What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-03 compared with 2024-02-28 · 217 added, 171 removed, 169 unchanged (70% of the section changed)

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Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under the sections of this Form 10-K captioned “Forward-Looking Statements” and “Risk Factors.”

We are one of the world’s largest manufacturers of ground-mounting tracking systems used in solar energy projects at utility scale.

Our principal products are a portfolio of integrated solar tracking systems comprised of steel supports, electric motors, gearboxes and electronic controllers commonly referred to as a single-axis “tracker.” Trackers move solar panels throughout the day to maintain an optimal orientation to the sun, which significantly increases their energy production.

Solar energy projects that use trackers generate more energy and deliver a lower LCOE than projects that use “fixed tilt” mounting systems, which do not move.

We are a leading global provider of solar tracking technology to utility-scale and distributed generation customers, who construct, develop and operate solar PV sites.

With solutions engineered to withstand the harshest weather conditions, ARRAY’s high-quality solar trackers, software platforms and field services combine to maximize energy production and deliver value to our customers for the entire lifecycle of a project.

Trackers move solar panels throughout the day to maintain an optimal orientation to the sun, which significantly increases their energy production.

Solar energy projects that use trackers typically generate more energy and deliver a lower LCOE than projects that use “fixed tilt” mounting systems, which do not move.

The vast majority of ground mounted solar systems in the U.S.

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This tracker uses one motor to drive two connected rows and is ideally suited for sites with irregular and highly angled boundaries or fragmented project areas.

To offer a comprehensive set of solutions to the growing market, in September of 2022, we also introduced a third tracker product requiring significantly less grading and civil works permitting prior to installation in addition to accommodating uneven terrain.

To offer a comprehensive set of solutions to the growing market, in September of 2022, we also introduced a third tracker product, OmniTrack, which requires significantly less grading and civil works permitting prior to installation in addition to accommodating uneven terrain.

This suite of products extends our target applications and ability to deliver the best utility-scale solar tracker solutions to the market.

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and the rest of the world, respectively.

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

As of December 31, 2024, we had shipped approximately 83 gigawatts of trackers to customers worldwide.

Acquisition of STI Norland

On January 11, 2022, we completed our acquisition of STI for purchase consideration of $410.5 million in cash and 13,894,800 shares of our common stock.

The fair value of the purchase consideration was $610.8 million and resulted in the Company owning 100% of the equity interests in STI.

STI generates revenue through the design, manufacture and sale of its utility-scale solar tracker systems to customers in global markets that include Spain, Brazil, U.S.

On January 11, 2022, we completed our acquisition of STI, which resulted in the Company owning 100% of the equity interests in STI.

Similar to Array Legacy Operations, the STI Operations generate revenue through the design, manufacture and sale of utility-scale solar tracker systems to customers in global markets that include Spain, Brazil, the U.S.

and South Africa.

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

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

Capped Calls and Put Option

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

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

See Note 11 – Debt and Item 9B.

Other Information .

The integration of STI has allowed us to accelerate our international expansion and better address rising global demand for utility-scale solar projects, particularly in developing countries in Latin America and Africa.

Factors Affecting Results of Operations

Project Timing

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

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

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

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

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

• The interest rate environment .

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

As interest rates rose in 2022 and 2023, we saw customers looking to renegotiate power purchase agreements to improve project returns.

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

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

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

While the Federal Reserve made the decision to lower the target interest rate by 0.5% in October 2024 the timing of any positive impact the lower rate may have on project timing remains uncertain, particularly in light of the Federal Reserve’s decision not to lower the target interest rate further in January 2025.

• Availability of necessary equipment .

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

We have a broad portfolio of customer relationships including presence with most Tier 1 utilities in the U.S.

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

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

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

• Macroeconomic factors .

There has been a rapid depreciation of the Brazilian Real in conjunction with existing pricing pressures on energy in the Brazilian market.

Due to these dynamics, the economic cases for the power purchase agreements, or PPAs, for many solar projects have become less attractive for our customers.

Many of the developers in Brazil of these projects are continuing signaling delays as they renegotiate the pricing of these PPAs.

In addition, our results will also be impacted by tax incentives we can recognize, for example the Brazil value-added tax benefit, Imposto sobre Circulação de Mercadorias e Servicos (“ICMS”), which will discontinue in 2033.

• Local permitting .

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

Research and Development

We incur R&D costs during the process of researching and developing new products and significant enhancements to existing products.

