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) September 30, 2024 December 31, 2023 ASSETS Current assets Cash and cash equivalents $ 332,372 $ 249,080 Accounts receivable, net of allowance of $ 6,614 and $ 3,824 , respectively 282,117 332,152 Inventories 195,697 161,964 Prepaid expenses and other 92,096 89,085 Total current assets 902,282 832,281 Property, plant and equipment, net 27,629 27,893 Goodwill 250,873 435,591 Other intangible assets, net 301,599 354,389 Deferred income tax assets 15,716 15,870 Other assets 65,005 40,717 Total assets $ 1,563,104 $ 1,706,741 LIABILITIES, REDEEMABLE PERPETUAL PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 149,202 $ 119,498 Accrued expenses and other 48,952 70,211 Accrued warranty reserve 1,503 2,790 Income tax payable 1,437 5,754 Deferred revenue 112,618 66,488 Current portion of contingent consideration 1,873 1,427 Current portion of debt 28,055 21,472 Other current liabilities 31,248 48,051 Total current liabilities 374,888 335,691 Deferred income tax liabilities 55,253 66,858 Contingent consideration, net of current portion 6,792 8,936 Other long-term liabilities 16,885 20,428 Long-term warranty 3,889 3,372 Long-term debt, net of current portion 648,318 660,948 Total liabilities 1,106,025 1,096,233 1 Array Technologies, Inc. Condensed Consolidated Balance Sheets (unaudited) (continued) (in thousands, except per share and share amounts) September 30, 2024 December 31, 2023 Commitments and contingencies (Note 11) Series A Redeemable Perpetual Preferred Stock of $ 0.001 par value; 500,000 authorized; 453,674 and 432,759 shares issued as of September 30, 2024 and December 31, 2023, respectively; liquidation preference of $ 493.1 million at both dates 392,592 351,260 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; 151,934,046 and 151,242,120 shares issued at respective dates 151 151 Additional paid-in capital 308,347 344,517 Accumulated deficit ( 243,721 ) ( 130,230 ) Accumulated other comprehensive income ( 290 ) 44,810 Total stockholders’ equity 64,487 259,248 Total liabilities, redeemable perpetual preferred stock and stockholders’ equity $ 1,563,104 $ 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 September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenue $ 231,406 $ 350,438 $ 640,575 $ 1,234,936 Cost of revenue Cost of product and service revenue 149,452 259,419 410,299 892,696 Amortization of developed technology 3,639 3,640 10,918 10,918 Total cost of revenue 153,091 263,059 421,217 903,614 Gross profit 78,315 87,379 219,358 331,322 Operating expenses General and administrative 40,149 37,432 114,904 115,825 Change in fair value of contingent consideration ( 39 ) 190 ( 271 ) 2,232 Depreciation and amortization 8,880 9,552 27,384 29,361 Goodwill impairment 162,000 — 162,000 — Total operating expenses 210,990 47,174 304,017 147,418 (Loss) income from operations ( 132,675 ) 40,205 ( 84,659 ) 183,904 Other loss, net ( 682 ) ( 446 ) ( 1,662 ) ( 127 ) Interest income 4,223 3,425 12,685 6,124 Foreign currency (loss) gain, net ( 106 ) 207 ( 1,073 ) 273 Interest expense ( 8,264 ) ( 13,064 ) ( 25,818 ) ( 35,372 ) Total other expense, net ( 4,829 ) ( 9,878 ) ( 15,868 ) ( 29,102 ) (Loss) income before income tax expense ( 137,504 ) 30,327 ( 100,527 ) 154,802 Income tax expense 3,850 7,229 12,964 36,904 Net (loss) income ( 141,354 ) 23,098 ( 113,491 ) 117,898 Preferred dividends and accretion 14,080 13,091 41,332 38,359 Net (loss) income to common shareholders $ ( 155,434 ) $ 10,007 $ ( 154,823 ) $ 79,539 (Loss) income per common share Basic $ ( 1.02 ) $ 0.07 $ ( 1.02 ) $ 0.52 Diluted $ ( 1.02 ) $ 0.07 $ ( 1.02 ) $ 0.52 Weighted average number of common shares outstanding Basic 151,923 151,068 151,691 150,865 Diluted 151,923 152,323 151,691 152,083 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 September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net (loss) income $ ( 141,354 ) $ 23,098 $ ( 113,491 ) $ 117,898 Foreign currency translation (1) 17,910 ( 22,495 ) ( 45,100 ) 15,289 Comprehensive (loss) income $ ( 123,444 ) $ 603 $ ( 158,591 ) $ 133,187 (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 September 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 June 30, 2024 446 $ 378,512 — $ — 151,875 $ 151 $ 320,379 $ ( 102,367 ) $ ( 18,200 ) $ 199,963 Equity-based compensation — — — — 59 — 2,060 — — 2,060 Tax withholding related to vesting of equity-based compensation — — — — — — ( 12 ) — — ( 12 ) Preferred cumulative dividends plus accretion 7 14,080 — — — — ( 14,080 ) — — ( 14,080 ) Net loss — — — — — — — ( 141,354 ) — ( 141,354 ) Foreign currency translation — — — — — — — — 17,910 17,910 Balance at September 30, 2024 453 $ 392,592 — $ — 151,934 $ 151 $ 308,347 $ ( 243,721 ) $ ( 290 ) $ 64,487 5 Array Technologies, Inc. Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (continued) (unaudited) (in thousands) Three Months Ended September 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 June 30, 2023 419 $ 324,838 — $ — 151,049 $ 151 $ 364,710 $ ( 172,670 ) $ 46,209 $ 238,400 Equity-based compensation — — — — 22 — 3,383 — — 3,383 Preferred cumulative dividends plus accretion 7 13,091 — — — — ( 13,091 ) — — ( 13,091 ) Net income — — — — — — — 23,098 — 23,098 Other comprehensive income — — — — — — — ( 22,495 ) ( 22,495 ) Balance at September 30, 2023 426 $ 337,929 — $ — 151,071 $ 151 $ 355,002 $ ( 149,572 ) $ 23,714 $ 229,295 6 Array Technologies, Inc. Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (continued) (unaudited) (in thousands) Nine Months Ended September 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 — — — — 692 — 6,896 — — 6,896 Tax withholding related to vesting of equity-based compensation — — — — — — ( 1,734 ) — — ( 1,734 ) Preferred cumulative dividends plus accretion 21 41,332 — — — — ( 41,332 ) — — ( 41,332 ) Net loss — — — — — — — ( 113,491 ) — ( 113,491 ) Foreign currency translation — — — — — — — — ( 45,100 ) ( 45,100 ) Balance at September 30, 2024 453 $ 392,592 — $ — 151,934 $ 151 $ 308,347 $ ( 243,721 ) $ ( 290 ) $ 64,487 7 Array Technologies, Inc. Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (continued) (unaudited) (in thousands) Nine Months Ended September 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 — — — — 558 1 11,694 — — 11,695 Preferred cumulative dividends plus accretion and commitment fees 20 38,359 — — — — ( 39,868 ) — — ( 39,868 ) Net income — — — — — — — 117,898 — 117,898 Foreign currency translation — — — — — — — — 15,289 15,289 Balance at September 30, 2023 426 $ 337,929 — $ — 151,071 $ 151 $ 355,002 $ ( 149,572 ) $ 23,714 $ 229,295 See accompanying Notes to Condensed Consolidated Financial Statements. 8 Array Technologies, Inc. Condensed Consolidated Statements of Cash Flows (unaudited) (in thousands) Nine Months Ended September 30, 2024 2023 Operating activities Net (loss) income $ ( 113,491 ) $ 117,898 Adjustments to net income: Goodwill impairment 162,000 — Provision for bad debts 3,415 ( 117 ) Deferred tax benefit ( 7,279 ) ( 2,328 ) Depreciation and amortization 29,015 30,318 Amortization of developed technology 10,918 10,918 Amortization of debt discount and issuance costs 4,652 9,123 Equity-based compensation 6,851 11,695 Change in fair value of contingent consideration ( 271 ) 2,232 Warranty provision 36 451 Write-down of inventories 2,481 4,587 Changes in operating assets and liabilities, net of business acquisition: Accounts receivable 41,865 ( 6,364 ) Inventories ( 29,964 ) 12,554 Income tax receivables ( 4,145 ) 3,165 Prepaid expenses and other ( 45,203 ) ( 2,140 ) Accounts payable 33,705 14,443 Accrued expenses and other ( 34,928 ) 18,484 Income tax payable ( 4,653 ) ( 730 ) Lease liabilities ( 5,730 ) ( 8,050 ) Deferred revenue 47,120 ( 78,165 ) Net cash provided by operating activities 96,394 137,974 Investing activities Purchase of property, plant and equipment ( 5,604 ) ( 11,615 ) Retirement/disposal of property, plant and equipment 38 — Sale of equity investment 11,975 — Net cash provided by (used in) investing activities 6,409 ( 11,615 ) Financing activities Series A equity issuance costs — ( 1,509 ) Tax withholding related to vesting of equity-based compensation ( 1,734 ) — Proceeds from issuance of other debt 19,024 60,516 Principal payments on other debt ( 24,879 ) ( 69,024 ) Principal payments on term loan facility ( 3,225 ) ( 73,225 ) Contingent consideration payments ( 1,427 ) ( 1,200 ) Net cash used in financing activities ( 12,241 ) ( 84,442 ) 9 Array Technologies, Inc. Condensed Consolidated Statements of Cash Flows (unaudited) (continued) (in thousands) Nine Months Ended September 30, 2024 2023 Effect of exchange rate changes on cash and cash equivalent balances ( 7,270 ) ( 1,808 ) Net change in cash and cash equivalents 83,292 40,109 Cash and cash equivalents, beginning of period 249,080 133,901 Cash and cash equivalents, end of period $ 332,372 $ 174,010 Supplemental cash flow information Cash paid for interest $ 29,666 $ 36,136 Cash paid for income taxes (net of refunds) $ 25,220 $ 36,797 Non-cash investing and financing activities Dividends accrued on Series A Preferred $ 20,914 $ 19,567 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 nine months ended September 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. The preparation of these condensed consolidated financial statements and accompanying notes requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. 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 of 2024, 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 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 product and service revenue for all periods presented. For the nine months ended September 30, 2023, the Brazil ICMS value-added tax benefit was $ 19.9 million, which has been included in cost of product and service revenue. 