Array Technologies, Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective at a reasonable assurance level, due to the material weaknesses identified below. However, after giving full consideration to the material weaknesses described below, and the additional analyses and other procedures we performed to ensure that our consolidated financial statements included in this Annual Report on Form 10-K were prepared in accordance with U.S. GAAP, our management has concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. GAAP. 56 Management’s Report on Internal Control Over Financial Reporting. The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the results of this evaluation, the Company’s management concluded that internal control over financial reporting was not effective as of December 31, 2023, due to the material weaknesses listed below. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Our independent registered public accounting firm, Deloitte & Touche LLP, has audited the effectiveness of our internal control over financial reporting as of December 31, 2023, as stated in their report, which appears herein. We have concluded that the following material weaknesses in our internal control over financial reporting that were previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, have not been remediated as of December 31, 2023: • We have identified a material weakness due to a deficiency in one of the principles associated with the Control Environment component of the COSO framework, specifically relating to a lack of a sufficient complement of qualified personnel at the appropriate levels to perform control activities in support of preparing the financial statements in accordance with U.S. GAAP. • Control Activities – STI. We did not design, implement, and monitor general information technology controls in the areas of program change management, user access, and segregation of duties for systems supporting substantially all of STI’s internal control processes and we did not design and implement formal accounting policies, procedures, and controls across substantially all of the STI’s business processes to achieve timely, complete, accurate financial accounting, reporting, and disclosures. Remediation Plan for Existing Material Weaknesses Management has been actively engaged in remediation efforts to address the material weaknesses throughout 2023, and these efforts will continue into 2024. We have made enhancements to our control environment by improving guidance, communication of expectations and importance of internal controls. We made progress towards addressing our material weakness in our lack of qualified personnel by hiring additional qualified accounting and finance personnel during 2023, which has helped to provide additional capacity and expertise to enhance our accounting and reporting review procedures. Specifically, in the fourth quarter of 2023, the Company hired a new Chief Financial Officer and additional qualified accounting resources, who are currently assessing if additional personnel should be hired at STI in connection with the planned system implementation, and elsewhere in the organization, in order to perform control activities in support of preparation of the financial statements in accordance with U.S. GAAP. We expect that this assessment will be completed during the first quarter of 2024, with appropriate action taken during 2024, to ensure that the Company has a sufficient complement of qualified personnel at the right levels, based on any identified gaps in personnel requirements. Due to accounting system limitations at STI, management is limited in its ability to effectively design and implement general information technology controls at STI, which support the underlying business cycle controls. The accounting system was in place when the Company acquired STI, and management is planning on implementing a new accounting system in the first half of 2024. The new system will allow management to effectively design and implement appropriate general information technology controls including system 57 enforced segregation of duties. Management is currently assessing the process level risks at STI, designing controls based upon the planned accounting system. In addition, with the assistance of an outside consulting firm, we are in the process of formalizing our STI accounting and business operation policies and procedures, in advance of this system implementation. Remediation of Previously Identified Material Weaknesses The following entity level material weaknesses were previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022: • Control Environment, Risk Assessment and Monitoring Activities – We did not maintain appropriately designed entity-level controls impacting the control environment and effective monitoring controls to prevent or detect material misstatements to the consolidated financial statements. These deficiencies were attributed to (i) a lack of a sufficient number of qualified resources and inadequate oversight and accountability over the performance of control activities, (ii) ineffective identification and assessment of risks to properly design and implement relevant controls, and (iii) ineffective evaluation and determination as to whether the components of internal control were present and functioning. We have concluded that with the exception of a lack sufficient number of qualified personnel as discussed above, that these material weaknesses have been remediated. Specifically, management, with the assistance of an outside consulting firm, implemented a process level risk assessment for all material classes of transactions, identified and designed relevant controls to mitigate the identified risks of material misstatement, and tested the design, implementation, and operating effectiveness of those controls. As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, we also identified material weaknesses related to Control Activities. With the exception of the STI related material weakness above we have completed our remediation efforts previously identified in Item 9A “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2022. Based on our testing of the design and operating effectiveness of the enhanced internal controls, we have concluded that the following material weaknesses related to Control Activities that existed as of December 31, 2022, exclusive of STI, have been remediated: • Inventory • Revenue Recognition • Accounts Receivable • Financial Reporting, Consolidation and Business Combination • Foreign Currency. Changes in Internal Control over Financial Reporting During the quarter ended December 31, 2023, except for the changes discussed above, there have been no other changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 58 Item 9B. Other Information Immaterial Correction of Interim Condensed Consolidated Financial Statements Capped Calls In connection with the pricing of the Convertible Notes, we entered into capped call transactions with the Option Counterparties. At issuance the Company concluded that the Capped Calls met the criteria for equity classification because they are indexed to the Company’s common stock and the Company has discretion to settle the Capped Calls in shares or cash. As a result, the amount paid for the Capped Calls was recorded as a reduction to additional paid-in capital. When the Company entered into the Capped Calls, the Company executed certain side letters (the “Side Letters”) with the counterparties that replaced some of the terms described in the primary contract including the volatility inputs used to value the Capped Calls under certain circumstances. Upon further evaluation of the accounting during the three months ended March 31, 2023, the Company concluded that the modification to the volatility inputs in the side letters precluded the Capped Calls from being accounted for as an equity instrument indexed to its own stock and should be accounted for as a freestanding derivative instrument asset recognized at fair value, with subsequent changes in fair value recognized in earnings. During the three months ended March 31, 2023, the Company began to account for the Capped Calls as derivative assets, with subsequent changes in fair value being recorded through earnings. During the three months ended December 31, 2023, after consultation with the staff of the Office of the Chief Accountant of the SEC, the Company concluded that the original equity classification accounting treatment was acceptable. As a result, the Company reclassified the derivative asset recognized during the interim periods of 2023 as a reduction to equity and reversed the related mark to market adjustments recognized during the interim periods of 2023. Redeemable Perpetual Preferred Stock At issuance, the Company evaluated the accounting for the instruments issued pursuant to the SPA and determined the Series A Shares and common stock issued in the Initial Closing, as well as the Prepaid Forward Contract, and Put Option are freestanding instruments that are classified in equity. During the first quarter of 2023, the Company reconsidered the provisions of the Put Option and concluded that it should be accounted for as a freestanding derivative instrument asset accounted for at fair value with subsequent fair value adjustments recognized in earnings. During the fourth quarter of 2023, after consultation with the staff of the Office of the Chief Accountant of the SEC, the Company concluded that the original equity accounting classification was correct. As a result, the Company reclassified the derivative asset recognized during the interim periods of 2023 as a reduction of equity and also reversed the related fair value adjustments. Management evaluated the above misstatements and concluded they were not material to the interim periods of 2023, individually or in aggregate. As a result, the Company plans to prospectively correct the relevant prior period condensed consolidated financial statements and related footnotes for these misstatements. The following tables reflect the effects of the correction on all affected line items of the Company’s previously reported condensed consolidated interim financial statements to be presented as comparative in the Form 10-Q for the nine months ended September 30, 2024: 59 Condensed Consolidated Statements of Operations (unaudited) Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 (in thousands) As Previously Reported Adjustments As Corrected As Previously Reported Adjustments As Corrected Change in fair value of derivative assets $ 116 $ (116) $ — $ (1,140) $ 1,140 $ — Total other income (expense) (9,762) (116) (9,878) (30,242) 1,140 (29,102) Income (loss) before income tax expense 30,443 (116) 30,327 153,662 1,140 154,802 Income tax expense (benefit) 7,229 — 7,229 39,508 (2,604) 36,904 Net income (loss) 23,214 (116) 23,098 114,154 3,744 117,898 Net income (loss) to common shareholders $ 10,123 $ (116) $ 10,007 $ 75,795 $ 3,744 $ 79,539 Income per common share Basic $ 0.07 $ — $ 0.07 $ 0.50 $ 0.02 $ 0.52 Diluted $ 0.07 $ — $ 0.07 $ 0.50 $ 0.02 $ 0.52 Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 (in thousands) As Previously Reported Adjustments As Corrected As Previously Reported Adjustments As Corrected Net income (loss) $ 23,214 $ (116) $ 23,098 $ 114,154 $ 3,744 $ 117,898 Comprehensive income (loss) $ 719 $ (116) $ 603 $ 129,443 $ 3,744 $ 133,187 60 Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (unaudited) Three Months Ended September 30, 2023 (in thousands) Additional Paid-In Capital Accumulated Deficit Total Stockholders’ Equity As Previously Reported Balance at June 30, 2023 $ 417,624 $ (176,530) $ 287,454 Net income — 23,214 23,214 Balance at September 30, 2023 407,916 (153,316) 278,465 Adjustments Balance at June 30, 2023 (52,914) 3,860 (49,054) Net loss — (116) (116) As Corrected Balance at June 30, 2023 364,710 (172,670) 238,400 Net income — 23,098 23,098 Balance at September 30, 2023 $ 355,002 $ (149,572) $ 229,295 Nine Months Ended September 30, 2023 (in thousands) Additional Paid-In Capital Accumulated Deficit Total Stockholders’ Equity As Previously Reported Balance at December 31, 2022 $ 383,176 $ (267,470) $ 124,281 Correction of the Capped Call and Put Option errors 52,914 — 52,914 Net income — 114,154 114,154 Balance at September 30, 2023 407,916 (153,316) 278,465 Adjustments Correction of the Capped Call and Put Option errors (52,914) — (52,914) Net income — 3,744 3,744 As Corrected Balance at December 31, 2022 383,176 (267,470) 124,281 Correction of the Capped Call and Put Option errors — — — Net income — 117,898 117,898 Balance at September 30, 2023 $ 355,002 $ (149,572) $ 229,295 Condensed Consolidated Statements of Cash Flows (unaudited) Nine Months Ended September 30, 2023 (in thousands) As Previously Reported Adjustments As Corrected Net income $ 114,154 $ 3,744 $ 117,898 Deferred tax expense (benefit) 284 (2,612) (2,328) Change in fair value of derivative assets 1,140 (1,140) — Income tax payable $ (738) $ 8 $ (730) 61 The following tables reflect the effects of the correction on all affected line items of the Company’s previously reported condensed consolidated financial statements to be presented as comparative in the Form 10-Q for six months ended June 30, 2024: Condensed Consolidated Statements of Operations (unaudited) Three Months Ended June 30, 2023 Six Months Ended June 30, 2023 (in thousands) As Previously Reported Adjustments As Corrected As Previously Reported Adjustments As Corrected Change in fair value of derivative assets $ 694 $ (694) $ — $ (1,256) $ 1,256 $ — Total other income (expense) (9,030) (694) (9,724) (20,480) 1,256 (19,224) Income (loss) before income tax expense 87,211 (694) 86,517 123,219 1,256 124,475 Income tax expense (benefit) 22,403 (1,051) 21,352 32,279 (2,604) 29,675 Net income 64,808 357 65,165 90,940 3,860 94,800 Net income to common shareholders $ 52,024 $ 357 $ 52,381 $ 65,672 $ 3,860 $ 69,532 Income per common share Basic $ 0.34 $ — $ 0.34 $ 0.44 $ 0.03 $ 0.47 Diluted $ 0.34 $ — $ 0.34 $ 0.43 $ 0.03 $ 0.46 Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) Three Months Ended June 30, 2023 Six Months Ended June 30, 2023 (in thousands) As Previously Reported Adjustments As Corrected As Previously Reported Adjustments As Corrected Net income $ 64,808 $ 357 $ 65,165 $ 90,940 $ 3,860 $ 94,800 Comprehensive income $ 88,720 $ 357 $ 89,077 $ 128,724 $ 3,860 $ 132,584 62 Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (unaudited) Three Months Ended June 30, 2023 (in thousands) Additional Paid-In Capital Accumulated Deficit Total Stockholders’ Equity As Previously Reported Balance at March 31, 2023 $ 426,221 $ (241,338) $ 207,330 Net income — 64,808 64,808 Balance at June 30, 2023 417,624 (176,530) 287,454 Adjustments Balance at March 31, 2023 (52,914) 3,503 (49,411) Net income — 357 357 As Corrected Balance at March 31, 2023 373,307 (237,835) 157,919 Net income — 65,165 65,165 Balance at June 30, 2023 $ 364,710 $ (172,670) $ 238,400 Six Months Ended June 30, 2023 (in thousands) Additional Paid-In Capital Accumulated Deficit Total Stockholders’ Equity As Previously Reported Balance at December 31, 2022 $ 383,176 $ (267,470) $ 124,281 Correction of the Capped Call and Put Option errors 52,914 — 52,914 Net income — 90,940 90,940 Balance at June 30, 2023 417,624 (176,530) 287,454 Adjustments Correction of the Capped Call and Put Option errors (52,914) — (52,914) Net income — 3,860 3,860 As Corrected Balance at December 31, 2022 383,176 (267,470) 124,281 Correction of the Capped Call and Put Option errors — — — Net income — 94,800 94,800 Balance at June 30, 2023 $ 364,710 $ (172,670) $ 238,400 Condensed Consolidated Statements of Cash Flows (unaudited) Six Months Ended June 30, 2023 (in thousands) As Previously Reported Adjustments As Corrected Net income $ 90,940 $ 3,860 $ 94,800 Deferred tax expense (benefit) 816 (2,612) (1,796) Change in fair value of derivative assets 1,256 (1,256) — Income tax payable $ 9,830 $ 8 $ 9,838 63 The following tables reflect the effects of the correction on all affected line items of the Company’s previously reported condensed consolidated financial statements to be presented as comparative in the Form 10-Q for three months ended March 31, 2024: Condensed Consolidated Statements of Operations (unaudited) Three Months Ended March 31, 2023 (in thousands) As Previously Reported Adjustments As Corrected Change in fair value of derivative assets $ (1,950) $ 1,950 $ — Total other income (expense) (11,450) 1,950 (9,500) Income before income tax benefit 36,008 1,950 37,958 Income tax expense (benefit) 9,876 (1,553) 8,323 Net income 26,132 3,503 29,635 Net income to common shareholders $ 13,648 $ 3,503 $ 17,151 Income per common share Basic $ 0.09 $ 0.02 $ 0.11 Diluted $ 0.09 $ 0.02 $ 0.11 Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) Three Months Ended March 31, 2023 (in thousands) As Previously Reported Adjustments As Corrected Net income $ 26,132 $ 3,503 $ 29,635 Comprehensive income $ 40,004 $ 3,503 $ 43,507 Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (unaudited) Three Months Ended March 31, 2023 (in thousands) Additional Paid-In Capital Accumulated Deficit Total Stockholders’ Equity As Previously Reported Balance at December 31, 2022 $ 383,176 $ (267,470) $ 124,281 Correction of the Capped Call and Put Option errors 52,914 — 52,914 Net income — 26,132 26,132 Balance at March 31, 2023 426,221 (241,338) 207,330 Adjustments Correction of the Capped Call and Put Option errors (52,914) — (52,914) Net income — 3,503 3,503 As Corrected Balance at December 31, 2022 383,176 (267,470) 124,281 Correction of the Capped Call and Put Option errors — — — Net income — 29,635 29,635 Balance at March 31, 2023 $ 373,307 $ (237,835) $ 157,919 64 Condensed Consolidated Statements of Cash Flows (unaudited) Three Months Ended March 31, 2023 (in thousands) As Previously Reported Adjustments As Corrected Net income $ 26,132 $ 3,503 $ 29,635 Deferred tax expense (benefit) 4,555 (1,553) 3,002 Change in fair value of derivative assets $ 1,950 $ (1,950) $ — Trading Arrangements During the fiscal quarter ended December 31, 2023, certain of our directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) entered into contracts, instructions or written plans for the purchase or sale of our securities that are intended to satisfy the conditions specified in Rule 10b5-1(c) under the Exchange Act for an affirmative defense against liability for trading in securities on the basis of material nonpublic information. We refer to these contracts, instructions, and written plans as “ Trading Plans ” and each one as a “Trading Plan.” Director/Officer Action & Date of Action Commencement of Trading Period Scheduled Termination of Trading Period (1) Security Covered Maximum Number of Securities to be Purchased or Sold Pursuant to the Rule 10b5-1 Trading Plan (2) Covers Purchase or Sale? Travis Rose , Chief Revenue Officer Adoption November 16, 2023 February 20, 2024 December 31, 2024 Common Stock 11,500 Sale We maintain a website at www.arraytechinc.com. The contents of our website are not incorporated in, or otherwise to be regarded as part of, this Annual Report on Form 10-K. We make available, free of charge on our website, access to our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we file or furnish them electronically with the SEC. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections None. PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this item and not set forth below will be contained in our definitive proxy statement to be filed with the Securities and Exchange Commission in connection with our 2024 Annual Meeting of Stockholders, or the Proxy Statement, which is expected to be filed not later than 120 days after the end of our fiscal year ended December 31, 2023, and is incorporated herein by reference. We have adopted a written Code of Business Conduct that applies to all officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Business Conduct is available on our website at 65 www.arraytechinc.com. If we make any substantive amendments to the Code of Business Conduct or grant any waiver from a provision of the Code of Business Conduct to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website or in a Current Report on Form 8-K. Item 11. Executive Compensation The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. Item 14. Principal Accountant Fees and Services The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. Auditor Firm Id: 34 Auditor Name: Deloitte & Touche LLP Auditor Location: Tempe, AZ, United States PART IV Item 15. Exhibit and Financial Statement Schedules (a)(1) Financial Statements. The financial statements and supplementary data required by this item are included after the Signature page of this Annual Report on Form 10-K beginning on page F-1. (a)(2) Financial Statement Schedules. All schedules have been omitted because they are not required or because the required information is given in the Financial Statements or Notes thereto. (a)(3) Exhibits. The exhibits listed in the Exhibit Index below are filed or incorporated by reference as part of this Annual Report. Exhibit Index Number Description of Document Form Date No. 3.1 Amended and Restated Certificate of Incorporation of Array Technologies, Inc., dated October 19, 2020 8-K 10/19/2020 3.1 3.2 Amended and Restated Bylaws of Array Technologies, Inc., dated October 19, 2020 8-K 10/19/2020 3.2 66 Number Description of Document Form Date No. 3.3 Certificate of Designations of Series A Perpetual Preferred Stock 8-K 08/11/2021 3.1 4.1 Description of securities registered under Section 12 of the Exchange Act 10-K 03/10/2021 4.1 4.2 Indenture, dated December 3, 2021, among Array Technologies, Inc. and U.S. Bank National Association 8-K 12/07/2021 4.1 4.3 Form of 1.00% Convertible Senior Note due 2028 8-K 12/07/2021 4.1 10.1 Registration Rights Agreement, dated August 10, 2021, by and between Array Technologies, Inc. and BCP Helios Aggregator L.P. 8-K 08/11/2021 10.2 10.2 Registration Rights Agreement, dated January 11, 2022, by and among Array Technologies, Inc. and the holders identified therein 8-K 01/11/2022 10.1 10.3 Credit Agreement, dated October 14, 2020, by and among Array Tech, Inc. (f/k/a Array Technologies, Inc.), as borrower, ATI Investment Sub, Inc., as guarantor, Goldman Sachs Bank USA, as administrative agent and collateral agent, and the Lenders (as defined therein) from time to time party thereto 8-K 10/19/2020 10.2 10.4 Amended and Restated ABL Credit and Guarantee Agreement, dated March 23, 2020, by and among ATI Investment Holdings, Inc., Wells Fargo Bank, National Association, as administrative agent, and the lenders from time to time party thereto S-1/A 10/14/2020 10.1 10.5 Tax Receivable Agreement, dated July 8, 2016, between Array Tech, Inc. (f/k/a Array Technologies, Inc.) and Ron P. Corio S-1/A 10/14/2020 10.3 10.6 Form of Array Technologies, Inc. 2020 Long-Term Incentive Plan S-1/A 10/7/2020 10.4 10.9 Employment Offer Letter, dated April 3, 2022, between Array Tech, Inc. and Kevin Hostetler 8-K 4/5/2022 10.1 10.10* Employment Offer Letter, dated March 7, 2019 , between Array Tech, Inc. (f/k/a Array Technologies, Inc. and Nipul Patel 10.11* Employment Offer Letter, dated July 25, 2022, between Array Tech, Inc. and Terrance Collins 10.12* Employment Offer Letter, dated April 7, 2022, between Array Tech, Inc. and Tyson Hottinger 10.13* Employment Offer Letter, dated November 28 , 20 22 , between Array Tech, Inc. and Neil Manning 10.14 Employment Offer Letter, dated November 3, 2023 , between Array Tech, Inc. and Kurt Wood 8-K 11/07/2023 10.1 10.15 Array Technologies, Inc. Executive Severance and Change in Control Plan 8-K 04/05/2022 10.2 10.16 Transition and Separation Agreement, dated November 3, 2023, by and between Array Technologies, Inc. and Nipul Patel 8-K 11/07/2023 10.2 10.17 Form of Director and Officer Indemnification Agreement S-1/A 10/14/2020 10.11 10.18 Employment Agreement Terms 10-K 03/10/2021 10.13 67 Number Description of Document Form Date No. 10.19 Amendment No. 1, dated February 23, 2021, to the credit agreement by and among Array Tech, Inc. (f/k/a Array Technologies, Inc.), as borrower, ATI Investment Sub, Inc., as guarantor, Goldman Sachs Bank USA, as administrative agent and collateral agent, and the lenders from time to time party thereto 10-K 03/10/2021 10.14 10.20 Amendment No. 2, dated February 26, 2021, to the credit agreement by and among Array Tech, Inc. (f/k/a Array Technologies, Inc.), as borrower, ATI Investment Sub, Inc., as guarantor, Goldman Sachs Bank USA, as administrative agent and collateral agent, and the lenders from time to time party thereto 8-K 03/02/2021 10.1 10.21 Form of Capped Call Confirmation 8-K 12/07/21 10.1 10.22* F orm of Capped Call Side Letter 21.1* List of Subsidiaries of the Registrant 23.1* Consent of Independent Registered Public Accounting Firm 23.2* Consent of Independent Registered Public Accounting Firm 31.1* Certification of the Chief Executive Officer, as required by Section 302 of the Sarbanes- Oxley Act of 2002 (18 U.S.C. 1350) 31.2* Certification of the Chief Financial Officer, as required by Section 302 of the Sarbanes- Oxley Act of 2002 (18 U.S.C. 1350) 32.1** Certification of the Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) 32.2** Certification of the Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) 97* Array Technologies, Inc. Clawback Policy 101* Interactive Data Files 104* Cover Page Interactive Data Files * Filed herewith ** Furnished herewith + Exhibits and schedules have been omitted pursuant to Regulation S-K Item 601(a)(5) and will be furnished on a supplemental basis to the Securities and Exchange Commission upon request. Item 16. Form 10–K Summary None. 68 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 27, 2024. Array Technologies, Inc. By: /s/ Kevin Hostetler Kevin Hostetler Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated. Signature Title Date /s/ Kevin Hostetler Chief Executive Officer February 27, 2024 Kevin Hostetler (Principal Executive Officer) /s/ Kurt Wood Chief Financial Officer February 27, 2024 Kurt Wood (Principal Financial and Accounting Officer) /s/ Brad Forth Chairman of the Board of Directors February 27, 2024 Brad Forth /s/ Paulo Almirante Member of the Board of Directors February 27, 2024 Paulo Almirante /s/ Troy Alstead Member of the Board of Directors February 27, 2024 Troy Alstead /s/ Orlando D. Ashford Member of the Board of Directors February 27, 2024 Orlando D. Ashford /s/ Jayanthi Iyengar Member of the Board of Directors February 27, 2024 Jayanthi Iyengar /s/ Bilal Khan Member of the Board of Directors February 27, 2024 Bilal Khan /s/ Tracy Jokinen Member of the Board of Directors February 27, 2024 Tracy Jokinen 69 Signature Title Date /s/ Gerrard Schmid Member of the Board of Directors February 27, 2024 Gerrard Schmid 70 INDEX TO FINANCIAL STATEMENTS Array Technologies, Inc. and Subsidiaries Reports of Independent Registered Public Accounting Firms F-2 Consolidated Balance Sheets F- 8 Consolidated Statements of Operations F- 10 Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders' Equity (Deficit) F- 12 Consolidated Statements of Cash Flows F- 14 Notes to Consolidated Financial Statements F- 16 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Array Technologies, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Array Technologies, Inc. (the "Company") as of December 31, 2023, the related consolidated statements of operations, comprehensive income (loss), changes in redeemable perpetual preferred stock and stockholders’ equity (deficit), and cash flows, for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2024 , expressed an adverse opinion on the Company’s internal control over financial reporting because of material weaknesses. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. F-2 Goodwill – STI Operations Reporting Unit – Refer to Note 2 and 7 to the financial statements Critical Audit Matter Description The Company’s goodwill for its STI Operations reporting unit (“STI”) is tested annually for impairment during the fourth quarter of each year, and more frequently if events and circumstances indicate that the assets might be impaired. The Company’s evaluation of its STI goodwill for impairment involves the comparison of the fair value of the reporting unit to its carrying value. The Company used a quantitative approach to determine the fair value of STI based upon the discounted cash flow method, which was compared to an indication of value using the guideline publicly-traded companies method. The fair value determination using the discounted cash flow method requires management to make significant estimates and assumptions related to forecasts of future revenues and earnings before interest, taxes, depreciation, and amortization (EBITDA) margins and the discount rate. The comparison of the fair value of the reporting unit to the marketplace multiples determined under the public company guideline method requires management to make assumptions related to marketplace EBITDA multiples from within a peer public company group. The goodwill balance was $435.6 million as of December 31, 2023, of which $365.9 million was allocated to STI. The fair value of STI exceeded its carrying value as of the measurement date and, therefore, no impairment was recognized. Given the significant judgments made by management to estimate the fair value of STI, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to forecasts of future revenues and EBITDA margins, as well as the selection of the discount rate and the comparison of the fair value to marketplace multiples, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the forecasts of future revenues and EBITDA margins ("forecasts"), the selection of the discount rate and the comparison of the fair value to marketplace multiples for STI included the following, among others: • We tested the effectiveness of controls over management's goodwill impairment evaluation over the determination of the fair value of STI, such as controls related to management's forecasts and the selection of the discount rate and market multiples used. • We evaluated the reasonableness of management's forecasts by comparing the forecasts to (1) historical results, (2) internal communications to management and the Board of Directors, (3) inquiry with non-accounting personnel and (4) forecasted information included in industry reports that STI operates within. • With the assistance of our fair value specialists, we evaluated (1) the valuation methodologies used, (2) the marketplace multiples used by management to compare to the DCF fair value, and (3) the discount rate used in determining the present value of the expected cash flows by developing independent estimates and comparing those to the rate selected by management. F-3 • We considered the impact of (1) changes in the industry and (2) current macroeconomic factors on management's forecasts. Accounting for Capped Calls -- Refer to Note 11 to the financial statements Critical Audit Matter Description In December 2021, in connection with the offering of convertible senior notes, the Company entered into capped call agreements (the “Capped Calls”) related to the issuance of the convertible senior notes. At inception, the Company paid $52.9 million for the capped calls which have been classified as equity. We identified the key judgements around whether the Capped Calls should be equity classified under Accounting Standards Codification Topic 815, Derivatives and Hedging, ("ASC 815”) or accounted for as a derivative asset with subsequent changes in fair value recorded through earnings at the end of each accounting period. When the Company entered into the Capped Calls, the Company executed certain side letters (the “Side Letters”) with the counterparties that modified some of the terms in the primary contract including the volatility inputs used to value the Capped Calls under certain circumstances. The evaluation of the impact of the Side Letters on the volatility inputs requires significant judgement in determining if the Capped Calls can be considered indexed to the Company’s own stock under ASC 815-40-15. This judgement requires a high degree of auditor judgment, and an increased extent of effort, including the need to involve professionals having expertise in accounting for complex financial instruments, when performing audit procedures to evaluate management's judgments and conclusions. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to determining the accounting for the Capped Calls within the financial statements included the following, among others: • We tested the effectiveness of internal controls over management's accounting evaluation of the impact of the side letters on the volatility inputs. • We read the underlying agreements and the related side letters and evaluated the Company's accounting analysis over the accounting of the Capped Calls, including managements conclusions around the impact of the side letters on equity classification. • With the assistance of professionals in our firm having expertise in capped calls and ASC 815, we evaluated the Company's conclusions regarding the accounting guidance and the impact of the side letters on the equity classification of the Capped Calls. /s/ Deloitte & Touche LLP Tempe, Arizona February 27, 2024 We have served as the Company's auditor since 2023. F-4 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Array Technologies, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Array Technologies, Inc. (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 27, 2024, expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with F-5 authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Material Weaknesses A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's assessment: Control Environment - management identified a material weakness due to a deficiency in one of the principles associated with the Control Environment component of the COSO framework, specifically relating to a lack of a sufficient complement of qualified personnel at the appropriate levels to perform control activities in support of preparing the financial statements in accordance with U.S. GAAP. Control Activities - the Company did not design, implement, and monitor general information technology controls in the areas of program change management, user access, and segregation of duties for systems supporting substantially all of STI’s internal control processes and did not design and implement formal accounting policies, procedures, and controls across substantially all of the STI’s business processes to achieve timely, complete, accurate financial accounting, reporting, and disclosures. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2023, of the Company, and this report does not affect our report on such financial statements. /s/ Deloitte & Touche LLP Tempe, Arizona February 27, 2024 F-6 Report of Independent Registered Public Accounting Firm Stockholders and Board of Directors Array Technologies, Inc. Albuquerque, New Mexico Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Array Technologies, Inc. (the “Company”) as of December 31, 2022, the related consolidated statements of operations, and comprehensive income(loss), changes in redeemable perpetual preferred stock and stockholders’ equity(deficit), and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022 , in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ BDO USA, LLP We served as the Company's auditor from 2016 to 2023 Austin, Texas March 22, 2023 F-7 Table of Contents Array Technologies, Inc. Consolidated Balance Sheets (in thousands, except per share and share amounts) December 31, 2023 2022 ASSETS Current assets Cash and cash equivalents $ 249,080 $ 133,901 Accounts receivable, net 332,152 421,183 Inventories 161,964 233,159 Income tax receivables — 3,532 Prepaid expenses and other 89,085 39,434 Total current assets 832,281 831,209 Property, plant and equipment, net 31,886 23,174 Goodwill 435,591 416,184 Other intangible assets, net 350,396 386,364 Deferred income tax assets 15,870 16,466 Other assets 40,717 32,655 Total assets $ 1,706,741 $ 1,706,052 LIABILITIES, REDEEMABLE PERPETUAL PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 119,498 $ 170,430 Accrued expenses and other 70,211 54,895 Accrued warranty reserve 2,790 3,690 Income tax payable 5,754 6,881 Deferred revenue 66,488 178,922 Current portion of contingent consideration 1,427 1,200 Current portion of debt 21,472 38,691 Other current liabilities 48,051 10,553 Total current liabilities 335,691 465,262 Deferred income tax liabilities 66,858 72,606 Contingent consideration, net of current portion 8,936 7,387 Other long-term liabilities 20,428 14,808 Long-term warranty 3,372 1,786 Long-term debt, net of current portion 660,948 720,352 Total liabilities 1,096,233 1,282,201 Commitments and contingencies (Note 16) Series A Redeemable Perpetual Preferred Stock: $ 0.001 par value; 500,000 shares authorized; 432,759 and 406,389 issued, respectively; liquidation preference of $ 493.1 million and $ 493.1 million, respectively 351,260 299,570 F-8 Table of Contents Array Technologies, Inc. Consolidated Balance Sheets (continued) (in thousands, except shares and par value) December 31, 2023 2022 Stockholders’ equity Preferred stock $ 0.001 par value - 4,500,000 shares authorized; none issued at respective dates — — Common stock $ 0.001 par value - 1,000,000,000 shares authorized; 151,242,120 and 150,513,104 shares issued at respective dates 151 150 Additional paid-in capital 344,517 383,176 Accumulated deficit ( 130,230 ) ( 267,470 ) Accumulated other comprehensive income 44,810 8,425 Total stockholders’ equity 259,248 124,281 Total liabilities, redeemable perpetual preferred stock and stockholders’ equity $ 1,706,741 $ 1,706,052 See accompanying Notes to Consolidated Financial Statements. F-9 Table of Contents Array Technologies, Inc. Consolidated Statements of Operations (in thousands) Year Ended December 31, 2023 2022 2021 Revenue $ 1,576,551 $ 1,637,546 $ 853,318 Cost of revenue: Cost of product and service revenue 1,146,442 1,410,270 770,459 Amortization of developed technology 14,558 14,558 14,558 Total cost of revenue 1,161,000 1,424,828 785,017 Gross profit 415,551 212,718 68,301 Operating expenses: General and administrative 159,535 150,777 80,974 Change in fair value of contingent consideration 2,964 ( 4,507 ) 2,696 Depreciation and amortization 38,928 84,581 9,372 Total operating expenses 201,427 230,851 93,042 Income (loss) from operations 214,124 ( 18,133 ) ( 24,741 ) Other (expense) income, net ( 1,015 ) 2,789 ( 905 ) Interest income 8,330 3,181 209 Legal settlement — 42,750 — Foreign currency transaction (loss) gain, net ( 53 ) 1,155 — Interest expense ( 44,229 ) ( 36,694 ) ( 35,684 ) Total other (expense) income ( 36,967 ) 13,181 ( 36,380 ) Income (loss) before income tax expense (benefit) 177,157 ( 4,952 ) ( 61,121 ) Income tax expense (benefit) 39,917 ( 9,384 ) ( 10,718 ) Net income (loss) 137,240 4,432 ( 50,403 ) Preferred dividends and accretion 51,691 48,054 15,715 Net income (loss) to common shareholders $ 85,549 $ ( 43,622 ) $ ( 66,118 ) Income (loss) per common share Basic $ 0.57 $ ( 0.29 ) $ ( 0.51 ) Diluted $ 0.56 $ ( 0.29 ) $ ( 0.51 ) Weighted average common shares outstanding Basic 150,942 149,819 129,984 Diluted 152,022 149,819 129,984 See accompanying Notes to Consolidated Financial Statements. F-10 Table of Contents Array Technologies, Inc. Consolidated Statements of Comprehensive Income (Loss) (in thousands) Year Ended December 31, 2023 2022 2021 Net income (loss) $ 137,240 $ 4,432 $ ( 50,403 ) Foreign currency (1) 36,385 8,425 — Comprehensive income (loss) $ 173,625 $ 12,857 $ ( 50,403 ) (1) There are no tax effects on foreign currency adjustments. See accompanying Notes to Consolidated Financial Statements. F-11 Table of Contents Array Technologies, Inc. Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (Deficit) (in thousands) Temporary Equity Permanent Equity Series A Redeemable Perpetual Preferred Stock Preferred Stock Common Stock Shares Amount Shares Amount Shares Amount Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders’ Equity (Deficit) Balance, December 31, 2020 — $ — — $ — 126,994 $ 127 $ 140,473 $ ( 221,499 ) $ — $ ( 80,899 ) Equity-based compensation — — — — 158 — 13,562 — — 13,562 Issuance of common stock, net — — — — 7,875 8 104,756 — — 104,764 Issuance of Series A Preferred, net of fees 350 229,799 — — — — — — — — Deferred tax impact of capped call — — — — — — ( 40,514 ) — — ( 40,514 ) Preferred cumulative dividends — 8,226 — — — — ( 8,226 ) — — ( 8,226 ) Payment of dividends — ( 8,052 ) — — — — — — — — Preferred accretion — 7,489 — — — — ( 7,489 ) — ( 7,489 ) Net (loss) — — — — — — — ( 50,403 ) — ( 50,403 ) Balance, December 31, 2021 350 237,462 — — — — 135,027 135 202,562 ( 271,902 ) — ( 69,205 ) Equity-based compensation — — — — 339 — 14,543 — — 14,543 Issuance of Series A Redeemable Perpetual Preferred Stock, net of fees 50 32,724 — — — — ( 1,938 ) — — ( 1,938 ) Issuance of common stock, net — — — — 15,147 15 216,063 — — 216,078 Preferred cumulative dividends plus accretion and commitment fees 19 48,054 — — — — ( 48,054 ) — — ( 48,054 ) Dividends paid ( 13 ) ( 18,670 ) — — — — — — — — F-12 Table of Contents Array Technologies, Inc. Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (Deficit) (in thousands) Temporary Equity Permanent Equity Series A Redeemable Perpetual Preferred Stock Preferred Stock Common Stock Shares Amount Shares Amount Shares Amount Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders’ Equity (Deficit) Net income — — — — — — — 4,432 — 4,432 Foreign currency translation — — — — — — — — 8,425 8,425 Balance, December 31, 2022 406 299,570 — — 150,513 150 383,176 ( 267,470 ) 8,425 124,281 Equity-based compensation — — — — 729 1 14,540 — — 14,541 Preferred cumulative dividends plus accretion and commitment fees 26 51,690 — — — — ( 53,199 ) — — ( 53,199 ) Net income — — — — — — — 137,240 — 137,240 Foreign currency translation — — — — — — — — 36,385 36,385 Balance, December 31, 2023 432 $ 351,260 — $ — 151,242 $ 151 $ 344,517 $ ( 130,230 ) $ 44,810 $ 259,248 See accompanying Notes to Consolidated Financial Statements. F-13 Table of Contents Array Technologies, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2023 2022 2021 Operating activities: Net income (loss) $ 137,240 $ 4,432 $ ( 50,403 ) Adjustments to net income (loss): Provision for (recovery of) bad debts 2,527 2,599 ( 467 ) Deferred tax benefit ( 8,862 ) ( 31,565 ) ( 10,102 ) Depreciation and amortization 40,268 86,501 11,388 Amortization of developed technology 14,558 14,558 14,558 Amortization of debt discount and issuance costs 10,570 6,857 15,036 Gain on debt refinancing ( 457 ) — — Equity-based compensation 14,540 14,982 13,757 Contingent consideration 2,964 ( 4,507 ) 2,696 Warranty provision 4,666 4,152 516 Write-down of inventories 6,431 ( 859 ) 990 Changes in operating assets and liabilities, net of business acquisition: Accounts receivable 92,800 ( 76,984 ) ( 116,848 ) Inventories 66,743 20,870 ( 88,184 ) Income tax receivables 9 5,611 8,106 Prepaid expenses and other ( 10,840 ) 19,124 ( 21,226 ) Accounts payable ( 37,654 ) 12,667 7,015 Accrued expenses and other 5,325 1,024 9,133 Income tax payable 1,936 ( 755 ) ( 8,754 ) Lease liabilities 1,177 3,784 221 Deferred revenue ( 111,986 ) 59,002 ( 50,619 ) Net cash provided by (used in) operating activities 231,955 141,493 ( 263,187 ) Investing activities: Purchase of property, plant and equipment ( 16,989 ) ( 10,619 ) ( 3,357 ) Retirement/disposal of PP&E 168 — — Acquisition of STI, net of cash acquired — ( 373,818 ) — Investment in equity securities — — ( 11,975 ) Net cash used in investing activities ( 16,821 ) ( 384,437 ) ( 15,332 ) Financing activities: Proceeds from Series A issuance — 33,098 224,987 Proceeds from common stock issuance — 15,885 120,645 Series A equity issuance costs and commitment fees ( 1,509 ) ( 1,893 ) ( 7,195 ) Common stock issuance costs — ( 450 ) ( 3,873 ) F-14 Table of Contents Array Technologies, Inc. Consolidated Statements of Cash Flows (continued) (in thousands) Year Ended December 31, 2023 2022 2021 Dividends paid on Series A Preferred — ( 18,670 ) ( 8,051 ) Payments on revolving credit facility — ( 116,000 ) ( 126,033 ) Proceeds from revolving credit facility — 116,000 126,033 Proceeds from issuance of other debt 63,311 20,188 — Proceeds from issuance of convertible notes — — 413,321 Premium paid on capped call — — ( 52,870 ) Fees paid on issuance of convertible notes — — ( 1,591 ) Principal payments on term loan facility ( 74,300 ) ( 14,300 ) — Principal payments on other debt ( 88,063 ) ( 23,935 ) ( 133,225 ) Contingent consideration payments ( 1,200 ) ( 1,483 ) ( 7,810 ) Debt issuance costs — — ( 6,590 ) Net cash (used in) provided by financing activities ( 101,761 ) 8,440 537,748 Effect of exchange rate changes on cash and cash equivalent balances 1,806 735 — Net change in cash and cash equivalents 115,179 ( 233,769 ) 259,229 Cash and cash equivalents, beginning of period 133,901 367,670 108,441 Cash and cash equivalents, end of period $ 249,080 $ 133,901 $ 367,670 Supplemental Cash Flow Information Cash paid for interest $ 43,949 $ 23,118 $ 24,306 Cash paid for income taxes $ 45,942 $ 10,739 $ 13,318 Non-cash Investing and Financing Activities Dividends accrued on Series A Preferred $ 26,370 $ 6,389 $ — Stock consideration paid for acquisition of STI $ — $ 200,224 $ — See accompanying Notes to Consolidated Financial Statements. F-15 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements 1. Organization, Business and Out-of-Period Adjustments Array Technologies, Inc. (the “Company”), formerly ATI Intermediate Holdings, LLC, is a Delaware corporation formed in December 2018 as a wholly owned subsidiary of ATI Investment Parent, LLC (“Former Parent”). On October 14, 2020, the Company converted from a Delaware limited liability company to a Delaware corporation and changed the Company’s name to Array Technologies, Inc. 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. Upon completion of the STI Acquisition, the Company began operating as two reportable operating segments: the Array Legacy operating segment (“Array Legacy Operations”) and the newly acquired operations (the “STI Legacy Operations”) operating segment pertaining to STI. Headquartered in Albuquerque, New Mexico, the Company is a leading global manufacturer and supplier of utility-scale solar tracking systems and technologies. 2. Summary of Significant Accounting Policies Basis of Accounting and Presentation The accompanying consolidated financial statements were prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). 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 consolidated statements of operations. The Company believes this presentation enhances the comparability of the Company’s financial statements to industry peers. This reclassification resulted in $ 14.6 million recorded to Amortization of developed technology within Total cost of revenue and a $ 14.6 million decrease to Depreciation and amortization within Total operating expenses during the year ended December 31, 2022. This reclassification 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 consolidated balance sheets or consolidated statements of cash flows for the dates and annual periods presented. Revenue in 2023, excludes a 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. For the year ended December 31, 2023, the Brazil ICMS value-added tax benefit was $ 23.2 million. For the year ended December 31, 2022, an ICMS benefit of $ 12.3 million was included in revenues. This reclassification in the current year 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 consolidated balance sheets or consolidated statements of cash flows. F-16 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements Principles of Consolidation The consolidated financial statements include the accounts of Array Technologies, Inc. and its Subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation. Use of 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 and the reported amounts of revenues and expenses during the reporting period. Although management believes its estimates are reasonable, actual results could differ from those estimates. 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. 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 of 2023, which has led to many shipping companies pausing 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 – 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 to reduce any negative impact on our business, financial condition and results of operations. Inflation 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. 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. The Company has, and will continue to, enter into arrangements with torque tube manufacturing vendors that produce 45X Credit eligible parts, in which the vendors agree to share a portion of the benefit received related to Array purchases, in the form of “Vendor Rebates”. F-17 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements The Company accounts 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 the Company recognizes 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. During the three months ended December 31, 2023, the Company had accumulated a total of $ 49.9 million in Vendor Rebates from current year activity, of which $ 48.4 million was outstanding and included in Prepaid expenses and other, and $ 40.6 million of deferred consideration was included in Other current liabilities, on the consolidated balance sheet as of December 31, 2023. Foreign Currency Translation Our foreign subsidiaries have functional currencies that are different than our reporting currency. When translating balances from the functional currency to the reporting currency, assets and liabilities are translated into U.S. dollars at period end exchange rates, retained earnings is translated at historical rates, and income, expenses, and cash flow items are translated at average exchange rates prevailing during the period. Translation adjustments for these subsidiaries are accumulated within accumulated other comprehensive income. In situations when a foreign subsidiary has a local currency that is different than the functional currency, monetary assets and liabilities are translated into the functional currency at the period end exchange rates, and non-monetary assets and the related income statement effects are translated into the functional currency using historical rates. Gains and losses that result from remeasurement from a local currency to the functional currency are included in earnings. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. We regularly maintain cash balances that exceed insured amounts, but we have experienced no losses associated with these amounts to date. Accounts Receivable The Company’s accounts receivable are due primarily from solar contractors across the U.S. and internationally. Credit is extended in the normal course of business based on evaluation of a customer’s financial condition and, generally, collateral is not required. Trade receivables consist of uncollateralized customer obligations due under normal trade terms requiring payment within 30 to 60 days of the invoice date. Management regularly reviews outstanding accounts receivable and provides for estimated credit losses through an estimate of expected credit losses valuation account. The Company adopted Accounting Standards Updated (“ASU”) No. 2016-13, Financial Instruments - Credit Losses, on January 1, 2021, which revised the methodology for measuring credit losses on financial instruments including trade accounts receivable and the timing of when such losses are recorded. The Company adopted ASU 2016-13 using a modified retrospective approach with a cumulative effect adjustment to the opening balance of retained earnings, which had no impact on the consolidated financial statements. The allowance for credit losses is a valuation account that is deducted from a financial asset’s amortized cost to present the net amount we expect to collect from the asset. We estimate allowances for credit losses using relevant available information from both internal and external sources. We monitor the estimated credit losses associated with our trade accounts receivable and unbilled accounts receivable based primarily on our collection history and the delinquency status of amounts owed to us, which we determine based on the aging of such receivables. In evaluating the level of established reserves, management makes judgments regarding the customers’ ability to make required payments, economic events, and other factors. As the financial conditions of these customers change, circumstances develop, or additional F-18 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements information becomes available, adjustments to the valuation account may be required. When deemed uncollectible, the receivable is charged against the valuation account for credit losses or directly written off. Unbilled receivables represent temporary timing differences between shipments made and billing milestones achieved and are recorded in the accounts receivable balances. Such amounts have not been billed due to pending commercial criteria such as billing on a specified date of the month or upon completion of mega-watt deliveries. Unbilled receivables are invoiced once the underlying commercial criteria have been met and we expect payment within 30 to 60 days. Inventories Inventories consist of raw materials and finished goods and are stated at the lower of cost or estimated net realizable value using primarily the moving average cost method that approximates the FIFO method. Provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Property, Plant and Equipment Property, plant and equipment are recorded at cost, net of accumulated depreciation and amortization. Improvements, betterments and replacements which extend the life of an asset are capitalized. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the respective assets. Repair and maintenance costs are expensed as incurred. A gain or loss on the sale of property, plant and equipment is calculated as the difference between the cost of the asset disposed of, net of depreciation, and the sales proceeds received. A gain or loss on an asset disposal is recognized in the period that the sale occurs. Leases Operating lease arrangements are comprised primarily of real estate and equipment agreements. The Company determines if an arrangement contains a lease at inception based on whether it conveys the right to control the use of an identified asset in exchange for consideration. Lease right-of-use assets (“ROU assets”) and associated lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Certain lease agreements may include one or more options to extend or terminate a lease. Lease terms are inclusive of these options if it is reasonably certain that the Company will exercise such options. ROU assets also include any initial direct costs and prepayments less lease incentives. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. Lease expense is recognized on a straight-line basis over the lease term. ROU assets and the corresponding operating lease liabilities are included in other assets and other liabilities in our consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our consolidated balance sheets. F-19 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements Impairment of Long-Lived Assets When events, circumstances or operating results indicate that the carrying values of long-lived assets might not be recoverable through future operations, the Company prepares projections of the undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the projections indicate that the recorded amounts are not expected to be recoverable, such amounts are reduced to estimated fair value. Management determined there was no impairment for the years ended December 31, 2023, 2022 and 2021. Goodwill and Indefinite-Lived Intangible Asset Goodwill reflects the excess of the consideration transferred, including the fair value of any contingent consideration over the assigned fair values of the identifiable net assets acquired. Goodwill is not amortized and is assigned at the reporting unit level and tested for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. 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 cannot determine if it is more likely than not that the fair value of a reporting unit is greater than its carrying value, a quantitative assessment is performed. 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. When determining the fair value of a reporting unit using the quantitative approach, we determine the fair value of the reporting unit using both a discounted cash flow (“DCF”) analysis and guideline publicly-traded companies (“GPC”) analysis to determine the fair value of the reporting unit. The Company has one indefinite-lived intangible asset for a Trade name it acquired as part of a past acquisition. The Company performs an annual impairment test on its Trade name indefinite-lived intangible asset, utilizing a qualitative or quantitative impairment analysis during the fourth quarter of each year. Investment in Equity Securities In 2021, the Company invested $ 12.0 million in the preferred stock of a private company. The investment is accounted for, in accordance with ASC 321 Investments — Equity Securities. Because the securities do not have a readily determined fair value, they are valued at cost, less any impairment. If the Company identifies an observable price change in an orderly transaction, the Company will measure the investment at fair value as of the date the observable transaction occurred. The equity investment is recorded in other assets on the consolidated balance sheets. No impairment has been recognized since the date of investment. Amortizable and Other Intangible Assets The Company amortizes identifiable finite lived intangible assets consisting of developed technology, customer relationships, contractual backlog and the STI trade name on a straight-line basis over the assets’ estimated useful lives. The basis of amortization approximates the pattern in which the assets are utilized, over their estimated useful lives. F-20 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements The Array Technologies trade name has been determined to have an indefinite life and, therefore, is not amortized but is subject to an annual impairment test or at any other time when impairment indicators exist. The Company did no t recognize any impairment charges for the years ended December 31, 2023, 2022 and 2021. Deferred Offering Costs Deferred offering costs consist primarily of registration fees, filing fees, listing fees, specific legal and accounting costs, and transfer agent fees, which are direct and incremental fees related to the offerings. Deferred offering costs were offset against the proceeds. Debt Discount and Issuance Costs Debt discount and issuance costs incurred to issue debt are deferred and amortized using the effective interest method as a component of interest expense over the life of the related debt agreement. Amortization expense of debt discount and deferred issuance costs was $ 10.6 million, $ 6.9 million and $ 15.0 million (including $ 9.6 million in write-offs in connection with unscheduled principal payoffs that occurred in February and August of 2021), for the years ended December 31, 2023, 2022 and 2021, respectively. Revenue Recognition In accordance with ASC 606, the Company recognizes revenues from the sale of solar tracking systems, parts, installation services, extended warranties on solar tracker system components and software licenses along with associated maintenance and support. The Company 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. 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. Further, the Company assesses whether control of the product or services promised under the contract is transferred to the customer at a point in time or over time. Performance Obligations The Company’s contracts for specific solar tracker system projects with customers are predominantly accounted for as a single performance obligation, because the Company is integrating the solar tracking system components and related services as part of a single project. The Company’s performance creates and enhances an asset that the customer controls as the Company performs under the contract, which is principally as tracker system components are delivered to the designated project site. The Company sources the component parts from third party manufacturers, it obtains control and receives title of such parts before transferring them to the customer because the Company is responsible for fulfillment to its customer. The Company’s engineering services and professional services are interdependent with the component parts whereby the parts form an input into a combined output for which it is the principal, and the Company could redirect the parts before they are transferred to the customer if needed. The customer owns the work-in-process over the course of the project and the Company’s performance enhances a customer-controlled asset, resulting in the recognition of the performance obligation over time. F-21 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements In contracts with a single performance obligation, the Company’s 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., the “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. The costs of materials and hardware components are recognized as incurred, which is typically upon delivery to the customer site or upon transfer of control while in transit. For contracts with customers that result in 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. These contracts include contracts for the sale of components, contracts with installation services, solar tracker systems sold with an extended warranty, and contracts that include the sale of software and maintenance. For all years presented, the transaction price associated with extended warranties and the sale of software and maintenance was not material. The Company uses the expected cost-plus margin approach to estimate the standalone selling price of each performance obligation. For contracts related to the sale of components as opposed to contracts to provide an integrated solar tracker project, the Company’s obligation to the customer is to deliver components that are used by the customer to create a tracker system and does not include engineering or other professional services or the obligation to provide such services in the future. Under these arrangements, each component is a distinct performance obligation, and often the components are delivered in batches at different points in time. The Company estimates the standalone selling price (“SSP”) of each performance obligation based on a cost-plus margin approach. Revenue allocated to a component is recognized at the point in time that control of the component transfers to the customer, which is usually upon delivery to the customer’s site. 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 for goods or services that 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. Bill and Hold Arrangements In certain situations, the Company recognizes revenue under bill-and-hold arrangements with its customers. In all bill-and-hold arrangements, because the customers lack sufficient storage capacity to accept a large amount of material prior to the start of construction, they request that the Company keep the product in our custody. The material is bundled or palletized in the Company’s warehouses, identified separately as belonging to the respective customer and is ready for immediate transport to the customer project upon customer request. Additionally, title and risk of loss has passed to the customer and the Company does not have the ability to use the product or direct it to another customer. 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. These assumptions include the cost and F-22 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements availability of materials. The Company reviews and updates its contract-related estimates on an ongoing basis and recognizes adjustments for any project specific facts and circumstances that could impact the measurement of the extent of progress, such as the total costs to complete the contracts, under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. At contract inception, any variable consideration such as liquidated damages are estimated based on probability of occurrence and then re-evaluated for probability at the end of the quarterly period. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes the total loss in the period it is identified. Contract Balances The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled accounts receivable for goods or services delivered but not invoiced, and deferred revenue (contract liabilities) on the consolidated balance sheets. The majority of the Company’s contract amounts are billed as work progresses in accordance with agreed-upon contractual terms, which generally coincide with the shipment of one or more phases of the project. Billing sometimes occurs subsequent to revenue recognition, resulting in unbilled accounts receivable. The changes in unbilled accounts receivable and the corresponding amounts recorded in revenue relate to fluctuations in the timing and volume of billings for the Company’s revenue recognized over-time. Practical Expedients and Exemptions The Company has elected to adopt certain practical expedients and exemptions as allowed under ASC 606, such as (i) recording sales commissions as incurred because the amortization period is less than one year, (ii) not adjusting for the effects of significant financing components when the contract term is less than one year, (iii) excluding collected sales tax amounts from the calculation of revenue and (iv) accounting for the costs of shipping and handling activities that are incurred after the customer obtains control of the product as fulfillment costs rather than a separate service provided to the customer for which consideration would need to be allocated. Warranty Obligations The Company offers a multi-year assurance type warranty for its products against manufacturer defects and does not contain service elements. For these assurance type warranties, a provision for estimated future costs related to warranty expense is recorded when they are probable and reasonably estimable, which is typically when products are delivered. This provision is based on historical information on the nature, frequency and average cost of claims for each product line. When little or no experience exists for an immature product line, the estimate is based on comparable product lines. These estimates are re-evaluated on an ongoing basis using best-available information and revisions to estimates are made as necessary. Claims estimated to be payable in the following year are classified as current liabilities and those payable beyond one year are classified as long-term liabilities. Income Taxes The Company provides for income taxes based on the provisions of ASC Topic 740 I ncome Taxes (“ASC 740”), which, among other things, requires that recognition of deferred income taxes be measured by the provisions of enacted tax rates in effect at the date of the consolidated financial statements. A valuation allowance is provided to reduce deferred income tax assets if it is more likely than not that all, or some portion, F-23 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements of such deferred tax assets will not be recognized. Provision for estimated income taxes is based upon elements of income and expense reported in the consolidated statements of operations. The Company also files certain corporate state income tax returns. Generally, the Company is subject to examination by U.S. federal, state and non-U.S. income tax authorities. The current provision for income taxes represents actual or estimated amounts payable on tax return filings each year. Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, and for operating loss and tax credit carryforwards. The change in deferred tax assets and liabilities for the period measures the deferred tax provision or benefit for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to the tax provision or benefit in the period of enactment. The Company determines whether uncertain tax positions are more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company recognizes interest and penalties related to unrecognized tax benefits within interest expense and other expenses, respectively, in the consolidated statements of operations. The Company does not have any uncertain tax positions. Equity-Based Compensation The Company recognizes equity-based compensation expense based on the equity award’s grant date fair value. The determination of the fair value of equity awards issued to employees of the Company is based upon the underlying share price and a number of assumptions, including volatility, performance period, risk-free interest rate and expected dividends. The Company values equity awards with a market condition using a Monte Carlo simulation model. The Company accounts for forfeitures as they occur. The grant date fair value of each unit is amortized on a straight-line basis over the requisite service period. Temporary Equity Equity instruments that are redeemable for cash or other assets are classified as temporary equity if the instrument is redeemable, at the option of the holder, at a fixed or determinable price on a fixed or determinable date or upon the occurrence of an event that is not solely within the control of the issuer. Redeemable equity instruments are initially carried at the fair value of the equity instrument at the issuance date, which is subsequently adjusted at each balance sheet date if the instrument is currently redeemable, or probable of becoming redeemable. The Series A Redeemable Perpetual Preferred Stock of the Company, par value $ 0.001 per share (the “Series A Shares”) issued in connection with the SPA as described in Note 12 – Redeemable Perpetual Preferred Stock are classified as temporary equity in the accompanying consolidated financial statements. The Company elected the accreted redemption value method under which it accretes changes in redemption value over the period from the date of issuance of the Series A 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 on the Company’s consolidated statements of changes in redeemable perpetual preferred stock and stockholders’ equity (deficit) and treated similarly to a dividend on preferred stock in accordance with U.S. GAAP. Earnings per Share Basic earnings per share (“EPS”), is computed by dividing net income available to common shareholders by the weighted average shares outstanding during the period. Diluted EPS takes into account the potential F-24 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements dilution that could occur if securities or other contracts to issue shares, such as stock options, unvested restricted stock, or convertible debt, were exercised and converted into shares. The convertible debt is not currently convertible. Diluted EPS is computed by dividing net income available to common shareholders by the weighted average shares outstanding during the period, increased by the number of additional shares that would have been outstanding if the potential shares had been issued and were dilutive. Credit Concentration Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. The Company has no significant off balance sheet concentrations of credit risk. The Company maintains its cash with financial institutions that are believed to be of high credit quality and has not experienced any material losses relating to cash balances. Our customer base consists primarily of large solar developers, independent power producers, utilities and EPCs. We do not require collateral on our accounts receivable. At December 31, 2023, the Company’s largest customer and five largest customers accounted for 2.7 % and 29.6 %, respectively, of total accounts receivable. At December 31, 2022, the Company’s largest and five largest customers constituted 7.9 % and 23.4 % of trade accounts receivable, respectively. During the year ended December 31, 2023, one customer accounted for 13.4 % of total revenue. During the year ended December 31, 2022, two customers accounted for 11.8 % and 10.6 %, respectively, of total revenue. During the year ended December 31, 2021, two customers accounted for 12.6 % and 10.2 %, respectively, of total revenue. Further, our accounts receivable are from companies within the solar industry and, as such, we are exposed to normal industry credit risk. We continually evaluate our reserves for potential credit losses and establish reserves for such losses. Fair Value Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company follows a fair value hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs may be used to measure fair value, as follows: • Level 1 - Quoted prices in active markets for identical assets or liabilities. • Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 - Unobservable inputs that are supported by little or no market activity that are significant to the fair value of the assets or liabilities. The fair values of the Company’s cash, accounts receivable, and accounts payable approximate their carrying values due to their short maturities. The carrying value of the Company’s notes payable approximate their fair values, as they are based on current market rates at which the Company could borrow funds with similar terms. F-25 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements The Company follows the provisions of ASC 820 Fair Value Measurement for nonfinancial assets and liabilities measured at fair value on a non-recurring basis. As it relates to the Company, this applies to certain nonfinancial assets and liabilities acquired in business combinations and measurement of goodwill impairment and non-amortizable intangibles and is thereby measured at fair value, which was determined by the Company with the assistance of third-party valuation specialists. Recent Accounting Pronouncements 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 11 – Debt ). There were no other changes to the agreement. There was no significant impact to the Company’s consolidated financial statements. In November 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU will require public entities to disclose significant segment expenses and other segment items and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Public entities with a single reportable segment will also be required to provide the new disclosures and all the disclosures required under ASC 280. The guidance is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments in this ASU should be applied retrospectively to all periods presented unless it is impracticable. The Company is currently assessing the impact of the guidance on its financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. The standard will become effective for the Company’s fiscal year ended December 31, 2025, with early adoption permitted. The Company is currently assessing the impact of the new guidance on the its consolidated financial statements. 