R&D costs are a subset of our total engineering spend and consist primarily of personnel-related costs associated with our team of internal engineers, third-party consultants, materials and overhead.

We expense these costs as incurred prior to a respective product being ready for

commercial production.

Total engineering expense was $17.0 million, $16.7 million and $11.8 million during the years ended December 31, 2024, 2023 and 2022, respectively, of which $6.7 million, $8.5 million and $4.2 million were related to R&D activities we performed during the same period, respectively.

Impact of IRA

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states even without the ITC, we believe step-downs in the ITC have influenced the timing and quantity of some customers’ orders.

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

With the passage of the IRA in August 2022, the ITC was raised to 30% with no step downs before 2032.

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

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

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

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

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

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

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

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

Section 45X Credit

After a period of uncertainty, on October 24, 2024, U.S.

Department of Treasury and the IRS issued final regulations on the section 45X manufacturing tax credit that largely adopted the statutory definitions of torque tube and structural fasteners, which we have determined apply to our components.

Beginning in late 2023 and continuing through 2024 and into 2025, we have successfully negotiated, and we continue to successfully negotiate, agreements with key suppliers around sharing the economic benefits of section 45X credits associated with torque tube and structural fasteners.

We continue to pursue additional agreements for splitting the economic benefits of section 45X with suppliers for parts we do not manufacture internally.

In addition, during the second quarter of 2024, we concluded that certain parts manufactured by the Company qualify for the section 45X advanced production credits.

Refer to Note 2 – Summary of Significant Accounting Policies in the accompanying notes to our consolidated financial statements included in this Annual Report on Form 10-K for a discussion on how we account for these incentives and amounts recognized for the periods presented.

Domestic Content Safe Harbor Guidance

The IRS issued Notice 2023-38 in May of 2023 setting forth guidance on the domestic content bonus tax credits under the IRA.

Uncertainties still exist under this guidance, like whose costs would be used (the manufacturer’s cost, a vendor’s cost to acquire, etc.) and how to define manufactured product components associated with trackers.

In May of 2024, the IRS issued Notice 2024-41 setting forth further guidance on the domestic content bonus tax credits, including a safe harbor method for calculating domestic content percentages.

On January 16, 2025, the IRS released Notice 2025-08, modifying Notice 2023-38 and Notice 2024-41 as well as introducing an updated elective safe harbor method for use in lieu of provisions of the adjusted percentage rule provided in Notice 2023-38 for calculating the domestic content bonus credit amounts applicable for certain qualified facilities and energy projects.

Notice 2024-41 and Notice 2025-08 and the updated definitions described therein have clarified some pre-existing uncertainty in the industry, but they have also introduced uncertainties of their own.

These uncertainties have and could continue to cause our customers to delay projects as they navigate the existing guidance in qualifying for the tax credit and possibly wait for further clarity.

Structured Cost Management

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

Impact of Attacks on Shipping in the Red Sea

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

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

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

We do not yet know the duration of these disruptions or the severity of their impact on our operations, but we continue to monitor the situation and evaluate our procurement strategy and supply chain as to reduce any negative impact on our business, financial condition and results of operations.

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

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

Regulatory Impacts

In June 2022, the U.S.

President authorized the U.S.

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

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

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

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

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

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

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

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

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

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

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

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

The USDOC has initiated investigations based on the petitions.

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

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

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

Impact of the Ongoing Russian-Ukraine War

The ongoing Russian-Ukraine war 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 Disruption of Key Shipping Lines, i.e.

Attacks on Shipping in the Red Sea

The disruption of container shipping traffic through the Red Sea has created port congestion, especially in Asia, affecting transit times, capacity, and shipping costs for routes connecting the rest of the world with Asia.

Many shipping companies have paused shipments through the Suez Canal and the Red Sea causing rerouting of commercial vessels.

To address the challenges arising from prolonged transit times, we have increased our local sourcing efforts where feasible within certain regions.

These measures aim to reduce delays to get the product to project sites on time.

There is still uncertainty 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.

Inflationary pressure may continue to negatively impact our results of operations in the near-term.

To mitigate the inflationary pressures on our business, despite our ASPs decreasing due to the current deflationary environment for commodities like steel, we have continued to accelerate our productivity initiatives, expanded our supplier base, and continued to execute on our overhead cost containment practices.

Impact of AD/CVD Petitions and Determinations

On August 18, 2023, the U.S.

