained.

Actual results may differ from those estimates and assumptions.

The critical accounting estimates discussed below are estimates made in accordance with U.S.

GAAP that we believe involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

Our consolidated financial statements are prepared in accordance with U.S.

In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures.

We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared.

On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with U.S.

However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates.

To the extent that

there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

We consider an accounting policy to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements.

Revenue Recognition

In accordance with Accounting Standards Codification (“ASC”) Topic 606 Revenue from Contracts with Customers (“ ASC 606”) the Company recognizes revenues from the sale of solar tracking systems and parts and determines its revenue recognition through the following steps:

(i) identification of the contract or contracts with a customer;

(ii) identification of the performance obligations within the contract;

(iii) determination of the transaction price;

(iv) allocation of the transaction price to the performance obligations within the contract;

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

Performance Obligations

The majority of the Company’s contracts with customers are accounted for as one performance obligation, because the Company is integrating the solar tracker system components and related services as part of a single project.

Certain contracts associated with customers using the federal investment tax credit (“ITC”) for solar energy projects and other standalone tracker component sales are accounted for as multiple performance obligations because some of these contracts consist of orders for tracker system components without certain of the related services.

For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the contract.

The Company uses the expected cost-plus margin approach to estimate the standalone selling price of each performance obligation.

In contracts with one performance obligation, the Company’s performance obligation is satisfied over-time as control is transferred to the customer by measuring the progress toward complete satisfaction of the performance obligation using an input (i.e.

“cost to cost”) method.

Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation.

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

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

Infrequently, in certain situations, when product is still in our custody,

and title and risk of loss has passed to the customer (known as bill-and-hold arrangement), revenue will be recognized when all the specific requirements for transfer of control under a bill-and-hold arrangement have been met.

In assessing the recognition of revenue, the Company also evaluates whether two or more contracts should be combined and accounted for as one contract and if the combined or single contract should be accounted for as multiple performance obligations which could change the amount of revenue and profit (loss) recorded in a period.

Contracts are often modified through change orders to account for changes in specifications or design, manner of performance, equipment, materials, scope of work, and/or the period of completion of the project.

Although the Company evaluates each change order to determine whether such modification creates a separate performance obligation, the majority of change orders are not distinct within the context of the original contract and, therefore, not treated as separate performance obligations but rather as a modification of the existing contract and performance obligation.

Contract Estimates

Accounting for contracts utilizing the cost-to-cost measure of progress is based on various assumptions to project the outcome of future events that can exceed a year.

The Company’s revenue recognition policy is described in Note 14 – Revenue , in the accompanying notes to our consolidated financial statements,

Accounting for contracts utilizing the cost-to-cost measure of progress is based on various assumptions to project the outcome of future events.

These assumptions include the cost and availability of materials.

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Revenue and profit in future periods of contract performance is recognized using the adjusted estimate.

As a result, if the actual costs to be incurred are different than the assumptions used to estimate those costs, there could be cumulative adjustments recorded to revenues as a result.

Business Combinations

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Determining these fair values required us to make significant estimates and assumptions, particularly with respect to acquired intangible assets.

The determination of fair value required considerable judgment and was sensitive to changes in underlying assumptions, estimates and market factors.

The Company’s estimates are inherently uncertain and subject to refinement.

During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill.

Estimating fair value required us to make assumptions and estimates regarding our future plans, as well as industry and economic conditions.

These assumptions and estimates include, but are not limited to:

backlog, discount rate and customer attrition rate.

The fair values of the intangible assets will be amortized over their useful lives.

If actual results are materially different than the assumptions we used to determine fair value of the assets acquired and liabilities assumed through a business combination, it is possible that adjustments to the carrying

values of such assets and liabilities will have a material impact on our financial position and results of operations .

See Note 3 – Acquisition of STI to the consolidated financial statements for more information.

Goodwill is assessed using either a qualitative assessment or quantitative approach to determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount.

The qualitative assessment evaluates factors including macroeconomic conditions, industry-specific and company-specific considerations, legal and regulatory environments, and historical performance.

If the Company determines that is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative assessment is performed.

Otherwise, no further assessment is required.

The quantitative approach compares the estimated fair value of the reporting unit to its carrying amount, including goodwill.

Impairment is indicated if the estimated fair value or the reporting unit is less than the carrying amount of the reporting unit, and an impairment charge is recognized for the differential.

The Company has two reporting units:

1) Array Legacy Operations, and 2) STI Operations.

At March 31, 2022, the Company determined that the decrease in its stock price from December 31, 2021 and the continuing negative impact of the price of raw materials to the gross margin of the Array Legacy Operations reporting unit during the quarter were events indicating that the fair value of the Array Legacy Operations reporting unit may be less than its carrying amount.

