Array Technologies, Inc. 10-Q

Item 1. Financial Statements. Array Technologies, Inc. Condensed Consolidated Balance Sheets (unaudited) (in thousands, except per share and share amounts) June 30, 2024 December 31, 2023 ASSETS Current assets Cash and cash equivalents $ 282,320 $ 249,080 Accounts receivable, net of allowance of $ 4,911 and $ 3,824 , respectively 309,719 332,152 Inventories 165,639 161,964 Prepaid expenses and other 91,259 89,085 Total current assets 848,937 832,281 Property, plant and equipment, net 26,677 27,893 Goodwill 402,501 435,591 Other intangible assets, net 307,591 354,389 Deferred income tax assets 13,369 15,870 Other assets 52,447 40,717 Total assets $ 1,651,522 $ 1,706,741 LIABILITIES, REDEEMABLE PERPETUAL PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 112,489 $ 119,498 Accrued expenses and other 57,265 70,211 Accrued warranty reserve 1,639 2,790 Income tax payable 3,368 5,754 Deferred revenue 90,982 66,488 Current portion of contingent consideration 1,918 1,427 Current portion of debt 29,221 21,472 Other current liabilities 40,697 48,051 Total current liabilities 337,579 335,691 Deferred income tax liabilities 54,512 66,858 Contingent consideration, net of current portion 6,786 8,936 Other long-term liabilities 18,613 20,428 Long-term warranty 4,035 3,372 Long-term debt, net of current portion 651,522 660,948 Total liabilities 1,073,047 1,096,233 1 Array Technologies, Inc. Condensed Consolidated Balance Sheets (unaudited) (continued) (in thousands, except per share and share amounts) June 30, 2024 December 31, 2023 Commitments and contingencies (Note 11) Series A Redeemable Perpetual Preferred Stock of $ 0.001 par value; 500,000 authorized; 446,541 and 432,759 shares issued as of June 30, 2024 and December 31, 2023, respectively; liquidation preference of $ 493.1 million at both dates 378,512 351,260 Stockholders’ equity Preferred stock of $ 0.001 par value - 4,500,000 shares authorized; none issued at respective dates — — Common stock of $ 0.001 par value - 1,000,000,000 shares authorized; 151,875,097 and 151,242,120 shares issued at respective dates 151 151 Additional paid-in capital 320,379 344,517 Accumulated deficit ( 102,367 ) ( 130,230 ) Accumulated other comprehensive income ( 18,200 ) 44,810 Total stockholders’ equity 199,963 259,248 Total liabilities, redeemable perpetual preferred stock and stockholders’ equity $ 1,651,522 $ 1,706,741 See accompanying Notes to Condensed Consolidated Financial Statements. 2 Array Technologies, Inc. Condensed Consolidated Statements of Operations (unaudited) (in thousands, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenue $ 255,766 $ 507,725 $ 409,169 $ 884,498 Cost of revenue Cost of product and service revenue 166,173 357,683 260,847 633,277 Amortization of developed technology 3,640 3,640 7,279 7,279 Total cost of revenue 169,813 361,323 268,126 640,556 Gross profit 85,953 146,402 141,043 243,942 Operating expenses General and administrative 36,971 40,250 74,755 78,392 Change in fair value of contingent consideration 503 705 ( 232 ) 2,043 Depreciation and amortization 8,877 9,206 18,504 19,808 Total operating expenses 46,351 50,161 93,027 100,243 Income from operations 39,602 96,241 48,016 143,699 Other (loss) income, net ( 1,794 ) 125 ( 980 ) 319 Interest income 4,782 1,468 8,462 2,699 Foreign currency (loss) gain, net ( 468 ) 260 ( 967 ) 66 Interest expense ( 8,614 ) ( 11,577 ) ( 17,554 ) ( 22,308 ) Total other expense, net ( 6,094 ) ( 9,724 ) ( 11,039 ) ( 19,224 ) Income before income tax expense 33,508 86,517 36,977 124,475 Income tax expense 7,810 21,352 9,114 29,675 Net income 25,698 65,165 27,863 94,800 Preferred dividends and accretion 13,749 12,784 27,251 25,268 Net income to common shareholders $ 11,949 $ 52,381 $ 612 $ 69,532 Income per common share Basic $ 0.08 $ 0.34 $ 0.00 $ 0.47 Diluted $ 0.08 $ 0.34 $ 0.00 $ 0.46 Weighted average number of common shares outstanding Basic 151,797 150,919 151,574 150,763 Diluted 152,207 152,129 152,170 151,970 See accompanying Notes to Condensed Consolidated Financial Statements. 3 Array Technologies, Inc. Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) (in thousands) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net income $ 25,698 $ 65,165 $ 27,863 $ 94,800 Foreign currency translation (1) ( 43,768 ) 23,912 ( 63,010 ) 37,784 Comprehensive (loss) income $ ( 18,070 ) 89,077 $ ( 35,147 ) $ 132,584 (1) There are no tax effects on foreign currency adjustments. See accompanying Notes to Condensed Consolidated Financial Statements. 4 Array Technologies, Inc. Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (unaudited) (in thousands) Three Months Ended June 30, 2024 Temporary Equity Permanent Equity Series A Redeemable Perpetual Preferred Stock Preferred Stock Common Stock Shares Amount Shares Amount Shares Amount Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders’ Equity Balance at March 31, 2024 439 $ 364,762 — $ — 151,727 $ 151 $ 333,570 $ ( 128,065 ) $ 25,568 $ 231,224 Equity-based compensation — — — — 148 — 559 — — 559 Tax withholding related to vesting of equity-based compensation — — — — — — — — — — Preferred cumulative dividends plus accretion 7 13,750 — — — — ( 13,750 ) — — ( 13,750 ) Net income — — — — — — — 25,698 — 25,698 Foreign currency translation — — — — — — — — ( 43,768 ) ( 43,768 ) Balance at June 30, 2024 446 $ 378,512 — $ — 151,875 $ 151 $ 320,379 $ ( 102,367 ) $ ( 18,200 ) $ 199,963 5 Array Technologies, Inc. Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (continued) (unaudited) (in thousands) Three Months Ended June 30, 2023 Temporary Equity Permanent Equity Series A Redeemable Perpetual Preferred Stock Preferred Stock Common Stock Shares Amount Shares Amount Shares Amount Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders’ Equity Balance at March 31, 2023 413 $ 312,054 — $ — 150,823 $ 150 $ 373,307 $ ( 237,835 ) $ 22,297 $ 157,919 Equity-based compensation — — — — 226 1 4,944 — — 4,945 Preferred cumulative dividends plus accretion 6 12,784 — — — — ( 13,541 ) — — ( 13,541 ) Net income — — — — — — — 65,165 — 65,165 Other comprehensive income — — — — — — — 23,912 23,912 Balance at June 30, 2023 419 $ 324,838 — $ — 151,049 $ 151 $ 364,710 $ ( 172,670 ) $ 46,209 $ 238,400 6 Array Technologies, Inc. Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (continued) (unaudited) (in thousands) Six Months Ended June 30, 2024 Temporary Equity Permanent Equity Series A Redeemable Perpetual Preferred Stock Preferred Stock Common Stock Shares Amount Shares Amount Shares Amount Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders’ Equity Balance at December 31, 2023 432 $ 351,260 — $ — 151,242 $ 151 $ 344,517 $ ( 130,230 ) $ 44,810 $ 259,248 Equity-based compensation — — — — 633 — 4,836 — — 4,836 Tax withholding related to vesting of equity-based compensation — — — — — — ( 1,722 ) — — ( 1,722 ) Preferred cumulative dividends plus accretion 14 27,252 — — — — ( 27,252 ) — — ( 27,252 ) Net income — — — — — — — 27,863 — 27,863 Foreign currency translation — — — — — — — — ( 63,010 ) ( 63,010 ) Balance at June 30, 2024 446 $ 378,512 — $ — 151,875 $ 151 $ 320,379 $ ( 102,367 ) $ ( 18,200 ) $ 199,963 7 Array Technologies, Inc. Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (continued) (unaudited) (in thousands) Six Months Ended June 30, 2023 Temporary Equity Permanent Equity Series A Redeemable Perpetual Preferred Stock Preferred Stock Common Stock Shares Amount Shares Amount Shares Amount Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders’ Equity Balance at December 31, 2022 406 $ 299,570 — $ — 150,513 150 383,176 ( 267,470 ) 8,425 124,281 Equity-based compensation — — — — 536 1 8,310 — — 8,311 Preferred cumulative dividends plus accretion and commitment fees 13 25,268 — — — — ( 26,776 ) — — ( 26,776 ) Net income — — — — — — — 94,800 — 94,800 Foreign currency translation — — — — — — — — 37,784 37,784 Balance at June 30, 2023 419 $ 324,838 — $ — 151,049 151 364,710 ( 172,670 ) 46,209 238,400 See accompanying Notes to Condensed Consolidated Financial Statements. 8 Array Technologies, Inc. Condensed Consolidated Statements of Cash Flows (unaudited) (in thousands) Six Months Ended June 30, 2024 2023 Operating activities Net income $ 27,863 $ 94,800 Adjustments to net income: Provision for bad debts 1,696 ( 141 ) Deferred tax benefit ( 3,501 ) ( 1,796 ) Depreciation and amortization 19,456 20,413 Amortization of developed technology 7,279 7,279 Amortization of debt discount and issuance costs 3,101 4,998 Equity-based compensation 4,836 8,311 Change in fair value of contingent consideration ( 232 ) 2,043 Warranty provision ( 61 ) 479 Write-down of inventories 1,227 3,458 Changes in operating assets and liabilities, net of business acquisition: Accounts receivable ( 1,379 ) ( 81,039 ) Inventories ( 7,207 ) 22,844 Income tax receivables ( 1,313 ) 3,220 Prepaid expenses and other ( 3,453 ) ( 3,292 ) Accounts payable ( 2,932 ) 30,542 Accrued expenses and other ( 15,172 ) 7,097 Income tax payable ( 2,684 ) 9,838 Lease liabilities ( 3,135 ) 1,414 Deferred revenue 27,070 ( 64,112 ) Net cash provided by operating activities 51,459 66,356 Investing activities Purchase of property, plant and equipment ( 4,527 ) ( 9,424 ) Retirement/disposal of property, plant and equipment 39 — Net cash used in investing activities ( 4,488 ) ( 9,424 ) Financing activities Series A equity issuance costs — ( 1,508 ) Tax withholding related to vesting of equity-based compensation ( 580 ) — Proceeds from issuance of other debt 12,684 23,801 Principal payments on other debt ( 12,671 ) ( 38,257 ) Principal payments on term loan facility ( 2,150 ) ( 22,150 ) Contingent consideration payments ( 1,427 ) ( 1,200 ) Net cash used in financing activities ( 4,144 ) ( 39,314 ) Effect of exchange rate changes on cash and cash equivalent balances ( 9,587 ) 4,447 Net change in cash and cash equivalents 33,240 22,065 Cash and cash equivalents, beginning of period 249,080 133,901 9 Array Technologies, Inc. Condensed Consolidated Statements of Cash Flows (unaudited) (continued) (in thousands) Six Months Ended June 30, 2024 2023 Cash and cash equivalents, end of period $ 282,320 $ 155,966 Supplemental cash flow information Cash paid for interest $ 17,819 $ 15,880 Cash paid for income taxes (net of refunds) $ 17,001 $ 18,484 Non-cash investing and financing activities Dividends accrued on Series A Preferred $ 13,782 $ 12,871 See accompanying Notes to Condensed Consolidated Financial Statements. 10 Array Technologies, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 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. 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 unaudited condensed consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), pursuant to the rules and regulations of the SEC. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of results for the interim periods reported. The results for the three and six months ended June 30, 2024, are not necessarily indicative of results to be expected for the year ending December 31, 2024, or any other interim periods, or any future year or period. The balance sheet as of December 31, 2023, included herein was derived from the audited financial statements as of that date. Certain disclosures have been condensed or omitted from the interim financial statements. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 28, 2024. Unless expressly stated or the context otherwise requires, the terms “the Company”, “we”, “us”, “our”, “Array”, and “Array Technologies” refer to Array Technologies, Inc. and its consolidated subsidiaries, and the term “condensed consolidated financial statements” refers to the accompanying unaudited condensed consolidated financial statements contained in this Quarterly Report. Reclassifications Software Implementation Costs During the first quarter the Company reclassified capitalized software costs recorded as Property, plant and equipment, net to Intangible assets, net on the condensed consolidated balance sheets. The reclassification was recorded retrospectively and resulted in a $ 4.0 million increase to Intangible assets, net at December 31, 2023, with a corresponding decrease in the same amount to Property, plant and equipment, net. These reclassifications did not impact the Company’s operating income (loss), net income (loss), earnings (loss) per share, or statements of cash flows for any current or historical periods. 