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. This reclassification 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 % 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. No gain or loss resulted from this transaction. Goodwill and Indefinite-Lived Intangible Assets Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination. Intangible assets are measured at their respective fair values as of the acquisition date and may be subject to adjustment within the measurement period, which may be up to one year from the acquisition date. The Company does not amortize goodwill but instead tests goodwill for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. Such triggering events potentially warranting an annual or interim goodwill impairment assessment include, among other factors, declines in historical or projected revenue, operating income or cash flows, and sustained decreases in the Company’s stock price or market capitalization. Goodwill is assessed for impairment 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 an income approach based on discounted cash flows. The fair value determined under the income approach is then compared to guideline publicly-traded companies (“GPC”) market place EBITDA multiples to corroborate the fair value of the reporting unit determined under the income approach. During the three months ended September 30, 2024, the Company identified certain indicators of impairment, and as a result, performed an interim quantitative goodwill impairment test, which resulted in an impairment of goodwill of $ 162.0 million. See Note 5 – Goodwill and Other Intangibles for additional information. 12 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. There were no indicators of impairment associated with this Trade name. Long-Lived Assets When events, circumstances or operating results indicate that the carrying values of long-lived assets, including our finite lived intangible assets, might not be recoverable through future operations, the Company prepares projections of the undiscounted future cash flows expected to be generated from the underlying asset group and the cash flows resulting from the asset groupings eventual disposition. If the projections indicate that the underlying asset grouping is not expected to be recoverable, the asset group is reduced to its estimated fair value. During the three months ended September 30, 2024, the Company identified indicators of impairment associated with certain asset groups, and as a result, performed an undiscounted cash flow test, which resulted in no impairment. Refer to Note 5 for further information. Revenue Recognition A majority of our revenue is recognized over time as work progresses, and for single performance obligations, we use an input measure, the cost-to-cost method, to determine progress. We review and update the contract related estimates on an ongoing basis and recognize 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. Due to the relatively short duration of our outstanding performance obligations, and our ability to estimate the remaining costs to be incurred, which are substantially all material costs covered under our material supply agreements with our suppliers, we have not recorded any material catch-up adjustments for the periods presented that would have impacted revenues or EPS related to revisions in our measurement of remaining progress of our performance obligations. 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 $ 1.6 million and $ 2.0 million during the three months ended September 30, 2024 and 2023, respectively, and $ 5.3 million and $ 6.4 million during the nine months ended September 30, 2024 and 2023, respectively. Inflation Reduction Act Vendor Rebates On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law, which includes numerous green energy credits. The 45X Advanced Manufacturing Production Tax Credit (“45X Credit”) was established as part of the IRA. The 45X Credit is a per-unit tax credit that is earned over time for each clean energy component domestically produced and sold by a manufacturer. 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.” 13 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 product and service revenue on the consolidated statements of operations. As of September 30, 2024, the Company had outstanding Vendor Rebate receivable of $ 91.6 million, of which $ 54.3 million was included in Prepaid expenses and other (current) and $ 37.3 million was included in Other assets (non-current) on the condensed consolidated balance sheets. As of December 31, 2023, the Company had outstanding Vendor Rebate receivable 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 September 30, 2024. During the second quarter of 2024, the Company concluded that certain parts manufactured by the Company qualify for the 45X Advanced Manufacturing Production Credits. 