Department of Commerce issued final affirmative determinations of circumvention with respect to certain CSPV cells and modules produced in Cambodia, Malaysia, Thailand and Vietnam using parts and components from China.

As a result, certain CSPV cells and modules from Cambodia, Malaysia, Thailand and Vietnam are now subject to AD/CVD orders on CSPV cells and modules from China that have been in place since 2012.

Subject to certain certification and utilization conditions, imports of CSPV cells and modules covered by the circumvention determinations that entered the U.S.

during the two-year period prior to June 6, 2024 were not subject to AD/CVD cash deposit or duty requirements.

Imports of CSPV cells and modules from the four Southeast Asian countries covered by the circumvention determination that entered the U.S.

on or after June 6, 2024 are subject to AD/CVD cash deposit requirements of the China AD/CVD orders and, possibly, final AD/CVD duty liability.

Cash deposit rates for CSPV modules covered by the China AD/CVD orders vary significantly depending on the producer and exporter of the modules and may amount to over 250% of the entered value of the imported merchandise.

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

We have seen a number of projects in our order book delayed as a result of the USDOC investigation, and effective enforcement of the AD/CVD orders could negatively impact our results of operations.

Trade Policy and Executive Orders

On February 1, 2025, the President Trump issued three executive orders directing the U.S.

to impose new tariffs on imports from Canada, Mexico, and China, to take effect on February 4, 2025, and on February 3,

2025, President Trump announced his intention to pause these tariffs on Canada and Mexico for a one-month period.

The tariffs impose an additional 25% ad valorem rate of duty on all imports from Canada and Mexico (other than imports of Canadian energy resources exports, which are subject to a 10% ad valorem rate of duty) and an additional 10% ad valorem rate of duty on all imports from China.

We are currently evaluating the potential impact of the imposition of the announced tariffs to our business and financial condition.

While we do not believe that the tariffs announced by the U.S.

on February 1, 2025 will have a material adverse effect upon our results of operations, financial condition, or liquidity, the actual impact of the new tariffs is subject to a number of factors including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any countermeasures that the target countries may take and any mitigating actions that may become available.

Foreign Currency Translation

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

Concentrations of Major Customers

Our customer base consists primarily of large solar developers, independent power producers, utilities and EPCs.

We do not require collateral on our accounts receivable.

At December 31, 2024, our largest customer and five largest customers accounted for 9.0% and 31.0%, respectively, of total accounts receivable.

At December 31, 2023, our largest and five largest customers constituted 2.7% and 29.6% of trade accounts receivable, respectively.

During the year ended December 31, 2024, two customers accounted for 15.6% and 11.9%, respectively, of total revenue.

During the year ended December 31, 2023, one customer accounted for 13.4% of total revenue.

During the year ended December 31, 2022, two customers accounted for 11.8% and 10.6%, respectively, of total revenue.

Further, our accounts receivable are from companies within the solar industry and, as such, we are exposed to normal industry credit risk.

We continually evaluate our reserves for potential credit losses and establish reserves for such losses.

Performance Measures

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These operating metrics are utilized by our management to evaluate our business, measure our performance, identify trends affecting our business and formulate projections.

The primary operating metric we use to evaluate our sales performance and to track market acceptance of our products from year to year is megawatts (“MWs”) shipped generally and the change in MWs shipped from period to period specifically.

MWs is measured for each individual project and is calculated based on the projects expected megawatt output once installed and fully operational.

The primary operating metric we use to evaluate our sales performance and to track market acceptance of our products is megawatts (“MWs”) shipped, and specifically the change in MWs shipped from period to period.

MWs are measured for each individual project and are calculated based on the respective projects’ expected megawatt output once installed and fully operational.

We also utilize metrics related to price and cost of goods sold per MW, including average selling price (“ASP”) and cost per watt (“CPW”).

ASP is calculated by dividing total applicable revenues by total applicable MWs, whereas CPW is calculated by dividing total applicable costs of goods sold by total applicable MWs.

ASP is calculated by dividing total applicable revenues by total applicable MWs,

whereas CPW is calculated by dividing total applicable costs of goods sold by total applicable MWs.

These metrics enable us to evaluate trends in pricing, manufacturing cost and customer profitability.

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The following discussion describes certain line items in our consolidated statements of operations.

We generate revenue from the sale of solar tracking systems and parts.