11 Amortization of Developed Technology Beginning in the third quarter of 2023, the Company retrospectively reclassified amounts recorded for amortization of certain acquired intangible assets in prior presentations from Total operating expenses under the caption "Depreciation and amortization" to Total cost of revenue under the caption "Amortization of developed technology" in the condensed consolidated statements of operations. The Company believes this presentation enhances the comparability of the Company’s financial statements to industry peers. These reclassifications did not impact the Company’s operating income (loss), net income (loss) or earnings (loss) per share for any current or historical periods. These reclassifications also did not impact the condensed consolidated balance sheets or condensed consolidated statements of cash flows. Brazil Value-Added Tax Benefit 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 for all periods presented. For the six months ended June 30, 2023, the Brazil ICMS value-added tax benefit was $ 13.2 million, which has been included in cost of sales. This reclassification had no impact on the Company’s gross profit, income (loss) from operations, net income or income (loss) per common share in the current period. These reclassifications also did not impact the condensed consolidated balance sheets or condensed consolidated statements of cash flows. Divestiture of Investment in Equity Securities In June 2024, we divested 100 % percent of our equity investment in preferred stock of a private company we purchased in 2021. We received $ 12.0 million in proceeds for the divestiture in July 2024. We recorded a receivable in the amount of $ 12.0 million included in Prepaid expenses and other on the condensed consolidated balance sheet at June 30, 2024. No gain or loss resulted from this transaction. Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation. Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from previously estimated amounts, and such differences may be material to the condensed consolidated financial statements; however, management believes that these estimates and assumptions provide a reasonable basis for the fair presentation of the condensed consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur. 12 Research and Development The Company incurs research and development costs during its process of researching and developing new products and significant enhancements to existing products. Research and development costs consist primarily of personnel-related costs associated with our team of internal engineers, third-party consultants, materials and overhead. The Company expenses these costs as incurred prior to a respective product being ready for commercial production. Research and development expense was $ 1.8 million and $ 2.3 million during the three months ended June 30, 2024 and 2023, respectively, and $ 3.7 million and $ 4.4 million during the six months ended June 30, 2024 and 2023, respectively. 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 The disruption of container shipping traffic through the Red Sea has created port congestion, especially in Asia, again temporarily elongating transit times, capacity, and shipping costs for routes connecting the rest of the world with Asia. To address the challenges arising from prolonged transit times, we have increased our local sourcing efforts where feasible within certain regions. These measures are required to ensure we fulfill our delivery commitments to customer projects on time. There is still uncertainly on how long these disruptions and the severity of their impact on our operations will last, but we continue to monitor the situation and evaluate our procurement and supply chain strategies, as to reduce any negative impact on our business, financial condition, and results of operations. Inflation Inflationary pressures persist and may continue to negatively impact our results of operations. To mitigate the inflationary pressures on our business, despite our ASPs decreasing due to the current deflationary environment for steel more than offsetting the inflationary environment for aluminum, we have continued to accelerate our productivity initiatives, expanded our supplier base, and continued to execute on our 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 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”. The Company accounts for these Vendor Rebates as a reduction of the purchase prices of the vendors’ products and therefore a reduction in the cost 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 13 operations. As of June 30, 2024, the Company had outstanding Vendor Rebates of $ 68.4 million, of which $ 45.8 million was included in Prepaid expenses and other and $ 22.6 million was included in Other assets on the condensed consolidated balance sheets. As of December 31, 2023, the Company had outstanding Vendor Rebates of $ 48.4 million included in Prepaid expenses and other. Inflation Reduction Act 45X Credits The Company accounts for the 45X Advanced Manufacturing Production Credit established by the IRA, under IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, as a reduction to production costs. The reduction to production costs, from the 45X Advanced Manufacturing Tax credit, is excluded from federal and state income taxes. The tax credit is included in Prepaid and other assets on the condensed consolidated balance sheet dated June 30, 2024. During the three months ended June 30, 2024, the Company concluded that certain parts manufactured by the Company qualify for the 45X Advanced Manufacturing Production Credits. As a result, the Company recorded it an immaterial cumulative catch-up for 45X Advanced Manufacturing Production Credits related to torque tubes manufactured by the Company and sold from January 1, 2023 through March 31, 2024. 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. Recent Accounting Pronouncements 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 does not expect to early adopt this reporting standard and expects no material impacts upon adoption. 