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 14 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 assessing the effect on our consolidated financial statement disclosures; however, adoption will not impact our consolidated balance sheets or statements of operations. In March 2024, the U.S. Securities and Exchange Commission (“SEC”) adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. The rule would require registrants to disclose certain climate-related information in registration statements and annual reports. In April 2024, the SEC voluntarily stayed the final rule as a result of pending legal challenges. The disclosure requirements would apply to the Company’s fiscal year beginning January 1, 2025, pending resolution of the stay. The Company is currently evaluating the final rule to determine its impact on the Company’s disclosures. 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 September 30, 2023, as a reduction to equity and reversed the related mark to market adjustments recognized during the nine months ended September 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 nine months ended September 30, 2023, as a reduction of equity and also reversed the related fair value adjustments. 15 Management evaluated the above misstatements and concluded they were not material to the nine months ended September 30, 2023, individually or in aggregate. 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 nine months ended September 30, 2024: 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 16 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 17 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 ) 3. Inventories Inventories consisted of the following (in thousands): September 30, 2024 December 31, 2023 Raw materials $ 47,389 $ 86,614 Finished goods 148,308 75,350 Inventories $ 195,697 $ 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 September 30, 2024, inventory valued using moving average cost and FIFO was $ 154.6 million and $ 41.1 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) September 30, 2024 December 31, 2023 Land N/A $ 1,647 $ 1,634 Buildings and land improvements 15 - 39 9,504 9,344 Manufacturing equipment 7 28,099 22,962 Furniture, fixtures and equipment 5 - 7 4,900 4,770 Vehicles 5 625 688 Hardware 3 - 5 3,879 3,114 Construction in progress N/A 2,941 6,199 Total 51,595 48,711 Less: accumulated depreciation ( 23,966 ) ( 20,818 ) Property, plant and equipment, net $ 27,629 $ 27,893 Depreciation expense was $ 1.3 million and $ 0.7 million for the three months ended September 30, 2024 and 2023, respectively, of which $ 0.7 million and $ 0.4 million, respectively, was included in cost of product and service revenue and $ 0.6 million and $ 0.3 million, respectively, was included in depreciation and amortization on the accompanying condensed consolidated statements of operations. 18 Depreciation expense was $ 3.3 million and $ 1.9 million for the nine months ended September 30, 2024 and 2023, respectively, of which $ 1.6 million and $ 1.0 million, respectively, was included in cost of product and service revenue and $ 1.7 million and $ 0.9 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 nine months ended September 30, 2024, consisted of the following (in thousands): Array Legacy Operations STI Operations Total Beginning balance $ 69,727 $ 365,864 $ 435,591 Foreign currency translation — ( 22,718 ) ( 22,718 ) Impairment charge — ( 162,000 ) ( 162,000 ) Ending balance (1) $ 69,727 $ 181,146 $ 250,873 (1) Goodwill attributable to Array Legacy Operations is net of cumulative impairments of $ 51.9 million. During the three months ended September 30, 2024, the Company experienced a sustained decline in its stock price, which hit a 52-week low during the quarter, resulting in a decrease in market capitalization. In addition, the Company updated its long-term projections for the Company’s reporting units and further evaluated the execution risk associated with the Company’s projections. As a result, the Company identified indicators of impairment related to the Company’s reporting units. Management, with the assistance of a third-party valuation specialist, performed an interim quantitative goodwill impairment test of the Array Legacy Operations and STI Operations reporting unit as of September 30, 2024. The fair value of the Array Legacy Operations and STI Operations reporting unit were determined using the income approach and then compared to the Guideline publicly traded companies (“GPC”) marketplace EBITDA multiples to corroborate the fair value of the reporting unit. As a result of these tests, the Company recorded an impairment of goodwill of $ 162.0 million related to STI Operations based on an estimated fair value of the STI Operations reporting unit of $ 455.9 million. Subsequent to recording the impairment of goodwill, the Company reconciled the overall market capitalization of the Company, within a reasonable range, to the sum of the estimated fair values of both of the Company’s reporting units. The estimated fair value of the Array Legacy Operations reporting unit was significantly higher than the carrying balance of the reporting unit. The significant assumptions used in determining the fair value