We generate revenue from the sale of solar tracking systems, parts, software and services.

Our customers include EPCs, utilities, solar developers and independent power producers.

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

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

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

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

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

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.

Cost of Revenue and Gross Profit

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

Cost of product and service revenue consists primarily of product costs, including raw materials, purchased components, net of any incentives or rebates earned from our suppliers, salaries, wages and benefits of manufacturing personnel, freight, tariffs, customer support, product warranty, amortization of developed technology, and depreciation of manufacturing and testing equipment.

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

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

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

When possible, we

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

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

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

Inflation Reduction Act Vendor Rebates

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

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

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

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

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

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

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

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

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

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

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

Gross profit will also be impacted by tax incentives we can recognize, for example ICMS value added tax benefits in Brazil, which will discontinue in 2033.

Operating Expenses

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

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

The majority of our sales in 2024, 2023, and 2022, were in the U.S.;

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

We currently have a sales presence in the U.S., Spain, Brazil, South Africa, Australia, and the U.K.

We currently have a sales presence in the U.S., Spain, Brazil, South Africa and Australia.

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

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

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

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

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

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

Amortization consists of the expense recognized over the expected period of use of our customer relationships, contractual backlog, and the STI trade name intangible assets.

Amortization related to certain acquired intangible assets is recorded as Total cost of revenue under the caption “Amortization of developed technology.”

Non-Operating Expenses

Interest income consists of interest earned on our cash and cash equivalents balance.

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

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Reportable Segments

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

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

Subsequent to the acquisition of STI, we began reporting our results of operations in two segments;

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

The segment amounts included in this Item 7.

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Depreciation and amortization 36,086 38,928 (2,842) (7) %

Long-lived assets impairment 91,904 — 91,904 100 %

Goodwill impairment 236,000 — 236,000 100 %

Total operating expenses 524,682 201,427 323,255 160 %

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

(Loss) income from operations (227,005) 214,124 (441,129) (206) %

Other (expense) income, net (1,008) (1,015) 7 1 %

Interest income 16,777 8,330 8,447 101 %

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

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

Foreign currency (loss) gain, net (4,515) (53) (4,462) (8419) %

Interest expense (34,825) (44,229) 9,404 21 %

Total other (expense) income (23,571) (36,967) (13,396) (36) %

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

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

(Loss) income before income tax expense (benefit) (250,576) 177,157 (427,733) (241) %

Income tax (benefit) expense (10,182) 39,917 (50,099) (126) %

$ (240,394) $ 137,240 $ (377,634) (275) %

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Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

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

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

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

Consolidated revenue for the year ended December 31, 2024 decreased by $660.7 million, or 42%, compared to the year ended December 31, 2023, primarily driven by lower revenue from Array Legacy Operations of 44% and STI Operations of 37%.

Array Legacy Operations revenue for the year ended December 31, 2024 decreased by $511.2 million, or 44%, compared to the year ended December 31, 2023.

The decrease was primarily driven by approximately 39% decrease in volume shipped and a decrease of approximately 8% in average selling prices.

STI Operations revenue for the year ended December 31, 2024 decreased by $149.5 million, or 37%, compared to the year ended December 31, 2023.

The decrease was primarily driven by a decrease of 12% in volume shipped, a decrease of approximately 24% in average selling prices and a foreign currency impact of approximately 4%.

Cost of Revenue and Gross Profit

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

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

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

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

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

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

Consolidated cost of revenue decreased by $542.9 million, or 47%, for the year ended December 31, 2024 compared to the year ended December 31, 2023, in line with lower revenue, partially offset by lower input cost per watt, resulting from supply chain and engineering cost control initiatives and the realization of 45X benefits associated with torque tubes and structural fasteners by Legacy Array Operations.

45X benefits realized for the year ended December 31, 2024 were $137.8 million compared to $9.3 million for the year ended December 31, 2023.

Consolidated gross profit decreased by $117.9 million, or 28%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.

Consolidated gross margin increased to 33% for the year ended December 31, 2024, as compared to 26% during the same period in the prior year.

Array Legacy Operations gross profit decreased by $47.6 million, or 15%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.

Gross margin increased to 41% from 27% for the years ended December 31, 2024 and 2023, respectively.

The increase in gross margin was driven the realization of 45X benefits associated with torque tubes and structural fasteners during the fiscal year.

45X benefits realized for the year ended December 31, 2024 were $137.8 million compared to $9.3 million for the year ended December 31, 2023.