3. Acquisition of STI On January 11, 2022, the Company completed the STI Acquisition pursuant to the purchase agreement, dated November 10, 2021, by and among Amixa Capital, S.L. and Aurica Trackers, S.L., each a company duly organized under the laws of the Kingdom of Spain (together, the “Sellers”) and Mr. Javier Reclusa Etayo (the “STI Purchase Agreement”). The STI Acquisition was funded primarily with borrowings from the Convertible Notes (as defined below) and the issuance of the Series A Shares. The STI Acquisition provided the Company with an immediate presence in Spain, Western Europe, Brazil and South Africa. Transaction expenses incurred in connection with the acquisition are $ 5.6 million recorded in the general and administrative line item on the consolidated statement of operations for the year ended December 31, 2022. In accordance with the Purchase Agreement, the Company paid closing consideration to the Sellers consisting of $ 410.5 million in cash and ( 13,894,800 shares) of the Company’s common stock with an estimated fair value of $ 200.2 million based on the closing share price on the date of acquisition. The fair value of the purchase consideration was $ 610.8 million and resulted in the Company owning 100 % of the interests in STI. The Company has performed a valuation of the acquisition assets and liabilities and determined the related accounting impact. F-26 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements The consideration paid to acquire STI consisted of the following (in thousands): Cash consideration for STI $ 409,647 Cash consideration for transaction expenses of STI 896 Total cash consideration 410,543 Non-cash equity consideration 200,224 Total consideration transferred 610,767 Total purchase price consideration $ 610,767 The STI Acquisition was accounted for as a business combination in accordance with ASC 805 Business Combinations . The equity consideration transferred consisted of the Company’s common stock and was measured at fair value based on the closing stock price on the Acquisition Date. The purchase price was allocated to the assets acquired and liabilities assumed based on management’s estimate of the respective fair values at the Acquisition Date. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of goodwill were the expected synergies of the combined entities that are expected to be realized from the STI Acquisition. None of the goodwill is expected to be deductible for income tax purposes. F-27 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements The following table summarizes the fair values of the assets acquired and liabilities assumed as of the Acquisition Date (in thousands): Fair Value of Net Assets Acquired and Liabilities Assumed: Acquisition Date Measurement Adjustment Remeasured Acquisition Date Cash and cash equivalents $ 36,725 $ — $ 36,725 Accounts receivable 110,789 — 110,789 Inventories 47,517 — 47,517 Prepaid expenses and other 23,399 — 23,399 Property, plant and equipment 4,434 — 4,434 Other intangible assets 304,431 — 304,431 Other assets 325 2,655 2,980 Total assets acquired $ 527,620 $ 2,655 $ 530,275 Accounts payable 65,761 — 65,761 Deferred revenue 20,345 — 20,345 Short-term debt 44,338 — 44,338 Other liabilities 10,115 2,655 12,770 Income tax payable 7,576 — 7,576 Deferred tax liability 95,510 — 95,510 Other long-term liabilities 4,524 — 4,524 Long-term debt 12,053 — 12,053 Total liabilities assumed $ 260,222 $ 2,655 $ 262,877 Fair value of net assets acquired 267,398 267,398 Allocation to goodwill $ 343,369 $ 343,369 The purchase price allocation was based upon Management’s estimates with the assistance of a third party valuation specialist. The estimates of the fair values of the assets acquired and liabilities assumed were estimated to approximate carrying values since they are short term in nature, and they are receivable or payable on demand. These assets and liabilities were cash and cash equivalents, accounts receivable, inventories, prepaid expenses and other, accounts payable, other liabilities, and deferred revenue. The deferred tax liability was determined utilizing statutory rates in effect at the time of the acquisition, as applied to the respective intangible assets by jurisdiction. For assets and liabilities excluded from the scope of the intangible assets and property, plant and equipment valuation, the Company considered net book value to be a reasonable proxy as of the Acquisition Date. F-28 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements The purchase price allocation includes $ 304.4 million of acquired identifiable intangible assets. (in thousands, except useful lives) Estimated Fair Value Estimated Weighted Average Useful Life in Years Backlog $ 50,000 1 Customer relationships 228,408 10 Trade name 26,023 20 Total $ 304,431 The fair value of the identifiable intangible assets has been estimated using the Excess Earnings Method (customer relationships and backlog) and Relief from Royalty Method (trade name). Significant inputs using the Excess Earnings Method and Level 3 inputs in the fair value hierarchy include economic life, estimated revenue, expenses based on historical results and forecasts, and a discount rate based on a weighted average cost of capital for customer relationships of 15 % for Spain, 16.5 % for Brazil and 14.0 % for Spain foreign sourced projects and for order backlog of 8.5 % for Spain, 9.5 % for Brazil and 7.5 % for Spain foreign sourced projects. Significant inputs to the Relief from Royalty method model include estimates of future revenue, economic life, estimated royalty rate of 1.25 %, and a discount rate based on a weighted average cost of capital 15.2 %. The weighted average cost of capital was determined based on the Company’s capital structure, cost of capital, inherent business risk profile and long-term growth expectations. The intangible assets are being amortized over their estimated useful lives on a straight-line basis that reflects the economic benefit of the asset. The determination of the useful lives is based upon various industry studies, historical acquisition experience, economic factors, and future forecasted cash flows of the Company following the STI Acquisition. The amounts of revenue and net income of STI included in the Company’s consolidated statement of operations from the Acquisition Date through December 31, 2023 are $ 773.4 million and $ 9.9 million, respectively. Pro Forma Financial Information (Unaudited) The following unaudited pro forma financial information presents the combined results of operations of the Company and STI as if the acquisition had occurred on January 1, 2021, after giving effect to certain unaudited pro forma adjustments. The unaudited pro forma adjustments reflected herein include only those adjustments that are directly attributable to the STI Acquisition including amortization of intangibles, debt financing expenses and tax benefits. The unaudited pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the STI Acquisition and is not necessarily indicative of the operating results that would have actually occurred had the STI Acquisition been consummated on January 1, 2021, (in thousands): Year Ended December 31, 2022 2021 Revenue $ 1,645,962 $ 1,118,903 Net income (loss) $ 36,285 $ ( 74,215 ) F-29 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements 4. Accounts Receivable Accounts receivable consists of the following (in thousands): December 31, 2023 2022 2021 Accounts receivable $ 335,976 $ 423,071 $ 236,149 Less: allowance for credit losses ( 3,824 ) ( 1,888 ) ( 140 ) Accounts receivable, net $ 332,152 $ 421,183 $ 236,009 Included in accounts receivable are amounts retained by project owners that represent funds withheld by our customers until the products are installed by a third-party, arranged by the customer, and the project is declared operational. Such retention amounts were $ 24.0 million, $ 47.4 million, and $ 13.5 million as of December 31, 2023, 2022, and 2021, respectively. All retention amounts outstanding as of December 31, 2023, are collectible within the next 12 months. The following is the activity of the allowance for credit losses on accounts receivable which includes trade accounts receivable and unbilled accounts receivable (in thousands): December 31, 2023 2022 2021 Beginning balance $ ( 1,888 ) $ ( 140 ) $ ( 663 ) Provision for credit losses ( 2,871 ) ( 2,599 ) 303 Collected 916 731 130 Written-off 19 120 90 Ending balance $ ( 3,824 ) $ ( 1,888 ) $ ( 140 ) 5. Inventories Inventories consist of the following (in thousands): December 31, 2023 2022 Raw materials $ 86,614 $ 66,574 Finished goods 75,350 166,585 Total $ 161,964 $ 233,159 The Company values a portion of its inventory using the moving average cost method that approximates the First In, First Out method (“FIFO”). As of December 31, 2023, inventory valued using moving average cost and FIFO was $ 129.5 million and $ 32.5 million, respectively. As of December 31, 2022, inventory valued using moving average cost and FIFO, was $ 209.3 million and $ 23.8 million, respectively. F-30 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements 6. Property, Plant and Equipment Property, plant and equipment consisted of the following (in thousands, except for useful lives): December 31, Estimated Useful Life (Years) 2023 2022 Land N/A $ 1,634 $ 1,583 Buildings and land improvements 15 - 39 9,344 7,411 Manufacturing equipment 7 22,962 18,983 Furniture, fixtures and equipment 5 - 7 4,770 3,583 Vehicles 5 688 585 Hardware and software 3 - 5 8,055 3,706 Construction in progress N/A 6,525 5,142 Total 53,978 40,993 Less: accumulated depreciation ( 22,092 ) ( 17,819 ) Property, plant and equipment, net $ 31,886 $ 23,174 Depreciation expense was $ 3.5 million, $ 2.6 million and $ 2.4 million for the years ended December 31, 2023, 2022 and 2021, respectively, of which $ 1.3 million, $ 1.6 million and $ 2.0 million, respectively, was included in cost of revenues and $ 2.2 million, $ 1.0 million and $ 0.4 million, respectively, was included in depreciation and amortization in the accompanying consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021. 7. Goodwill and Other Intangible Assets Goodwill At December 31, 2022, goodwill related to the Former Parent’s acquisition of the Company was $ 69.7 million, net of accumulated impairment of $ 51.9 million. As a result of the STI Acquisition, the Company recorded $ 343.4 million of goodwill and began reporting two segments, Array Legacy Operations and STI Operations (the newly acquired STI Operations). These reportable segments are separate operating segments and reporting units. Changes in the carrying amount of goodwill by reporting unit during the year ended December 31, 2023, consisted of the following (in thousands): Array Legacy Operations (1) STI Operations Total Beginning balance $ 69,727 $ 346,457 $ 416,184 Adjustment to goodwill — ( 2,000 ) ( 2,000 ) Foreign currency translation — 21,407 21,407 Ending balance $ 69,727 $ 365,864 $ 435,591 (1) Goodwill attributable to Array Legacy Operations is net of impairment of $ 51.9 million. F-31 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements In connection with the acquisition of STI, the Company had understated goodwill by $ 2.0 million and overstated inventory by the same amount that was sold during 2022. The Company corrected the goodwill balance during the first quarter 2023, resulting in an increase in goodwill and a decrease in cost of revenue. The Company performs an annual goodwill impairment test, utilizing a qualitative or quantitative impairment analysis during the fourth quarter of each year. The results of this analysis indicated that goodwill was not impaired as of December 31, 2023 and 2022. Other Intangible Assets Other intangible assets consisted of the following (in thousands, except for useful lives): December 31, Estimated Useful Life (Years) 2023 2022 Amortizable: Developed technology 14 $ 203,800 $ 203,800 Customer relationships 10 336,134 321,935 Backlog 1 54,438 51,015 Trade name 20 27,061 25,682 Total amortizable intangibles 621,433 602,432 Accumulated amortization: Developed technology 108,905 94,347 Customer relationships 115,444 81,268 Backlog 54,322 49,507 Trade name 2,666 1,246 Total accumulated amortization 281,337 226,368 Total amortizable intangibles, net 340,096 376,064 Non-amortizable: Trade name 10,300 10,300 Total other intangible assets, net $ 350,396 $ 386,364 Amortization expense related to intangible assets was $ 51.3 million, $ 98.2 million and $ 23.5 million for the years ended December 31, 2023, 2022 and 2021, respectively, of which $ 14.6 million was included in amortization of developed technology, a component of cost of revenue, in all three periods. The remaining amortization expense of $ 36.7 million, $ 83.6 million and $ 8.9 million, respectively, was included in depreciation and amortization, on the accompanying consolidated statements of operations. F-32 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements The following table presents estimated future annual amortization expense (in thousands): Amount 2024 $ 49,107 2025 49,107 2026 44,801 2027 40,157 2028 40,157 Thereafter 116,767 $ 340,096 The Company performs an annual impairment test on its Trade name indefinite-lived intangible asset, utilizing a qualitative or quantitative impairment analysis during the fourth quarter of each year. The results of this analysis indicated that its Trade name was not impaired as of December 31, 2023 and 2022. 8. Income Taxes The components of the Company’s income (loss) before provision for income taxes are as follows (in thousands): Year Ended December 31, 2023 2022 2021 U.S. $ 136,498 $ 34,344 $ ( 61,332 ) Foreign 40,659 ( 39,296 ) 211 Income (loss) before provision for income taxes $ 177,157 $ ( 4,952 ) $ ( 61,121 ) The provision for income taxes charged to operations consists of the following (in thousands): Year Ended December 31, 2023 2022 2021 Current expense (benefit): Federal $ 26,592 $ 12,826 $ ( 8 ) State 5,678 1,630 ( 668 ) Foreign 16,509 7,725 60 48,779 22,181 ( 616 ) Deferred expense (benefit): Federal 942 ( 6,160 ) ( 9,085 ) State ( 327 ) ( 960 ) ( 1,017 ) Foreign ( 9,477 ) ( 24,445 ) — ( 8,862 ) ( 31,565 ) ( 10,102 ) Total income tax expense (benefit) $ 39,917 $ ( 9,384 ) $ ( 10,718 ) F-33 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands): December 31, 2023 2022 Deferred tax assets: Bad debts $ 164 $ 234 Inventories 3,528 2,780 Accrued warranties 4,336 3,575 Accrued compensation 569 637 Net operating loss 2,181 1,014 Equity-based compensation 3,222 2,240 Lease liabilities 5,794 4,588 Premium on capped call 9,376 10,792 Interest expense carryforward 3,411 6,750 Capitalized research and development expenses 2,000 1,752 Other 4,580 2,435 Deferred tax assets 39,161 36,797 Valuation allowance ( 2,360 ) ( 1,449 ) Deferred tax assets, net 36,801 35,348 Deferred tax liabilities: Property, plant, and equipment ( 2,825 ) ( 1,592 ) Intangible assets ( 79,913 ) ( 85,927 ) ROU assets ( 5,051 ) ( 3,969 ) Deferred tax liabilities ( 87,789 ) ( 91,488 ) Deferred tax asset (liability), net $ ( 50,988 ) $ ( 56,140 ) F-34 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements A reconciliation of income tax expense computed at the federal statutory rate of 21% to actual income tax expense at the Company’s effective rate is as follows (in thousands): Year Ended December 31, 2023 2022 2021 Income tax rate reconciliation Income tax expense (benefit) at U.S. statutory rate $ 37,204 $ ( 1,040 ) $ ( 12,835 ) State income taxes 4,150 530 ( 1,545 ) Officer’s compensation 518 740 435 Equity-based compensation ( 932 ) 712 1,542 Contingent consideration 622 ( 947 ) 567 Tax credits ( 407 ) ( 421 ) ( 620 ) Non-U.S. income taxed at different rate than U.S. statutory rate 2,658 ( 4,274 ) — Non-U.S. indirect tax incentives ( 5,035 ) ( 4,183 ) — Foreign derived intangible income benefit ( 403 ) ( 1,668 ) — Transaction costs — 1,628 950 Change in valuation allowance 911 ( 534 ) 14 Nondeductible expenses 299 10 69 Other 332 63 705 Total income tax expense (benefit) $ 39,917 $ ( 9,384 ) $ ( 10,718 ) The Company receives a non-U.S. indirect tax incentive which is excluded from the local income tax base, resulting in a reduction of the overall effective tax rate of the Company. The income tax benefits from the non-U.S. indirect tax incentive is $ 5.0 million and 4.2 million for 2023 and 2022, respectively. Due to recent legislation, effective in 2024 these non-U.S. indirect tax incentives will no longer be excluded from the local income tax base. As of December 31, 2023, the Company has federal income tax net operating loss (“NOL”) carryforwards of approximately $ 6.8 million that do not expire, state income tax NOL carryforwards of approximately $ 2.3 million that will expire in future years beginning in 2029, state tax credits of approximately $ 0.3 million that will expire in future years beginning in 2033, and certain foreign NOLs that are immaterial. As of December 31, 2022, the Company has