of the STI Operations reporting unit primarily relate to the revenue growth rate, the forecasted EBITDA margin, and the selected discount rate used in the discounted cash flow model under the income approach. Under the GPC method, the selection of EBITDA multiple to be used requires significant judgement. To the extent that the discount rate used in determining the present value of our cash flows increases, if we do not meet the cash flow projections for the reporting unit, or GPC multiples in the future decrease, additional impairment charges may be recorded in the future. In addition, a further decrease in the Company’s common stock share price and market capitalization could be an indication that there has been a further decrease in the fair value of the Company’s reporting units. 19 Long Lived Assets As discussed above, there were indicators of impairment that required an interim impairment test for the Legacy Array and STI Operations reporting units. Management considered these events to be a triggering event requiring the long-lived assets associated with the STI Operations reporting unit be tested for impairment (which includes the amortizable intangible assets) as of September 30, 2024. Because the sum of future undiscounted cash flows for the underlying asset groups indicated that the carrying amount of the asset groups were recoverable, no impairment charge was recorded. The difference between the undiscounted cash flows of the Company’s reporting groups and carrying balance of its reporting groups was significant as of September 30, 2024. As of September 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. Other Intangible Assets, Net Other intangible assets consisted of the following (in thousands, except useful lives): Estimated Useful Lives (Years) September 30, 2024 December 31, 2023 Amortizable: Developed technology 14 $ 203,800 $ 203,800 Computer software 3 1,245 5,267 Customer relationships 10 320,489 336,134 Backlog 1 50,605 54,438 Trade name 20 26,000 27,061 Total amortizable intangibles 602,139 626,700 Accumulated amortization: Developed technology 119,822 108,905 Computer software 522 1,274 Customer relationships 136,354 115,444 Backlog 50,605 54,322 Trade name 3,537 2,666 Total accumulated amortization 310,840 282,611 Total amortizable intangibles, net 291,299 344,089 Non-amortizable: Trade name 10,300 10,300 Total other intangible assets, net $ 301,599 $ 354,389 Amortization expense related to intangible assets was $ 11.9 million and $ 12.8 million for the three months ended September 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 $ 8.3 million and $ 9.2 million, respectively, was included in depreciation and amortization, on the accompanying condensed consolidated statements of operations. 20 Amortization expense related to intangible assets was $ 36.6 million and $ 39.3 million for the nine months ended September 30, 2024 and 2023, respectively, of which $ 10.9 million was included in amortization of developed technology, a component of cost of revenue, in both periods and $ 25.7 million and $ 28.4 million, respectively, was included in depreciation and amortization, on the accompanying condensed consolidated statements of operations. Estimated future amortization expense of intangible assets as of September 30, 2024, is as follows (in thousands): Amount Remainder of 2024 $ 11,987 2025 47,946 2026 43,635 2027 39,041 2028 39,041 Thereafter 109,649 $ 291,299 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 $ 3.9 million and $ 7.2 million for the three months ended September 30, 2024 and 2023, respectively, and an expense of $ 13.0 million and $ 36.9 million for the nine months ended September 30, 2024 and 2023, respectively. The income tax expense for the nine months ended September 30, 2024 was favorably impacted by lower profits in non-US jurisdictions and additional tax credits recorded during the period. This was partially offset by legislative changes in Brazil where a local tax incentive is no longer being exempt from Federal income tax beginning in 2024. Additionally, tax expense of $ 0.5 million related to equity-based compensation, was recorded discretely. No tax benefit was recorded on the goodwill impairment recorded in the nine months ended September 30, 2024, as the goodwill is non-deductible for income tax purposes. The tax expense for the nine months ended September 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 equity-based compensation recorded discretely. For the nine months ended September 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): September 30, 2024 December 31, 2023 Senior Secured Credit Facility: Term loan facility $ 234,950 $ 238,175 Revolving credit facility — — Total secured credit facility 234,950 238,175 Convertible notes 425,000 425,000 Other debt 33,038 39,889 Total principal 692,988 703,064 Unamortized discount and issuance costs, total ( 16,615 ) ( 20,644 ) Current portion of debt ( 28,055 ) ( 21,472 ) Total long-term debt, net of current portion $ 648,318 $ 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 at September 30, 2024 and December 31, 2023. At September 30, 2024 and December 31, 2023 the Company had $ 16.4 million and $ 24.8 million, respectively, in standby letters of credit, and $ 183.6 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 $ 235.0 million and $ 238.2 million as of September 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 $ 8.7 million and $ 11.3 million as of September 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 22 are being amortized using the effective interest method and the effective interest rate of the Term Loan Facility as of September 30, 2024, was 10.20 %. 