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 14 unless it is impracticable. The Company is assessing the effect on our consolidated financial statement disclosures; however, adoption will not impact our consolidated balance sheets or statements of operations. In March 2023, the Company adopted ASU 2020-04 and 2022-06, Reference Rate Reform (Topic 848), and amended an existing debt agreement to replace the London Interbank Offered Rate (“LIBOR”) interest rate provisions with interest rate provisions based on a forward-looking term rate based on the secured overnight funding rate (“SOFR”) (see Note 7 – Debt ). There were no other changes to the agreement. There was no significant impact to the Company’s condensed consolidated financial statements. Immaterial Correction of 2023 Interim Period 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 at June 30, 2023, as a reduction to equity and reversed the related mark to market adjustments recognized during the six months ended June 30, 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 six months ended June 30, 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 six months ended June 30, 2023, individually or in aggregate. 15 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 the 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 16 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 17 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 3. Inventories Inventories consisted of the following (in thousands): June 30, 2024 December 31, 2023 Raw materials $ 47,140 $ 86,614 Finished goods 118,499 75,350 Inventories $ 165,639 $ 161,964 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 June 30, 2024, inventory valued using moving average cost and FIFO was $ 137.1 million and $ 28.5 million, respectively. As of December 31, 2023, inventory valued using moving average cost and FIFO, was $ 129.5 million and $ 32.5 million, respectively. 4. Property, Plant and Equipment, Net Property, plant and equipment consisted of the following (in thousands, except useful lives): Estimated Useful Lives (Years) June 30, 2024 December 31, 2023 Land N/A $ 1,636 $ 1,634 Buildings and land improvements 15 - 39 9,440 9,344 Manufacturing equipment 7 26,539 22,962 Furniture, fixtures and equipment 5 - 7 4,754 4,770 Vehicles 5 614 688 Hardware 3 - 5 3,518 3,114 Construction in progress N/A 2,821 6,199 Total 49,322 48,711 Less: accumulated depreciation ( 22,645 ) ( 20,818 ) Property, plant and equipment, net $ 26,677 $ 27,893 Depreciation expense was $ 1.1 million and $ 0.6 million for the three months ended June 30, 2024 and 2023, respectively, of which $ 0.4 million and $ 0.3 million, respectively, was included in cost of revenue and $ 0.7 million and $ 0.3 million, respectively, was included in depreciation and amortization on the accompanying condensed consolidated statements of operations. 18 Depreciation expense was $ 2.0 million and $ 1.2 million for the six months ended June 30, 2024 and 2023, respectively, of which $ 0.9 million and $ 0.6 million, respectively, was included in cost of revenue and $ 1.1 million and $ 0.6 million, respectively, was included in depreciation and amortization on the accompanying condensed consolidated statements of operations. 5. Goodwill and Other Intangible Assets, Net Goodwill Changes in the carrying amount of goodwill by operating segment during the six months ended June 30, 2024, consisted of the following (in thousands): Array Legacy Operations (1) STI Operations Total Beginning balance $ 69,727 $ 365,864 $ 435,591 Foreign currency translation — ( 33,090 ) ( 33,090 ) Ending balance $ 69,727 $ 332,774 $ 402,501 (1) Goodwill attributable to Array Legacy Operations is net of impairment of $ 51.9 million. Each quarter the Company evaluates if facts and circumstances indicate that it is more-likely-than-not that the fair value of its reporting units is less than their carrying value, which would require the Company to perform an interim goodwill impairment test During our most recent evaluation, the Company noted facts and circumstances around its STI Operations, were indicative that the fair value of the STI reporting unit could be less than its carrying value. Accordingly, with the assistance of a third-party specialist, the Company performed the first step of the goodwill impairment test (“Step One”). Based on the results of the Step One test, the Company concluded there were no indicators of impairment as of June 30, 2024. The Company concluded there were no indicators of impairment of the Array Legacy Operations operating unit as of June 30, 2024. 19 Other Intangible Assets, Net Other intangible assets consisted of the following (in thousands, except useful lives): Estimated Useful Lives (Years) June 30, 2024 December 31, 2023 Amortizable: Developed technology 14 $ 203,800 $ 203,800 Computer software 3 1,452 5,267 Customer relationships 10 313,563 336,134 Backlog 1 49,124 54,438 Trade name 20 25,147 27,061 Total amortizable intangibles 593,086 626,700 Accumulated amortization: Developed technology 116,183 108,905 Computer software 932 1,274 Customer relationships 126,450 115,444 Backlog 49,124 54,322 Trade name 3,106 2,666 Total accumulated amortization 295,795 282,611 Total amortizable intangibles, net 297,291 344,089 Non-amortizable: Trade name 10,300 10,300 Total other intangible assets, net $ 307,591 $ 354,389 Amortization expense related to intangible assets was $ 11.8 million and $ 12.6 million for the three months ended June 30, 2024 and 2023, respectively, of which $ 3.6 million was included in amortization of developed technology, a component of cost of revenue, in both periods and $ 8.1 million and $ 9.0 million, respectively, was included in depreciation and amortization, on the accompanying condensed consolidated statements of operations. Amortization expense related to intangible assets was $ 24.7 million and $ 26.5 million for the six months ended June 30, 2024 and 2023, respectively, of which $ 7.3 million was included in amortization of developed technology, a component of cost of revenue, in both periods and $ 17.4 million and $ 19.2 million, respectively, was included in depreciation and amortization, on the accompanying condensed consolidated statements of operations. 