federal income tax NOL carryforwards of approximately $ 4.8 million that do not expire, state income tax NOL carryforwards of approximately $ 4.5 million that will expire in future years beginning in 2029, and certain foreign NOLs that are immaterial. Realization of deferred tax assets is dependent upon generating sufficient taxable income of the appropriate type and in the appropriate jurisdictions. In assessing the ability to realize a portion of the deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. It is not more likely than not that deferred tax assets from certain U.S. Federal, state and foreign net operating loss would be realized due to type and location of future earnings. As a result, the Company has a valuation allowance of $ 2.4 million and $ 1.4 million for the years ended December 31, 2023 and 2022. A valuation allowance of $ 1.8 million was established against certain of STI’s acquired deferred income tax assets. F-35 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements ASC 740 addresses the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. In accordance with ASC 740, the Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The Company’s assessments of its tax positions in accordance with ASC 740 did not result in changes that had a material impact on results of operations, financial condition or liquidity. The Company had no unrecognized income tax benefits at either December 31, 2023 or 2022. The Company files income tax returns in the U.S. federal jurisdiction, in multiple U.S. states, as well as in non-U.S. jurisdictions. Through global expansion and the acquisition of STI, the Company has a significant presence in Spain and Brazil. The Company and its subsidiaries are routinely examined by various U.S. and non-U.S. taxing authorities. The Company is not subject to U.S. federal, state and non-U.S. income tax examinations by tax authorities for years before 2017. There are currently no income tax audits in any material jurisdictions. The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and future foreign investments. Repatriation of funds could result in an adjustment to the tax liability for foreign withholding taxes, foreign and/or state income taxes and the impact of foreign currency movements. At December 31, 2023, management believed that sufficient liquidity was available in the U.S. The Company may consider repatriating certain funds from its non-U.S. subsidiaries that are not needed to finance local operations; however, any repatriation activities are not expected to result in a significant incremental tax liability to the Company. The Organization for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar Two), with certain aspects of Pillar Two effective January 1, 2024 and other aspects effective January 1, 2025. While it is uncertain whether the U.S. will enact legislation to adopt Pillar Two, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar Two. We currently do not expect Pillar Two to have a material impact on our effective tax rate or our consolidated results of operation, financial position, and cash flows. Additionally, the IRA created a 15% corporate alternative minimum tax on certain large corporations and a 1% excise tax on certain corporate stock repurchases. These provisions, which became effective for Company beginning on January 1, 2023, did not have a material impact on the Company during the year ended December 31, 2023. F-36 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements 9. Accrued Expenses and Other Accrued expenses and other consisted of the following (in thousands): December 31, 2023 2022 Unvouchered payables $ 21,548 $ 11,562 Accrued payroll expenses 15,778 11,488 Accrued interest 4,723 3,054 Non-income taxes payable 5,560 950 Other 22,602 27,840 Accrued expenses and other $ 70,211 $ 54,895 10. Accrued Warranty Reserve The following table presents changes in the accrued warranty reserve balances (in thousands): December 31, 2023 2022 2021 Beginning balance $ 5,476 $ 3,192 $ 3,049 Provision for warranties issued 6,328 5,289 1,064 Payments ( 3,980 ) ( 1,868 ) ( 373 ) Warranty expirations ( 1,662 ) ( 1,137 ) ( 548 ) Ending balance $ 6,162 $ 5,476 $ 3,192 F-37 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements 11. Debt The following table summarizes the Company’s total debt (in thousands): December 31, 2023 2022 Senior Secured Credit Facility: Term loan facility $ 238,175 $ 312,475 Revolving credit facility — — Total secured credit facility 238,175 312,475 Convertible notes 425,000 425,000 Other debt 39,889 51,951 Total principal 703,064 789,426 Unamortized discount and issuance costs, total ( 20,644 ) ( 30,383 ) Current portion of debt ( 21,472 ) ( 38,691 ) Total long-term debt, net of current portion $ 660,948 $ 720,352 Senior Secured Credit Facility On October 14, 2020, the Company entered into a credit agreement (as amended, the “Credit Agreement”) governing the Company’s senior secured credit facility, consisting of (i) a $ 575 million senior secured 7-year term loan facility (the “Term Loan Facility”) and (ii) a $ 200 million senior secured 5-year revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Secured Credit Facility”). The Credit Agreement was amended on February 23, 2021 (the “First Amendment”), on February 26, 2021 (the “Second Amendment”) and again on March 2, 2023 (the “Third Amendment”). The First Amendment, in the case of Eurocurrency borrowings, lowered the London interbank offered rate floor to 50 basis points from 100 basis points and lowered the applicable margin to 325 basis points from 400 basis points per annum. The Second Amendment increased the borrowing capacity of the Revolving Credit Facility from $ 150 million to $ 200 million. The Third Amendment replaced the former discontinued Senior Secured Credit Facility reference rate of LIBOR, with the comparable active reference rate, SOFR. The outstanding balance on the Term Loan Facility was $ 238.2 million and $ 312.5 million as of December 31, 2023 and 2022, respectively. The Term Loan Facility is presented in the accompanying consolidated balance sheets, net of debt discount and issuance costs of $ 11.3 million and $ 19.1 million at December 31, 2023 and 2022, respectively. The Company had no outstanding balance under the revolving credit facility as of both December 31, 2023 and 2022, $ 24.8 million and $ 38.8 million in standby letters of credit as of December 31, 2023 and 2022, respectively, and availability of $ 175.2 million and $ 161.2 million as of December 31, 2023 and 2022, respectively. F-38 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements Terms and Conditions of the Senior Secured Credit Facility Interest Rates The interest rates applicable to the loans under the Term Loan Facility equal, at the Company’s election, to 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 %. Applicable interest rate at December 31, 2023 and 2022, were 10.15 % and 7.94 %, respectively. For the years ended December 31, 2023 and 2022, interest expense related to the Term Loan Facility was $ 32.4 million and $ 21.2 million, respectively, of which, $ 24.5 million and $ 17.0 million, respectively, was contractual interest and $ 7.9 million and $ 4.2 million, respectively, was amortization of debt discount and issuance costs. The discount and issuance costs are amortized over the life of the debt using the effective interest rate method. Prepayments and Amortization The Term Loan Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00 % per annum of the original principal amount of the loans funded thereunder. There is no scheduled amortization under the Revolving Credit Facility. Loans under the Revolving Credit Facility may be voluntarily prepaid in whole, or in part, in each case without premium or penalty. Loans under the Term Loan Facility may be voluntarily prepaid in whole, or in part, in each case without premium or penalty (other than a 1 % premium with respect to prepayments on account of certain “repricing events,” subject to exceptions, occurring within 12 months of the closing date of the Senior Secured Credit Facility). Additionally, the Term Loan Facility requires 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, 2023. Restrictive Covenants and Other Matters The Revolving Credit Facility includes a springing financial maintenance covenant that is tested on the last day of each fiscal quarter if the outstanding loans and certain other credit extensions under the Revolving Credit Facility exceed 35 % of the aggregate amount of commitments thereunder, subject to customary exclusions and conditions. If the financial maintenance covenant is triggered, the first lien net leverage ratio will be tested for compliance not to exceed 7.10 to 1.00. As of December 31, 2023, the Company was in compliance with all the required covenants. The Senior Secured Credit Facility also contains affirmative and negative covenants customary for financings of this type, including covenants that restrict our incurrence of indebtedness and liens, dispositions, investments, acquisitions, restricted payments, and transactions with affiliates. The Senior Secured Credit Facility also includes customary events of default, including the occurrence of a change of control. Guarantees and Security The obligations under the Senior Secured Credit Facility are guaranteed by ATI Investment Sub, Inc., a wholly owned subsidiary of the Company, and its wholly owned domestic subsidiaries other than certain immaterial F-39 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements subsidiaries and other excluded subsidiaries. The obligations under the Senior Secured Credit Facility are secured by a first priority security interest in substantially all of the future property and assets of the guarantor and the borrower, Array Tech, Inc. (f/k/a Array Technologies, Inc.), including accounts receivable, inventory, equipment, general intangibles, intellectual property, investment property, other personal property, material owned real property, cash and proceeds of the foregoing. Convertible Debt On December 3, 2021 and December 9, 2021, the Company completed a $ 425 million private 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 “Indenture”). For each of the years ended December 31, 2023 and 2022, interest expense related to the Convertible Notes was $ 6.1 million, of which, $ 4.2 million was contractual interest and $ 1.9 million was amortization of debt discount and issuance costs. The discount and issuance costs will be amortized over the life of the debt using the effective interest rate of 1.5 %. The Convertible Notes are senior unsecured obligations of the Company and will mature on December 1, 2028, unless earlier converted, redeemed, or repurchased. The Convertible Notes bear interest at a rate of 1.00 % per year, payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2022. As of December 31, 2023 and 2022, the principal balance of the Convertible Notes was $ 425.0 million with unamortized discount and issuance costs of $ 9.4 million and $ 11.2 million, respectively, for a net carrying amount of $ 415.6 million and $ 413.8 million, respectively. The Convertible Notes were not convertible during the year ended December 31, 2023, and none have been converted to date. As the average market price of the Company’s common stock has not exceeded the exercise price since inception, there was no dilutive impact to earnings per share for the year ended December 31, 2023. Redemption At any time prior to the close of business on the business day immediately preceding June 1, 2028, the Convertible Notes are convertible at the option of the holders only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2022 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price then in effect on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $ 1,000 principal amount of Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate for the Convertible Notes on each such trading day; (3) if the Company calls such Convertible Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date, but only with respect to the Convertible Notes called (or deemed called) for redemption; or (4) upon the occurrence of specified corporate events as described in the Indenture. On or after June 1, 2028, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Convertible Notes may convert F-40 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements all or any portion of their Convertible Notes at any time regardless of the foregoing circumstances. Upon conversion of the Convertible Notes, the Company will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, in respect of the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted. The Company may redeem (an “Optional Redemption”) for cash all or any portion of the Convertible Notes, at its option, on or after December 6, 2025, if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100 % of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company redeems less than all the outstanding Convertible Notes, at least $ 100 million aggregate principal amount of Convertible Notes must be outstanding and not subject to redemption as of the date of the relevant notice of redemption. No sinking fund is provided for the Convertible Notes. The conversion rate for the Convertible Notes was initially, and remains currently, 41.9054 shares of the Company’s common stock per $ 1,000 principal amount of the Convertible Notes, which is equivalent to a conversion price of approximately $ 23.86 per share of common stock or 10.1 million shares. The conversion price of the Convertible Notes represents a premium of approximately 32.5 % to the last reported sale price of the Company’s common stock on the Nasdaq Global Market on November 30, 2021. The conversion rate for the Convertible Notes is subject to adjustment under certain circumstances in accordance with the terms of the Indenture. In addition, following certain corporate events that occur prior to the maturity date of the Convertible Notes or if the Company delivers a notice of redemption in respect of the Convertible Notes, the Company will, under certain circumstances, increase the conversion rate of the Convertible Notes for a holder who elects to convert its Convertible Notes (or any portion thereof) in connection with such a corporate event or convert its Convertible Notes called (or deemed called) for redemption during the related Redemption Period (as defined in the Indenture), as the case may be. If the Company undergoes a Fundamental Change (as defined in the Indenture), holders may require, subject to certain conditions and exceptions, the Company to repurchase for cash all or any portion of their Convertible Notes at a Fundamental Change Repurchase Price (as defined in the Indenture) equal to 100 % of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, to, but excluding, the Fundamental Change Repurchase Date (as defined in the Indenture). The Indenture includes customary covenants and sets forth certain events of default after which the Convertible Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company or certain of its subsidiaries after which the Convertible Notes become automatically due and payable. Capped Calls In connection with the issuances of the Convertible Notes, the Company paid $ 52.9 million, in aggregate, to enter into capped call option agreements to reduce the potential dilution to holders of the Company’s common stock after a conversion of the Convertible Notes. Specifically, upon the exercise of the capped call instruments F-41 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements issued pursuant to the agreements (the “Capped Calls”), the Company would receive shares of its common stock equal to approximately 17.8 million shares (a) multiplied by (i) the lower of $ 36.0200 or the then-current market price of its common stock, less (ii) the applicable exercise price, $ 23.86 , and (b) divided by the then-current market price of its common stock. The results of this formula are that the Company would receive more shares as the market price of its common stock exceeds the exercise price and approaches the cap, which was initially, and remains currently, $ 36.02 per share. Consequently, if the Convertible Notes are converted, then the number of shares to be issued by the Company would be effectively partially offset by the shares of common stock received by the Company under the Capped Calls as they are exercised. The formula above would be adjusted in the event of certain specified extraordinary events affecting the Company, including a merger; a tender offer; nationalization, insolvency or delisting of the Company’s common stock; changes in law; failure to deliver; insolvency filing; stock splits, combinations, dividends, repurchases or similar events; or an announcement of certain of the preceding actions. The Company can also elect to receive the equivalent value of cash in lieu of shares of common stock upon settlement, except in certain circumstances. The Capped Calls expire on December 1, 2028 and terminate upon the occurrence of certain extraordinary events such as a merger, tender offer, nationalization, insolvency, delisting, event of default, a change in law, failure to deliver, an announcement of certain of these events, or an early conversion of the Convertible Notes. Although intended to reduce the net number of shares of common stock issued after a conversion of the Convertible Notes, the Capped Calls were separately negotiated transactions, are not a part of the terms of the Convertible Notes, and do not affect the rights of the holders of the Convertible Notes. The Company made a tax election to integrate the Convertible Notes and the Capped Calls. The accounting impact of this tax election makes the Capped Calls deductible as original issue discount interest for tax purposes over the term of the note, and as a result, established as deferred income tax asset of $ 10.8 million at inception, with an offsetting adjustment to additional paid-in capital on the consolidated balance sheets as of December 31, 2022. At issuance the Company concluded that the Capped Calls met the criteria for equity classification because they are indexed to the Company’s common stock and the Company has discretion to settle the Capped Calls in shares or cash. As a result, the amount paid for the Capped Calls was recorded as a reduction to additional paid-in capital. When the Company entered into the Capped Calls, the Company executed certain side letters (the “Side