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 September 30, 2024 and December 31, 2023, the principal balance of the Convertible Notes was $ 425.0 million with unamortized discount and issuance costs of $ 8.0 million and $ 9.4 million, respectively, for a net carrying amount of $ 417.0 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 nine months ended September 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 nine months ended September 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. 23 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. 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”) and the $ 33.0 million balance is denominated in Euros. Interest rates on other debt range from 3.63 % to 4.53 % annually. 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 $ 20.4 million and $ 18.8 million for the nine months ended September 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 24 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”). 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 nine months ended September 30, 2024, the Company accrued dividends on the Series A Shares at the Accrued Regular Dividend rate of 6.25 % totaling $ 20.9 million. As of September 30, 2024, total accrued and unpaid dividends were $ 53.7 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. 25 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 September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Over-time revenue $ 174,128 $ 321,154 $ 508,062 $ 1,120,526 Point in time revenue 57,278 29,284 132,513 114,410 Total revenue $ 231,406 $ 350,438 $ 640,575 $ 1,234,936 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. For certain customer contracts, billing can occur in advance of shipment, resulting in contract liabilities. 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): September 30, 2024 December 31, 2023 Unbilled receivables $ 77,492 $ 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): September 30, 2024 December 31, 2023 Deferred revenue $ 112,618 $ 66,488 During the nine months ended September 30, 2024, the Company converted $ 37.6 million in deferred revenue to revenue, which represented 56.7 % of the prior year’s deferred revenue balance. Included in deferred revenue as of December 31, 2023 are cash advances for signed contracts that begin several months subsequent to receiving the advance. In addition, deferred revenue includes paid extended warranty, that can be recognized upon expiration of the warranty. 26 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 nine months ended September 30, 2024, the Company recognized zero and $ 1.9 million, respectively, in revenue from one customer for the sale of goods and services under bill-and-hold arrangements. During the three and nine months ended September 30, 2023, the Company recognized zero and $ 22.8 million, respectively, in revenue from one customer for the sale of goods and services under bill-and-hold arrangements. Remaining Performance Obligations As of September 30, 2024, the Company had $ 466.9 million of remaining performance obligations. The Company expects to recognize revenue on 94 % 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 September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net (loss) income $ ( 141,354 ) $ 23,098 $ ( 113,491 ) $ 117,898 Less: preferred dividends and accretion 14,080 13,091 41,332 38,359 Net (loss) income to common shareholders $ ( 155,434 ) $ 10,007 $ ( 154,823 ) $ 79,539 Basic: Weighted average shares 151,923 151,068 151,691 150,865 (Loss) income per share $ ( 1.02 ) $ 0.07 $ ( 1.02 ) $ 0.52 Diluted: Effect of restricted stock and performance awards — 1,255 — 1,219 Weighted average shares 151,923 152,323 151,691 152,083 Income per share $ ( 1.02 ) $ 0.07 $ ( 1.02 ) $ 0.52 27 Since the Company was in a loss position for the three and nine months ended September 30, 2024, basic net loss per share to common shareholders is the same as diluted net loss per share to common stockholders, as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive. At September 30, 2024 and 2023, 3,834,690 and 34,634 respectively, of common stock equivalents were excluded from the calculation of diluted net loss per share to common stockholders, as they had an antidilutive effect. There were no potentially dilutive common shares issuable pursuant to the Convertible Notes for both the nine months ended September 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 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 28 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. 