20 Estimated future amortization expense of intangible assets as of June 30, 2024, is as follows (in thousands): Amount Remainder of 2024 $ 23,928 2025 47,594 2026 42,817 2027 38,300 2028 38,300 Thereafter 106,352 $ 297,291 Long-lived assets, including both amortizable and non-amortizable intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset group may not be recoverable. During the second quarter of 2024, the Company noted facts and circumstances around asset groups at its STI reporting unit were indicative that the fair value could be less than its carrying value. The Company performed a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to the STI asset groups to the net carrying value of the STI asset groups as of June 30, 2024. The result of the recoverability test indicated the sum of the expected future undiscounted cash flows was greater than the carrying amount of the asset groups of the STI. Accordingly, we concluded the asset groups of the STI reporting unit were not impaired as of June 30, 2024. As of June 30, 2024, no events or circumstances were noted that would indicate the carrying amount of any of Legacy Array’s asset groups may not be recoverable. 6. Income Taxes The Company follows guidance under ASC Topic 740-270 Income Taxes , which requires that an estimated annual effective tax rate is applied to year-to-date ordinary income (loss). At the end of each interim period, the Company estimates the effective tax rate expected to be applicable for the full fiscal year. The tax effect of discrete items is recorded in the quarter in which the discrete events occur. The Company recorded income tax expense of $ 7.8 million and $ 21.4 million for the three months ended June 30, 2024 and 2023, respectively, and an expense of $ 9.1 million and $ 29.7 million for the six months ended June 30, 2024 and 2023, respectively. The income tax expense for the six months ended June 30, 2024, was impacted by legislation in Brazil which resulted in a local tax incentive no longer being exempt from Federal income tax beginning in 2024. Additionally, tax expense of $ 0.5 million was recorded discretely related to equity-based compensation. The tax expense for the six months ended June 30, 2023, was unfavorably impacted by higher income reported in non-U.S. jurisdictions, offset by a tax benefit of $ 1.2 million related to excess equity-based compensation recorded discretely. For the six months ended June 30, 2024 and 2023, no reserves for uncertain tax positions have been recorded. The Company will continue to monitor this position each interim period. 21 7. Debt The following table summarizes the Company’s total debt (in thousands): June 30, 2024 December 31, 2023 Senior Secured Credit Facility: Term loan facility $ 236,025 $ 238,175 Revolving credit facility — — Total secured credit facility 236,025 238,175 Convertible notes 425,000 425,000 Other debt 37,676 39,889 Total principal 698,701 703,064 Unamortized discount and issuance costs, total ( 17,958 ) ( 20,644 ) Current portion of debt ( 29,221 ) ( 21,472 ) Total long-term debt, net of current portion $ 651,522 $ 660,948 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”). Revolving Credit Facility The Company had no outstanding balance under the Revolving Credit Facility as of both June 30, 2024 and December 31, 2023, $ 15.9 million and $ 24.8 million, respectively, in standby letters of credit, and $ 184.1 million and $ 175.2 million, respectively, available to withdraw. In accordance with the Third Amendment, the Revolving Credit Facility pays interest at the Company’s election, at either (x) for SOFR Loans at Adjusted Term SOFR (as defined in the Credit Agreement) plus 3.25 % or (y) for Base Rate Loans at the higher of the Prime Rate, one half of 1.00 % above the Federal Funds Rate or the Adjusted Term SOFR for one-month interest period, after giving effect to any floor plus 1.00 %, plus 2.25 %. Term Loan Facility The outstanding balance on the Term Loan Facility was $ 236.0 million and $ 238.2 million as of June 30, 2024 and December 31, 2023, respectively. The Term Loan Facility is presented in the accompanying condensed consolidated balance sheets, net of debt discount and issuance costs of $ 9.5 million and $ 11.3 million as of June 30, 2024 and December 31, 2023, respectively. In accordance with the Third Amendment, the Term Loan Facility pays interest at the Company’s election, at either (x) for SOFR Loans at Adjusted Term SOFR (subject to a floor of 0.50 %) plus 3.25 % or (y) for Base Rate Loans at the higher of the Prime Rate, one half of 1.00 % above the Federal Funds Rate or the Adjusted Term SOFR for one-month interest period, after giving effect to any floor plus 1.00 %, plus 2.25 %. The debt discount and issuance costs are being amortized using the effective interest method and the effective interest rate of the Term Loan Facility as of June 30, 2024, was 22 10.27 %. The Term Loan Facility has an annual excess cash flow calculation, for which the prescribed formula did not result in requiring the Company to make an advance principal payment for the year ended December 31, 2023. Convertible Notes 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 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 June 30, 2024 and December 31, 2023, the principal balance of the Convertible Notes was $ 425.0 million with unamortized discount and issuance costs of $ 8.4 million and $ 9.4 million, respectively, for a net carrying amount of $ 416.6 million and $ 415.6 million, respectively. The conversion rate for the Convertible Notes was initially 41.9054 shares of the Company’s common stock per $ 1,000 principal amount of Convertible Notes, which was equivalent to an initial conversion price of approximately $ 23.86 per share of common stock or 10.1 million shares of common stock. The Convertible Notes were not convertible during the six months ended June 30, 2024, and none have been converted to date. Also, given that the average market price of the Company’s common stock has not exceeded the exercise price since inception, there was no dilutive impact for the three and six months ended June 30, 2024. 