Based on the Company’s quantitative goodwill impairment analysis of the Array Legacy Operations reporting unit at March 31, 2022, the fair value exceeded the carrying value by a substantial margin.

Accordingly, no impairment was recorded.

As for the STI Operations reporting unit, the Company noted no such events or circumstances occurred from the date acquisition through March 31, 2022 and concluded an interim goodwill impairment test was not considered necessary at the time.

The Company completed its annual goodwill impairment test using a qualitative approach and concluded goodwill was not impaired as of December 31, 2022.

The determination of fair value required considerable judgment and were sensitive to changes in underlying assumptions, estimates and market factors.

There were no business combinations during the year ended December 31, 2023.

Our goodwill represents the excess of the purchase price of business combinations over the fair value of the net assets acquired.

Goodwill impairment testing requires significant judgment and management estimates, including, but not limited to, the determination of (i) the number of reporting units, (ii) the goodwill and other assets and liabilities to be allocated to the reporting units and (iii) the fair values of the reporting units.

The estimates and assumptions described above, along with other factors such as discount rates, will significantly affect the outcome of the impairment tests and the amounts of any resulting impairment losses.

We may use either a qualitative or quantitative approach when testing a reporting unit’s goodwill for impairment on an

annual basis during the fourth quarter of each year, and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

If we use a qualitative approach and determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we would then perform the first step of the goodwill impairment test, which would consist primarily of a discounted cash flow (“DCF”) analysis compared to a guideline publicly-traded companies (“GPC”) analysis to determine the fair value of the reporting unit.

During the fourth quarter of 2023, we used a qualitative approach to assess if it is more likely than not that that the fair value of the Array Legacy Operations reporting unit is less than its carrying value.

During the fourth quarter of 2023, with the assistance of a third-party specialist, we performed a quantitative assessment of the fair value of our STI reporting unit using the DCF and GPC methods described in Note 7 – Goodwill and Other Intangible Assets of the consolidated financial statements.

The significant assumptions used in determining the fair values of the STI reporting unit primarily relate to the selection of EBITDA multiples used in the GPC analysis, and the revenue growth rate, the forecasted EBITDA margin, and the selected discount rate used in the DCF model.

To the extent that GPC multiples in the future decrease, the discount rate used in determining the present value of our cash flows increases, or if we do not meet its cash flow projections for the reporting unit, an impairment charge may be recorded in the future.

Product Warranty

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Concurrent with the Former Parent’s acquisition of Patent LLC, Array Tech, Inc.

entered into the TRA with Ron P.

Corio, a former indirect stockholder.

The TRA is accounted for as contingent consideration and subsequent changes in fair value of the contingent liability are recognized in general and administrative expense within the Company’s consolidated statement of operations.

The TRA obligation was recorded at acquisition-date fair value at inception and is classified as a liability.

The TRA will generally provide for the payment by Array Tech, Inc.

Corio for certain federal, state, local and non-U.S.

tax benefits deemed realized in post-closing taxable periods by Array Tech, Inc.

from the use of certain deductions generated by the increase in the tax value of the developed technology.

entered into the TRA with a former indirect stockholder.

The TRA is valued based on the future expected payments under the agreement and is accounted for as contingent consideration and subsequent changes in fair value of the contingent liability are recognized in earnings within the Company’s consolidated statement of operations.

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

The significant fair value inputs used to estimate the future expected TRA payments to Mr.

Corio include the timing of tax payments, a discount rate, book income projections, timing of expected adjustments to calculate taxable income and the projected rate of use for attributes defined in the TRA.

December 31, 2022 and December 31, 2021, the estimated fair value of the TRA was $8.6 million and $14.6 million, respectively, which was recorded as a liability.

Subsequent changes in fair value of the TRA will be recognized in earnings.

The significant fair value inputs used to estimate the future expected TRA payments include the timing of tax payments, a discount rate, book income projections, timing of expected adjustments to calculate taxable income and the projected rate of use for attributes defined in the TRA.

For discussion and analysis of the TRA see Note 16 – Commitments and Contingencies .

Equity-Based Compensation

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The Company accounts for forfeitures as they occur.

Temporary Equity

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

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

The Series A Shares issued in connection with the SPA, as described in Note 1 1 – Redeemable Perpetual Preferred Stock in the accompanying notes to our consolidated financial statements, is classified as temporary equity in the accompanying consolidated financial statements.

The Company elected the accreted redemption value method which accretes changes in redemption value over the period from the date of issuance of the Series A Shares to the earliest costless redemption date (the fifth anniversary) using the effective interest method.

Such adjustments are included in preferred undeclared dividends and accretion on Series A Shares in the Company’s consolidated statements of changes in equity and treated similarly to a dividend on preferred stock for U.S.

GAAP purposes.

Recent Accounting Pronouncements

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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 7. Management’s Discussion and Analysis