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 September 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 29 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 September 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. 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 September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Beginning balance $ 8,704 $ 9,429 $ 10,363 $ 8,587 Payments — — ( 1,427 ) ( 1,200 ) Fair value adjustment ( 39 ) 190 ( 271 ) 2,232 Ending balance $ 8,665 $ 9,619 $ 8,665 $ 9,619 The TRA liability requires significant judgment and is classified as Level 3 in the fair value hierarchy. Surety Bonds As of September 30, 2024, the Company posted surety bonds in the total amount of $ 198.2 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. 30 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): September 30, 2024 December 31, 2023 Carrying Value Fair Value Carrying Value Fair Value Convertible Notes $ 417,049 $ 314,500 $ 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 $ 33.0 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. 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 nine months ended September 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 2,176,206 9.55 Shares vested ( 708,036 ) 15.45 Shares forfeited ( 318,594 ) 14.16 Outstanding non-vested, September 30, 2024 2,820,085 $ 11.01 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 nine months ended September 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 nine months ended September 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 ( 264,184 ) 15.35 Outstanding non-vested, September 30, 2024 1,014,605 $ 12.60 For three months ended September 30, 2024 and 2023, the Company recognized $ 2.0 million and $ 3.4 million, respectively, in equity-based compensation costs. For nine months ended September 30, 2024 and 2023, the Company recognized $ 6.9 million and $ 11.9 million, respectively, in equity-based compensation costs. At September 30, 2024, the Company had $ 24.9 million of unrecognized compensation costs related to RSUs and PSUs, which are expected to be recognized over 2.2 years and 2.3 years, respectively. 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 nine months ended September 30, 2024 and 2023 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenue Array Legacy Operations $ 160,266 $ 244,857 $ 459,807 $ 895,322 STI Operations 71,140 105,581 180,768 339,614 Total $ 231,406 $ 350,438 $ 640,575 $ 1,234,936 Gross Profit Array Legacy Operations $ 65,726 $ 58,233 $ 192,118 $ 241,019 STI Operations 12,589 29,146 27,240 90,303 Total $ 78,315 $ 87,379 $ 219,358 $ 331,322 15 Subsequent Events In May 2024, Array Technologies, Inc. (“Array”, Lessee) entered into a triple net lease (“NNN term lease”) with GDC Sunshine, LLC (“GDC”, Lessor) for 13 ½ years ( 162 months) for a new manufacturing and office facility located in Bernalillo County, New Mexico. Among other things, Array would be responsible for the payment of personal property taxes, if any, and all real property taxes related to the facility and real property that is subject to the NNN term lease. The NNN term lease was contingent upon the closing of the Lessor’s successful financing to construct the facility. On October 16, 2024, the Lessor closed the financing and consequently the lease agreement became effective. The Lessee has an option to renew the lease for an additional ten years . The new facility that is mixed use and built for general purposes will be approximately 216,000 square feet when constructed, and the NNN term lease commences upon the earliest occurrence of several events, including the Lessor’s completion of the construction of the building, which is currently expected to occur in the fourth quarter of 2025. Under the construction agreement with GDC, Array also contributed approximately $ 11.2 million to the construction costs for the facility during October 2024. In connection with this NNN term lease and the Company’s planned acquisition of machinery and equipment related to the new facility, GDC and the Company entered into a series of transactions with Bernalillo County (the “County”) related to a tax abatement plan. These transactions had no net impact to the consolidated financial statements of the Company. The tax abatement plan provides for the effective elimination of 75 % of the real property taxes and 100 % of the personal property taxes payable to the County by the Company and GDC during the term of the NNN term lease, and the abatement of 100 % of the sales and use taxes that would be incurred by the Company and GDC related to the purchase and use of machinery and equipment. 33