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 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 23 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. See Note 2 – Summary of Significant Accounting Policies for information regarding the accounting for the Capped Calls. Other Debt Other debt consists of the debt obligations of STI (“Other Debt”). Interest rates on other debt range from 0.4 % to 15.17 % annually. Of the $ 37.7 million Other Debt balance, the equivalent of $ 28.7 million is denominated in Euros and $ 9.0 million is denominated in Brazilian Real. 8. 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 Redeemable Perpetual Preferred Stock (the “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 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 $ 13.5 million and $ 12.4 million for the six months ended June 30, 2024 and 2023, respectively. 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 24 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”). 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 accrued dividends of such share at the time of the determination. During the six months ended June 30, 2024, the Company accrued dividends on the Series A Shares at the Accrued Regular Dividend rate of 6.25 % totaling $ 13.8 million. As of June 30, 2024, total accrued and unpaid dividends were $ 46.5 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 three 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. 9. 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): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Over-time revenue $ 209,598 $ 417,448 $ 333,934 $ 703,759 Point in time revenue 46,168 90,277 75,235 180,739 Total revenue $ 255,766 $ 507,725 $ 409,169 $ 884,498 25 Contract Balances The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (“contract assets”), and deferred revenue (“contract liabilities”) on the condensed 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 contract assets. The changes in contract assets and the corresponding amounts recorded in revenue relate to fluctuations in the timing and volume of billings. Contract assets consisting of unbilled receivables are recorded within accounts receivable, net on the condensed consolidated balance sheets on a contract-by-contract basis at the end of the reporting period and consisted of the following (in thousands): June 30, 2024 December 31, 2023 Unbilled receivables $ 78,505 $ 102,603 The Company also receives advances or deposits from its customers, before revenue is recognized, resulting in contract liabilities recorded within Deferred revenue. The changes in contract liabilities relate to advanced orders and payments received by the Company. Contract liabilities are recorded on a contract-by-contract basis and consisted of the following at the end of each reporting period (in thousands): June 30, 2024 December 31, 2023 Deferred revenue $ 90,982 $ 66,488 During the six months ended June 30, 2024, the Company converted $ 30.5 million in deferred revenue to revenue, which represented 45.8 % of the prior year’s deferred revenue balance. 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 three and six months ended June 30, 2023, the Company recognized $ 3.5 million and $ 22.8 million, respectively, in revenue from one customer for the sale of goods and services under bill-and-hold arrangements. During the three and six months ended June 30, 2024, the Company recognized $ 0.0 and $ 1.9 26 million, respectively, in revenue from one customer for the sale of goods and services under bill-and-hold arrangements. Remaining Performance Obligations As of June 30, 2024, the Company had $ 333.9 million of remaining performance obligations. The Company expects to recognize revenue on 100 % of these performance obligations in the next twelve months . 10. Earnings Per Share The following table sets forth the computation of basic and diluted (loss) income per share (in thousands, except per share amounts): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net income $ 25,698 $ 65,165 $ 27,863 $ 94,800 Less: preferred dividends and accretion 13,749 12,784 27,251 25,268 Net income to common shareholders $ 11,949 $ 52,381 $ 612 $ 69,532 Basic: Weighted average shares 151,797 150,919 151,574 150,763 (Loss) income per share $ 0.08 $ 0.34 $ — $ 0.47 Diluted: Effect of restricted stock and performance awards 410 1,210 596 1,207 Weighted average shares 152,207 152,129 152,170 151,970 Income per share $ 0.08 $ 0.34 $ — $ 0.46 Potentially dilutive common shares issuable pursuant to equity-based awards of 479,623 and 473,074 were not included for the three and six months ended June 30, 2024, respectively, as their potential impact was anti-dilutive. Common shares issuable pursuant to equity-based awards of 52,609 and 57,263 were excluded from the Company’s diluted EPS calculation for the three and six months ended June 30, 2023, respectively, as their potential impact was anti-dilutive. There were no potentially dilutive common shares issuable pursuant to the Convertible Notes for both the six months ended June 30, 2024 and 2023, as the average market price of the Company’s common stock has not exceeded the exercise price since their issuance. 11. Commitments and Contingencies Legal Proceedings 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 against the Company and certain officers and directors alleging violations of Sections 10(b) and 20(a) of 27 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 complaint 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, and the Company’s March 2021 offering during the putative class period of October 14, 2020 through May 11, 2021. A consolidated amended class action complaint was filed on December 7, 2021, with 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. On June 30, 2021, a substantially similar 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”), which was consolidated with the Plymouth Action. All Defendants in the Plymouth Action, including the Company, moved to dismiss the consolidated amended complaint. On May 19, 2023, the Court granted the Company’s motion to dismiss and, on July 5, 2023, denied a request from the Plymouth Action plaintiffs for leave to amend the consolidated amended complaint and dismissed the Plymouth Action in its entirety with prejudice. On August 4, 2023, the lead plaintiffs filed a notice of appeal of the Court’s dismissal of the consolidated amended complaint to the U.S. Court of Appeals for the Second Circuit. After full briefing, the Court of Appeals heard oral argument on June 26, 2024 and the case is pending decision by the Court. 