Letters”) with the counterparties that replaced some of the terms described in the primary contract including the volatility inputs used to value the Capped Calls under certain circumstances. Upon further evaluation of the accounting during the three months ended March 31, 2023, the Company concluded that the modification to the volatility inputs in the side letters precluded the Capped Calls from being accounted for as an equity instrument indexed to its own stock and should be accounted for as a freestanding derivative instrument asset recognized at fair value, with subsequent changes in fair value recognized in earnings. During the three months ended March 31, 2023, the Company began to account for the Capped Calls as derivative assets, with subsequent changes in fair value being recorded through earnings. During the three months ended December 31, 2023, after consultation with the staff of the Office of the Chief Accountant of the SEC, the Company concluded that the original equity classification accounting treatment was acceptable. As a result, the Company reclassified the derivative asset recognized during the interim periods of 2023 as a reduction to equity and reversed the related mark to market adjustments recognized during the interim periods of 2023. The impact of reversing the mark to market adjustments in the interim periods for the Capped Calls and the Put F-42 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements Option referenced in Note 12 – Redeemable Perpetual Preferred Stock , was not material to the condensed consolidated statements of operations for each of the interim periods for 2023. Other Debt Other debt consists of the debt obligations of STI (“Other Debt”). Interest rates on other debt range from 0.55 % to 4.50 % annually. Of the $ 39.9 million Other debt balance as of December 31, 2023, $ 29.5 million is denominated in Euros and $ 10.4 million is denominated in Brazilian Real. Aggregate Debt Maturities Aggregate future debt maturities are as follows (in thousands): Amount 2024 $ 21,472 2025 19,140 2026 9,828 2027 227,624 2028 425,000 $ 703,064 12. Redeemable Perpetual Preferred Stock Series A Redeemable Perpetual Preferred Stock The Company entered into a Securities Purchase Agreement (the “SPA”) with certain investors (the “Purchasers”) pursuant to which, on August 11, 2021, the Company issued 350,000 shares of its newly designated Series A Shares and 7,098,765 shares of the Company’s common stock for an aggregate purchase price of $ 346.0 million (the “Initial Closing”). Further, pursuant to the 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 $ 776 (the “Prepaid Forward Contract”). The Company used the net proceeds from the initial Closing to repay the $ 102.0 million outstanding balance under its existing Revolving Credit Facility and prepay $ 100.0 million of the Company’s Term Loan Facility. The Series A Shares have no maturity date. The Put Option included in the SPA required the Purchasers to purchase up to an additional 150,000 shares of Series A Shares 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) until June 30, 2023, 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” or the “Put Option”). The Put Option expired effective June 30, 2023. On January 7, 2022, pursuant to the Put Option, the Company issued and sold to the Purchasers 50,000 shares of Series A Shares and 1,125,000 shares of the Company’s common stock in an additional closing for an aggregate purchase price of $ 49.4 million (the “Additional Closing”). The Company evaluated the accounting for the instruments issued pursuant to the SPA and determined the Series A Shares and common stock issued in the Initial Closing, as well as the Prepaid Forward Contract, and Delayed Draw Commitment are freestanding instruments accounted for in equity. The Series A Shares are F-43 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements recorded in temporary equity on the consolidated balance sheets as they have redemption features upon certain triggering events that are outside the Company’s control, such as a fundamental change. The proceeds of the Series A Shares, net of transaction costs and discount of $ 334.6 million have been allocated to each instrument based on its relative fair value. At the Initial Closing date, $ 229.8 million was allocated to the Series A Shares, $ 105.4 million to common stock, $ 12.4 million to the Delayed Draw Commitment, which was recorded as a debit to additional paid-in-capital, and $ 11.7 million to the Prepaid Forward Contract. Direct costs associated with the issuance of the Securities were $ 11.1 million, which along with the $ 4.4 million discount, have been accounted for as a reduction in the proceeds of the Securities. The net proceeds of $ 334.6 million have been allocated to Series A Shares of $ 229.8 million, common stock of $ 105.4 million and additional paid-in capital of $ 12.4 million for the committed financing put right. The Additional Closing proceeds, net of transaction costs and discount of $ 1.3 million, were allocated among the Series A Shares and common stock based on the proceeds of $ 33.1 million and $ 15.9 million, respectively. 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 $ 25.3 million and $ 23.2 million for the years ended December 31, 2023 and 2022, respectively. At issuance, the Company evaluated the accounting for the instruments issued pursuant to the SPA and determined the Series A Shares and common stock issued in the Initial Closing, as well as the Prepaid Forward Contract, and Put Option are freestanding instruments that are classified in equity. During the first quarter of 2023, the Company reconsidered the provisions of the Put Option and concluded that it should be accounted for as a freestanding derivative instrument asset accounted for at fair value with subsequent fair value adjustments recognized in earnings. During the fourth quarter of 2023, after consultation with the staff of the Office of the Chief Accountant of the SEC, the Company concluded that the original equity accounting classification was correct. As a result, the Company reclassified the derivative asset recognized during the interim periods of 2023 as a reduction of equity and also reversed the related fair value adjustments. The impact of reversing the mark to market adjustments in the interim periods for the Put Option and Capped Calls referenced in Note 11 – Debt , was not material to the condensed consolidated statements of operations for each of the interim periods for 2023. Dividends On or prior to the fifth anniversary of the Initial Closing, the Company may pay dividends on the Series A Shares either in (i) cash at the then-applicable Cash Regular Dividend Rate (as defined below), (ii) through accrual to the Liquidation Preference at the Accrued Regular Dividend Rate of 6.25 % (the “Permitted Accrued Dividends,”) or (iii) a combination thereof. Following the fifth anniversary of the Initial Closing, dividends are payable only in cash. To the extent the Company does not declare such dividends and pay in cash following the fifth anniversary of the Initial Closing, the dividends accrue to the Liquidation Preference (“Default Accrued Dividends”) at the then-applicable Cash Regular Dividend Rate plus 200 basis points. In the event there are Default Accrued Dividends outstanding for six consecutive quarters, the Company, at the option of the holders of the Series A Shares, will pay 100 % of the amount of Default Accrued Dividends by delivering to such holder a number of shares of the Company’s common stock equal to the quotient of (i) the amount of Default Accrued Dividends divided by (ii) 95 % of the 30-day VWAP of the Company’s common stock (“Non-Cash Dividend”). F-44 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements The “Cash Regular Dividend Rate” of the Series A Shares means (i) initially, 5.75 % per annum on the Liquidation Preference and (ii) increased by (a) 50 basis points on each of the fifth, sixth and seventh anniversaries of the Initial Closing and (b) 100 basis points on each of the eighth, ninth and tenth anniversaries of the Initial Closing. The “Accrued Regular Dividend Rate” on the Series A Shares means 6.25 % per annum on the Liquidation Preference. As used herein, “Liquidation Preference” means, with respect to the Series A Shares, the initial liquidation preference of $ 1,000 per share plus any accrued dividends of such share as the time of the determination. During the year ended December 31, 2023, the Company accrued dividends on the Series A Shares at the Accrued Regular Dividend rate of 6.25 % totaling $ 26.4 million. As of December 31, 2023 total accrued and unpaid dividends were $ 32.8 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 . As a result, the discount on Series A Shares is considered an unstated dividend cost that is amortized over the period preceding commencement of the perpetual dividend using the effective interest method, by charging imputed dividend cost against retained earnings, or additional paid in capital in the absence of retained earnings, and increasing the carrying amount of the Series A Shares by a corresponding amount. Accordingly, the discount is amortized over five years using the effective yield method. Fees 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 the Put Option. The Put Option expired effective June 30, 2023. Ranking and Liquidation Preference The Series A Shares rank senior to the Common Stock with respect to dividend rights and rights upon the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company (a “Liquidation”). Upon a Liquidation, each of Series A Redeemable Share would be entitled to receive an amount per share (the “Liquidation, Redemption or Repurchase Amount”) equal to the greater of (i) the Liquidation Preference of such share, plus all accrued and unpaid dividends (including any Accrued Dividends) thereon and (ii) an amount in cash equal to the sum of (a) 130.0 % of the Initial Liquidation Preference (as defined below) of such share, minus (b) the cumulative amount of cash dividends paid in respect of such share prior to such payment. As used herein, “Liquidation Preference” means, with respect to any of the Series A Shares, the initial liquidation preference of $ 1,000 per share (the “Initial Liquidation Preference”) plus any Accrued Dividends of such share as of the time of determination. Redemption Rights The Company may redeem all or any portion of the Series A Shares (in increments of not less than $ 200 million, based on the Liquidation Preference of the Series A Shares to be redeemed at such time or such lesser amount to the extent the Company chooses to redeem all of the outstanding shares of Series A Shares) for an amount in cash equal to the Liquidation, Redemption or Repurchase Amount. Upon a “Fundamental Change” (involving a change of control, bankruptcy, insolvency or liquidation of the Company as further described in the Certificate of Designations), each Holder shall have the right to require the Company to F-45 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements redeem all or any part of the Holder’s Series A Shares for an amount in cash equal to the Liquidation, Redemption or Repurchase Amount. Voting Rights Each Holder of Series A Shares will have one vote per share on any matter on which Holders of Series A Shares are entitled to vote separately as a class (as described below), whether at a meeting or by written consent. The Holders of Series A Shares do not otherwise have any voting rights. 13. Common and Preferred Stock Common Stock Each holder of Common Stock shall be entitled to one vote for each share of Common Stock held as of the applicable record date on any matter that is submitted to a vote or for the consent of the stockholders of the Company. The holders of Common Stock shall be entitled to share equally, on a per share basis, in such dividends and other distributions of cash, property or shares of stock of the Company as may be declared by the Board of Directors of the Company (the “Board”), subject to the preferences applicable to holders of Preferred Stock. In the event of a voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Company, all assets of the Corporation of whatever kind available for distribution to the holders of Common Stock shall be divided among and paid ratably to the holders of Common Stock, subject to the preferences applicable to holders of Preferred Stock. Preferred Stock Preferred Stock may be issued from time to time by the Company for such consideration as may be fixed by the Company’s Board of Directors (the “Board”). The Board is authorized to provide for one or more series of Preferred Stock and to fix the designation of such series, the voting rights, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, of such series of Preferred Stock and the number of shares of such series, as may be permitted under the General Corporation Law of the State of Delaware. The powers, preferences and relative, participating, optional and other special rights of, and the qualifications, limitations or restrictions thereof, of each series of Preferred Stock, if any, may differ from those of any and all other series at any time outstanding. 14. Revenue 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): Year Ended December 31, 2023 2022 2021 Over-time revenue $ 1,417,217 $ 1,155,848 $ 519,003 Point in time revenue 159,334 481,698 334,315 Total revenue $ 1,576,551 $ 1,637,546 $ 853,318 F-46 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements Contract assets consisting of unbilled receivables are recorded within accounts receivable, net on the consolidated balance sheets on a contract-by-contract basis at the end of the reporting period and consisted of the following (in thousands): December 31, 2023 2022 2021 Unbilled receivables $ 102,603 $ 101,513 $ 111,224 The Company also receives advances or deposits from its customers, before revenue is recognized, resulting in contract liabilities. The changes in contract liabilities (i.e., deferred revenue) relate to advanced orders and payments received by the Company. Contract liabilities consisting of deferred revenue recorded on a contract-by-contract basis at the end of each reporting period were as follows (in thousands): December 31, 2023 2022 2021 Deferred revenue $ 66,488 $ 178,922 $ 99,575 During the years ended December 31, 2023 and 2022, the Company converted $ 161.2 million and $ 84.7 million deferred revenue to revenue, respectively, which represented 90 % and 85 % of the prior years’ deferred revenue balance, respectively. Bill-and-Hold Arrangements Revenue recognized for the Company’s federal investment tax credit (“ITC”) contracts and standalone system component sales is recorded at a point in time and recognized when obligations under the terms of the contract with the Company’s customer are satisfied. Generally, this occurs with the transfer of control of the asset, which is typically upon delivery to the customer in line with shipping terms. In certain situations, the Company recognizes revenue under a bill-and-hold arrangement with its customers. An example of such a situation is when customers purchase material prior to the start of construction of a solar project in order to meet the Five Percent Safe Harbor test to qualify for the ITC. Because the customers lack sufficient storage capacity to accept a large amount of material prior to the start of construction, they request that the Company keep the product in its custody. All bill-and-hold inventory is bundled or palletized in the Company’s warehouses, separately identified as not belonging to the Company and ready for immediate transport to the customer project upon request. Additionally, title and risk of loss has passed to the customer and the Company does not have the ability to use the product or direct it to another customer . During the year ended December 31, 2023, the Company recognized $ 38.8 million in revenue from three customers for the sale of goods and services that contained bill-and-hold obligations such as storage, handling and other custodial duties. During the year ended December 31, 2022 and 2021, the Company recognized $ 13.7 million, and $ 168.9 million, respectively, from one customer that also contained bill-and-hold obligations. Remaining Performance Obligations As of December 31, 2023, the Company had $ 376.9 million of remaining performance obligations. The Company expects to recognize revenue on 100 % of these performance obligations in the next twelve months . F-47 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements 15. Earnings per Share The following table sets forth the computation of basic and diluted income (loss) per share (in thousands, except per share amounts): Year Ended December 31, 2023 2022 2021 Net income (loss) $ 137,240 $ 4,432 $ ( 50,403 ) Preferred dividends and accretion 51,691 48,054 15,715 Net income (loss) to common shareholders 85,549 ( 43,622 ) ( 66,118 ) Basic: Weighted average common shares outstanding 150,942 149,819 129,984 Earnings (loss) per share $ 0.57 $ ( 0.29 ) $ ( 0.51 ) Diluted: Weighted average common shares outstanding 150,942 149,819 129,984 Effect of Restricted Stock and Performance Awards 1,080 — — Weighted average dilutive shares 152,022 149,819 129,984 Income (loss) per share $ 0.56 $ ( 0.29 ) $ ( 0.51 ) Potentially dilutive common shares issuable pursuant to equity-based awards of 2,362,982 were not included as their effect was anti-dilutive for the year ended December 31, 2023. Potentially dilutive common shares issuable pursuant to equity-based awards of 2,165,217 and 1,078,096 were not included for the years ended December 31, 2022 and 2021, respectively, as their potential effect was anti-dilutive since the Company generated a net loss to common shareholders. There were no potentially dilutive common shares issuable pursuant to the Convertible Notes for the years ended December 31, 2023, 2022 and 2021, as the average market price of the Company’s common stock has not exceeded the exercise price since their issuance. 16. Commitments and Contingencies Litigation The Company, in the normal course of business, is subject to claims and litigation. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company would accrue a liability for the estimated loss. On May 14, 2021, a putative class action was filed in the U.S. District Court for the Southern District of New York (the “Southern District of New York” or the “Court”) against the Company and certain officers and directors alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, promulgated thereunder, and Sections 11, 12(a)(2) and 15 of the Securities Exchange Act of 1933 (“Plymouth Action”). The Plymouth Action alleges misstatements and/or omissions in the Company’s registration statements and prospectuses related to the Company’s October 2020 initial public offering (“IPO”), the Company’s December 2020 offering (the “2020 Follow-On Offering”), and the Company’s March 2021 offering F-48 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements (the “2021 Follow-On Offering”) during the putative class period of October 14, 2020 through May 11, 2021. An amended class action complaint was filed on December 7, 2021 containing allegations similar to those in the original complaint, and additional allegations regarding misstatements and/or omissions in: (1) in the Company’s Annual Report on Form 10-K and associated press release announcing results for the fourth quarter and full fiscal year 2020; and (2) in the Company’s November 5, 2020 and March 9, 2021 earnings calls (“Consolidated Amended Complaint”). On June 30, 2021, a second putative class action was filed in the Southern District of New York against the Company and certain officers and directors alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, promulgated thereunder, and Sections 11 and 15 of the Securities Exchange Act of 1933 (“Keippel Action”). The Keippel Action similarly alleged misstatements and/or omissions in certain of the Company’s registration statements and prospectuses related to the Company’s IPO, the Company’s 2020 Follow-On Offering, and the Company’s 2021 Follow-On Offering during the putative class period of October 14, 2020 through May 11, 2021. On July 6, 2021, the Court entered an order that the Keippel Action was in all material respects substantially similar to the Plymouth Action that both actions arise out of the same or similar operative facts, and that the parties are substantially the same parties. The Court accordingly consolidated the Keippel Action with the Plymouth Action for all pretrial purposes and, ordered all filings to be made in the Plymouth Action. On July 16, 2021, a verified derivative complaint was filed in the Southern District of New York against certain officers and directors of the Company (“First SDNY Derivative Action”). The complaint alleges: (1) violations of Section 14(a) of the Securities Exchange Act of 1934 for misleading proxy statements, (2) breach of fiduciary duty, (3) unjust enrichment, (4) abuse of control, (5) gross mismanagement, (6) corporate waste, (7) aiding and abetting breach of fiduciary duty, and (8) contribution under sections 10(b) and 21D of the Securities Exchange Act of 1934. On July 30, 2021, a second and related verified derivative complaint was filed in the Southern District of New York against certain officers and directors of the Company (“Second SDNY Derivative Action”). 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. 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 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: (1) breach of fiduciary duty and (2) unjust enrichment (“First Delaware Derivative Action”). On August 11, 2022, a second verified derivative complaint was filed against certain officers and directors of the Company Court of Chancery, asserting claims for: (1) breach of fiduciary duty; (2) aiding and abetting breaches of fiduciary duty; (3) waste of corporate assets; (4) unjust enrichment; (5) insider selling; and (6) aiding and abetting insider selling (“Second Delaware Derivative Action”). F-49 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements 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 July 5, 2023, the Court granted the Company’s motion to dismiss 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 (the “Second Circuit Appeal”). Opening briefs have been filed in the Second Circuit Appeal and appellant may file a reply brief on or before March 8, 2024. 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 consolidated balance sheets as of December 31, 2023. Contingent Consideration Tax Receivable Agreement Concurrent with the Former Parent’s acquisition of Array Technologies Patent Holdings Co., LLC on July 8, 2016, Array Tech, Inc. entered into a TRA with the former majority shareholder of the Company. The TRA is valued based on the future expected payments under the agreement. The TRA provides for the payment by Array Tech, Inc. to the former owners for certain federal, state, local and non-U.S. tax benefits deemed realized in post-closing taxable periods by the Company, from the use of certain deductions generated by the increase in the tax value of the developed technology. The TRA is accounted for as contingent consideration and changes in the fair value of the TRA are recognized in earnings. As of December 31, 2023 and 2022, the fair value of the TRA was $ 10.4 million and $ 8.6 million, respectively. The Company considers certain factors to estimate the future expected TRA payments to the former owners 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. These factors are classified as Level 3 inputs within the fair value hierarchy as discussed in Note 2 – Summary of Significant Accounting Policies . F-50 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements The following table summarizes the activity related to our estimated TRA obligation (in thousands): TRA Liability Balance, December 31, 2021 $ 14,577 IRS Settlement ( 4,507 ) Fair value adjustment ( 1,483 ) Balance, December 31, 2022 8,587 Payments ( 1,200 ) Fair value adjustment 2,976 Balance, December 31, 2023 $ 10,363 Payments made under the TRA incorporate tax positions taken by the Company and are due within 125 days following the filing of the Company’s U.S. federal and state income tax returns under procedures described in the TRA. The current portion of the TRA liability is based on expected tax returns. The TRA will continue until 2030, or the Company elects early termination under the terms described in the TRA. The current and noncurrent amounts of the TRA Liability are presented as Current portion of contingent consideration and Contingent consideration, net of current portion, respectively, on the consolidated balance sheets. The undiscounted future expected payments under the TRA are as follows (in thousands): Amount 2024 $ 1,427 2025 2,017 2026 1,662 2027 1,654 2028 1,654 Thereafter 5,795 $ 14,209 Surety Bond 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. As of December 31, 2023, the Company had surety bonds outstanding in the amount of $ 172.9 million. 17. Fair Value of Financial Instruments The carrying values and the estimated fair values of debt financial instruments were as follows (in thousands): December 31, 2023 December 31, 2022 Carrying Value Fair Value Carrying Value Fair Value Convertible Notes $ 415,632 $ 416,500 $ 413,752 $ 430,236 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. F-51 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements The fair value of the Term Loans and Other Debt is estimated using Level 2 inputs. The carrying values of the Term Loans outstanding under the Senior Secured Credit facility recorded in consolidated balance sheets approximate fair value due to the variable interest rate. Other Debt totaling $ 39.9 million, consists of variable rate obligations only. The carrying value of the $ 39.9 million variable rate obligations approximate fair value due to the variable nature of the interest rates. 18. Equity-Based Compensation 2020 Equity Incentive Plan On October 14, 2020, the Company’s 2020 Equity Incentive Plan (the “2020 Plan”) became effective. The 2020 Plan authorized 6,683,919 new shares, subject to adjustments pursuant to the 2020 Plan. Restricted Stock Units Pursuant to the 2020 Plan, the Company grants restricted stock units (“RSUs”) to employees and board of director members. The fair value of the RSUs is determined using the market value of common stock on the grant date. RSU activity under the 2020 Plan was as follows: Number of Shares Weighted Average Grant Date Fair Value Outstanding non-vested, December 31, 2020 500,006 $ 22.00 Shares granted 661,924 $ 23.17 Shares vested ( 157,473 ) $ 22.00 Shares forfeited ( 74,048 ) $ 27.51 Outstanding non-vested, December 31, 2021 930,409 $ 22.39 Shares granted 1,484,782 $ 10.93 Shares vested ( 458,849 ) $ 20.00 Shares forfeited ( 255,518 ) $ 15.42 Outstanding non-vested, December 31, 2022 1,700,824 $ 13.81 Shares granted 904,075 $ 17.89 Shares vested ( 736,774 ) $ 14.43 Shares forfeited ( 197,616 ) $ 16.43 Outstanding non-vested, December 31, 2023 1,670,509 $ 15.44 F-52 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements Performance Stock Units The Company has granted performance stock units (“PSUs”) to certain executives. The PSUs cliff vest after three years and upon meeting certain revenue and adjusted EPS targets. The PSUs also contain a modifier based on the total stock return (“TSR”) compared to a certain index which modifies the number of PSUs that vest. The PSUs were valued using a Monte-Carlo simulation method on the date of grant based on the U.S. 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 years ended December 31, 2023 and 2022: 2023 2022 Volatility 90 % 60 % Risk-free interest rate 3.74 % 2.83 % Dividend yield — % — % PSU activity under the 2020 Plan during the years ended December 31, 2023, 2022 and 2021, was as follows: Number of Shares Weighted Average Grant Date Fair Value PSUs Outstanding non-vested, December 31, 2020 — $ — Shares granted (1) 177,472 $ 28.25 Shares vested — $ — Shares forfeited ( 29,785 ) $ 30.74 Outstanding non-vested, December 31, 2021 147,687 $ 27.75 Shares granted (1) 466,916 $ 10.88 Shares vested — $ — Shares forfeited ( 150,210 ) $ 20.81 Outstanding non-vested, December 31, 2022 464,393 $ 11.96 Shares granted (1) 263,594 $ 19.22 Shares vested — $ — Shares forfeited ( 35,514 ) $ 15.47 Outstanding non-vested, December 31, 2023 692,473 $ 14.54 (1) Number of PSUs granted is based on the attainment level of performance metric(s), by key executive officers and employees of the Company, estimated to be probable at the grant date. The actual number of shares to be issued will depend on the relative attainment of the performance metrics. For the years ended December 31, 2023, 2022 and 2021, the Company recognized $ 14.6 million, $ 14.8 million and $ 16.3 million, respectively, in equity-based compensation, which is included in General and administrative expense on the consolidated statements of operations. At December 31, 2023, the Company had $ 19.8 million of unrecognized compensation costs related to RSUs and PSU, which are expected to be recognized over a weighted average of 1.9 years and 2.1 years, respectively. F-53 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements Class B Units and Class C Units of Former Parent The Company accounted for equity grants to employees of Class B units and Class C units (collectively, the “Units”) of Former Parent as equity-based compensation under ASC 718 Compensation-Stock Compensation . The Units contain vesting provisions and do not forfeit upon termination. Equity-based compensation cost is measured at the grant date fair value and is recognized on a straight-line basis over the requisite service period, including those Units with graded vesting with a corresponding credit to additional paid-in capital as a capital contribution from Former Parent. The amount of equity-based compensation at any date is equal to the portion of the grant date value of the award that is vested. The Units issued to employees are measured at fair value on the grant date using an option pricing model. The Company utilizes the estimated weighted average of the Company’s expected fund life dependent on various exit scenarios to estimate the expected term of the awards. Expected volatility is based on the average of historical and implied volatility of a set of comparable companies, adjusted for size and leverage. The risk-free rates are based on the yields of U.S. Treasury instruments with comparable terms. Actual results may vary depending on the assumptions applied within the model. On November 19, 2019 and May 19, 2020, Former Parent issued 22,326,653 and 4,344,941 , respectively, Class B Units to certain employees of the Company. On March 28, 2020, Former Parent issued 1,000 Class C Units to a member of the board of directors of the Company. On March 23, 2021, in connection with the closing of the 2021 Follow-On Offering, all of the outstanding Class B and Class C Units of Former Parent were immediately vested per the terms of the equity awards, resulting in the Company accelerating the recognition of equity-based compensation expense of $ 8.9 million for the year ended December 31, 2021. Employee Stock Purchase Plan The Company’s Compensation Committee approved the Employee Stock Purchase Plan in December 2021. The Plan allows employees to purchase shares at a 15 % discount off the lower of the stock price at the beginning or ending of the six months window through payroll deductions. The plan is considered compensatory in nature and the Company recorded equity-based compensation expense on the plan beginning in 2022. During the years ended December 31, 2023 and 2022, the Company recorded $ 0.2 million and $ 0.1 million, respectively, in equity-based compensation related to the Employee Stock Purchase Plan. 401(k) Plan We have a defined contribution plan (“401(k) Plan”) which allows eligible employees to contribute up to 75 % of their compensation up to the Internal Revenue Service maximum. We match each employee’s deferrals (contributions) at 100 % for the first 3 % and 50 % of the fourth and fifth percentages of compensation and may make additional contributions at our discretion. Employees are immediately vested in the contributions made by us. Our contributions to the 401(k) Plan were $ 1.9 million, $ 1.5 million, and $ 1.1 million for the years ended December 31, 2023, 2022 and 2021, respectively, and are recorded in cost of revenue and general and administrative expense. We have made no discretionary contributions to the 401(k) Plan to date. F-54 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements 19. Leases Effective January 1, 2021, the Company adopted ASC 842 Leases (“ASC 842”) using the modified retrospective approach. The Company elected the use of the package of practical expedients permitted under the transition guidance which allows the Company not to reassess whether a contract contains a lease, carry forward the historical lease classification, and not reassess initial direct lease costs. The Company also elected to apply the short-term measurement and recognition exemption in which the right-of-use (“ROU”) assets and lease liabilities are not recognized for short-term leases. Adoption of this standard resulted in recording of net operating lease ROU assets and corresponding operating lease liabilities of $ 13.2 million and $ 13.5 million, respectively. The standard did not materially affect the consolidated statements of income and had no impact on the consolidated statements of cash flows. The following table summarizes the Company’s ROU assets and lease liabilities (in thousands): December 31, Location on the Consolidated Balance Sheets 2023 2022 ROU Assets Other assets $ 22,085 $ 17,770 Lease liabilities, current portion Other current liabilities 5,744 6,509 Lease liabilities, long-term portion Other long-term liabilities 19,475 13,897 Total lease liabilities $ 25,219 $ 20,406 The components of lease cost related to the Company’s operating leases were as follows (in thousands): Year Ended December 31, 2023 2022 2021 Operating lease expense $ 8,188 $ 7,701 $ 6,635 Variable lease expense 1,501 1,089 106 Short-term lease expense 86 327 — Total lease expense $ 9,775 $ 9,117 $ 6,741 Future minimum operating lease payments as of December 31, 2023, are as follows (in thousands): Operating Leases 2024 $ 4,855 2025 6,654 2026 3,042 2027 2,969 2028 2,983 Thereafter 14,316 Total lease payments 34,819 Less: Imputed lease interest ( 9,600 ) Total lease liabilities $ 25,219 F-55 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements Other information pertaining to operating leases consists of the following: Year Ended December 31, 2023 2022 2021 Weighted average remaining lease-term 5.7 years 4.2 years 3.8 years Weighted average discount rate 7.9 % 5.4 % 5.0 % Supplemental cash flow and other information related to operating leases are as follows (in thousands): Year Ended December 31, 2023 2022 2021 Operating cash flows from operating leases $ 7,911 $ 5,380 $ 6,644 Non cash investing activities: Lease liabilities arising from obtaining right-of-use assets $ 10,562 $ 12,558 $ 17,363 20 . Segment and Geographic Information ASC 280 Segment Reporting establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM is the Chief Executive Officer of the Company. Based on the way the CODM allocates resources and assess performance, the Company has concluded that it has two operating and reporting segments; Array Legacy Operations and STI Operations. Segment revenue and gross profit were as follows during the periods presented (in thousands): Year Ended December 31, 2023 2022 2021 Revenue: Array Legacy Operations $ 1,172,827 $ 1,267,883 $ 853,318 STI Operations 403,724 369,663 — Total $ 1,576,551 $ 1,637,546 $ 853,318 Gross Profit: Array Legacy Operations $ 317,605 $ 153,612 $ 68,301 STI Operations 97,946 59,106 — Total $ 415,551 $ 212,718 $ 68,301 The total assets of the Array Legacy Operations segment are $ 1,437.6 million or approximately 84 % of total consolidated assets. The total assets of the STI Operations segment are $ 269.1 million or approximately 16 % of total consolidated assets. F-56 Table of Contents Array Technologies, Inc. Notes to Consolidated Financial Statements The following table presents revenues by geographic region, based on the customers project location (in thousands): Year Ended December 31, 2023 2022 2021 U.S. $ 1,166,160 $ 1,286,064 $ 826,639 Spain 99,160 129,292 7,281 Brazil 257,872 144,464 — Australia 20,842 9,429 5,509 Remainder 32,517 68,297 13,889 Total revenue $ 1,576,551 $ 1,637,546 $ 853,318 The following table presents property, plant and equipment, net by geographic region at the end of the period (in thousands): December 31, 2023 2022 U.S. $ 22,731 $ 17,789 Spain 3,457 2,676 Brazil 3,549 1,676 Australia 554 1 Remainder 1,595 1,032 Total property, plant and equipment, net $ 31,886 $ 23,174 F-57