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. 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 verified derivative complaint was filed in the Southern District of New York against certain officers and directors of the Company. 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 Southern District of New York derivative actions were consolidated and the Court appointed co-lead counsel. The consolidated cases remain stayed pending the outcome of the appeal of the Plymouth Action. On August 3, 2022, a verified derivative complaint was filed in the Court of Chancery of the State of Delaware against certain officers and directors of the Company, asserting claims for: (1) breach of fiduciary duty and (2) unjust enrichment. 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. 28 On September 2, 2022, the Chancery Court derivative cases were consolidated and the Court appointed co-lead counsel. The consolidated cases have been stayed pending the outcome of the appeal of the Plymouth Action. At this time the Company believes that the likelihood of any material loss related to these matters is remote given the preliminary stage of the claims and strength of the Company’s defenses. The Company has not recorded any material loss contingency in the condensed consolidated balance sheets as of June 30, 2024. Commercial Supplier Settlement During March 2024, the Company reached a settlement with one of its vendors, in which the Company received $ 4.0 million in the form of a one-time $ 2.6 million cash payment due immediately, and $ 1.4 million in credits with the vendor which can be applied by the Company to future orders from the respective vendor. If the Company does not utilize all of the credits by January 2026, it will receive a one-time cash payment from the vendor for the remaining unused credit balance. As of March 31, 2024, the Company recognized $ 4.0 million in Prepaid and other expenses, net on the condensed consolidated balance sheet and for the three months ended March 31, 2024, a $ 4.0 million reduction to Cost of revenue on the condensed consolidated statement of operations. The Company is party to various other legal proceedings, claims, governmental and/or regulatory inspections, inquiries and investigations arising out of the ordinary course of its business. The Company believes that, there are no other proceedings or claims pending against it, the ultimate resolution of which could have a material adverse effect on its financial condition or results of operations. In all cases, at each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under ASC 450, Contingencies (ASC 450). Legal costs are expensed as incurred. It is possible that future results for any particular quarter or annual period may be materially affected by changes in our assumption or the effectiveness of the Company’s strategies relating to these proceedings. Contingent Consideration Tax Receivable Agreement Concurrent with the Former Parent’s acquisition of Array Technologies Patent Holdings Co., LLC on July 8, 2016, the Company’s operating subsidiary, Array Tech, Inc. (f/k/a Array Technologies, Inc.), entered into a Tax Receivable Agreement (the “TRA”) with the former majority shareholder of Array. The TRA is valued based on the future expected payments under the agreement. 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 Array Tech, Inc., from the use of certain deductions generated by the increase in the tax value of the developed technology. The TRA is accounted for as contingent consideration and subsequent changes in fair value of the contingent liability are recognized in contingent consideration on the condensed consolidated statements of operations. As of June 30, 2024 and December 31, 2023, the fair value of the TRA was $ 8.7 million and $ 10.4 million, respectively. Estimating the amount of payments that may be made under the TRA is by nature imprecise. The significant fair value inputs used to estimate the future expected TRA payments to 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. 29 Payments made under the TRA consider 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 agreement. The current portion of the TRA liability is based on tax returns. The TRA will continue until all tax benefit payments have been made or the Company elects early termination under the terms described in the TRA. The following table summarizes the activity related to the estimated TRA liability (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Beginning balance $ 8,201 $ 8,724 $ 10,363 $ 8,586 Payments — — ( 1,427 ) ( 1,200 ) Fair value adjustment 503 705 ( 232 ) 2,043 Ending balance $ 8,704 $ 9,429 $ 8,704 $ 9,429 The TRA liability requires significant judgment and is classified as Level 3 in the fair value hierarchy. Surety Bonds As of June 30, 2024, the Company posted surety bonds in the total amount of $ 197.8 million. The Company is required to provide surety bonds to various parties as required for certain transactions initiated during the ordinary course of business to guarantee the Company’s performance in accordance with contractual or legal obligations. These off-balance sheet arrangements do not adversely impact the Company’s liquidity or capital resources. 12. Fair Value of Financial Instruments The carrying values and estimated fair values of the Company’s debt financial instruments were as follows (in thousands): June 30, 2024 December 31, 2023 Carrying Value Fair Value Carrying Value Fair Value Convertible Notes $ 416,573 $ 343,719 $ 415,632 $ 416,500 The fair value of the Convertible Notes is estimated using Level 2 inputs, as they are not registered securities nor listed on any securities exchange but may be traded by qualified institutional buyers. The fair value of the Term Loan Facility and Other Debt is estimated using Level 2 inputs. The carrying values of the Term Loan Facility outstanding under the Senior Secured Credit facility recorded in the condensed consolidated balance sheets approximate fair value due to the variable nature of the interest rates. Other Debt with an aggregate carrying value of $ 37.7 million, consists only of variable rate obligations. The carrying value of these variable rate obligations approximate fair value due to the variable nature of the interest rates. 30 13. 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 members of the Company’s board of directors. The fair value of the RSUs is determined using the market value of the Company’s common stock on the grant date. RSU activity under the 2020 Plan during the six months ended June 30, 2024, was as follows: Number of Shares Weighted Average Grant Date Fair Value Outstanding non-vested, December 31, 2023 1,670,509 $ 15.44 Shares granted 1,104,000 12.19 Shares vested ( 681,353 ) 15.49 Shares forfeited ( 141,562 ) 15.11 Outstanding non-vested, June 30, 2024 1,951,594 $ 13.57 31 Performance Stock Units The Company has granted performance stock units (“PSUs”) to certain employees. 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 six months ended June 30, 2024 and 2023: 2024 2023 Volatility 79 % 90 % Risk-free interest rate 4.62 % 3.74 % Dividend yield — % — % PSU activity under the 2020 Plan during the six months ended June 30, 2024, was as follows: Number of Shares Weighted Average Grant Date Fair Value Outstanding non-vested, December 31, 2023 692,473 $ 14.54 Shares granted 586,316 11.74 Shares vested — — Shares forfeited ( 128,399 ) 21.53 Outstanding non-vested, June 30, 2024 1,150,390 $ 12.80 For three months ended June 30, 2024 and 2023, the Company recognized $ 0.8 million and $ 5.2 million, respectively, in equity-based compensation costs. For six months ended June 30, 2024 and 2023, the Company recognized $ 4.8 million and $ 8.6 million, respectively, in equity-based compensation costs. At June 30, 2024, the Company had $ 26.7 million of unrecognized compensation costs related to RSUs and PSUs, which are expected to be recognized over 2.2 years each. Deferred Compensation Plan On May 21, 2024, the Human Capital Committee (the “Committee”) of the Board of Directors (the “Board”) of Array Technologies, Inc. adopted the Array Tech, Inc. Deferred Compensation Plan (the “Plan”). The Plan is a non-qualified deferred compensation plan intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). Participation in the Plan is voluntary and is currently available to U.S. employees of the Company and its subsidiaries at the level of Vice President and above. The Plan allows participants to defer up to 50 % of their base salary and/or up to 100 % of their cash incentive compensation. There is no maximum dollar limit on the amount that may be deferred by a participant in any year. In addition, the Company will make a matching contribution to the Plan in respect of cash compensation that could not be recognized under the Company’s 401(k) plan due to the Code Section 401(a)(17) compensation limit ($ 0.3 million for 2024). The Plan matching contribution will be equal to the matching contribution for the Company’s 401(k) plan for the applicable year. Under the terms of the Plan, the Company may also provide discretionary contributions to participants annually as determined by the Committee. The participants are 100% 32 vested in the amount they defer, and any Company contributions will vest fully on the second anniversary of the date on which the Company contribution was made. Compensation deferred pursuant to the Plan, along with any Company contributions to the Plan, may be invested by participants in various investment fund vehicles, which mirror the investment fund vehicles offered to participants as part of the Company’s 401(k) plan. Compensation deferred pursuant to the Plan will be distributed in accordance with elections made by the participant. Participants may elect to receive distributions upon a separation from service or a specified date in the form of a lump sum payment or annual installment payments for up to ten years, for distributions following a separation from service, or five years, for distributions upon a specified date. Compensation deferred pursuant to the Plan may also be distributed in the form of a lump sum benefit in the event of the participant’s death, disability, or unforeseeable emergency that results in “severe financial hardship,” as contemplated by Section 409A of the Code. The Plan does not require the Company to establish any trust, escrow account, or other mechanism to hold the participant deferrals and Company contributions. The obligations of the Company under the Plan are general unsecured obligations. The Company may amend the Plan at any time, except that no such amendment or termination may adversely affect a participant’s right with respect to the amount of the participant’s accounts as of the date of such amendment or termination. The Company may terminate the Plan at any time, in accordance with the requirements of Section 409A of the Code, and pay the participants their vested amounts in a single lump sum or on a schedule determined by the Committee. 14 Segment Reporting 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 in deciding how to allocate resources and in assessing performance. Historically, the Company managed its business on the basis of one operating and reportable segment. Concurrent with the acquisition of STI in January 2022, the Company began operating as two segments; Array Legacy Operations and STI Operations. The following table provides a reconciliation of certain financial information for the Company’s reportable segments to information presented in its condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenue Array Legacy Operations $ 185,160 $ 345,261 $ 299,541 $ 650,465 STI Operations 70,606 162,464 109,628 234,033 Total $ 255,766 $ 507,725 $ 409,169 $ 884,498 Gross Profit Array Legacy Operations $ 77,306 $ 102,950 $ 126,392 $ 182,785 STI Operations 8,647 43,452 14,651 61,157 Total $ 85,953 $ 146,402 $ 141,043 $ 243,942 33