STI Operations gross profit decreased by $70.3 million, or 72%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.

Gross margin for STI Operations decreased to 11% from 24% for the years ended December 31, 2024 and 2023, respectively, driven by a decline in average selling prices of 24%, reduction in volume of 12%, partially offset by lower costs from operational efficiencies and lower input costs.

Operating Expenses

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

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

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

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

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

Consolidated general and administrative expense for the year ended December 31, 2024 increased by $1.0 million compared to the same period in the prior year, primarily as a result of higher legal and professional fees of $6.3 million and an increase in facility and infrastructure costs of $0.9 million, partially offset by lower personnel expenses of $6.2 million as a result of lower stock-based compensation and headcount.

Change in the fair value of contingent consideration resulted in a gain of $0.1 million for the year ended December 31, 2024, due to the fair value remeasurement of the TRA liability, primarily driven by a decrease in the discount rates used in the valuation.

Consolidated depreciation and amortization expense decreased $2.8 million, or 7%, due to the decrease in the amortization of intangibles, as the Backlog intangible recognized as part of the STI Acquisition had a one-year life and was fully amortized as of the first quarter of 2023.

During the year ended December 31, 2024, the Company identified certain indicators of impairment, which resulted in an impairment of goodwill and long-lived assets of $327.9 million.

Other (Expense) Income, Net

Other expense was $1.0 million for both years ended December 31, 2024 and 2023.

Other expense primarily consists of certain other non-income taxes and miscellaneous income/expense.

Interest Income

Consolidated interest income for the year ended December 31, 2024 increased by $8.4 million, or 101%, as compared to the prior year, due to higher cash on hand balances during 2024 and higher yields on our cash management program.

Legal Settlement

Legal settlement income in 2022 resulted from the settlement of litigation related to trade secret misappropriation, for which the Company received a $42.8 million settlement.

Legal settlement income in 2022 resulted from the settlement of litigation related to trade secret misappropriation, for which we received a $42.8 million settlement.

The settlement is related to Nextracker’s acknowledgment that an Array employee was hired in violation of his non-compete agreement, certain Array confidential information was improperly obtained, and Nextracker’s behavior was wrongful.

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

There were no settlements in 2023.

Foreign Currency Gain

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

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

Interest Income

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

Foreign Currency Loss

Consolidated foreign currency loss was $4.5 million during 2024 due to certain monetary assets and liabilities denominated in currencies other than the Brazilian Real, which weakened significantly during 2024.

The foreign currency loss recorded during 2023 was not material.

Interest Expense

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

Consolidated interest expense for the year ended December 31, 2024 decreased by $9.4 million, or 21%, compared to the prior year period, primarily due to the impact of the $4.3 million and $74.3 million principal pay downs on our Term Loan Facility during 2024 and 2023, respectively.

These pay downs were the result of focused efforts to decrease our outstanding debt balance with free cash flows from operations.

Income Tax Expense (Benefit)

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

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

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

Consolidated income tax expense (benefit) decreased by $50.1 million, or (126)%, We recorded income tax benefit of $10.2 million and an expense of $39.9 million for the years ended December 31, 2024 and 2023, respectively.

The decrease in the tax expense is mostly related to the decrease in pre-tax income, which includes an impairment charge of $91.9 million for acquired intangibles and PP&E.

The impairment resulted in a benefit of $31.2 million, offset by a valuation allowance against deferred tax assets of $7.2 million.

In addition, the income tax expense for the year ended December 31, 2024, was favorably impacted by losses in non-U.S.

jurisdictions which have higher tax rates than the U.S., additional tax credits, and reduced state income tax expense, partially offset by benefits related to excess equity-based compensation deductions and non-deductible expense.

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

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

jurisdictions which have higher tax rates than the U.S.

and benefit from a non-US tax incentive, partially offset by non-deductible expenses.

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

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

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

Liquidity and Capital Resources

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Series A Shares

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

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

Debt Obligations

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

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

We are required to provide surety bonds to various parties as required for certain transactions initiated during the ordinary course of business to guarantee our performance in accordance with contractual or legal obligations.

These off-balance sheet arrangements do not adversely impact our liquidity or capital resources.

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

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

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

We believe we have sufficient liquidity as well as financing options available to fund current and future commitments.

Based on our past performance and current expectations, we believe that operating cash flows will be sufficient to meet our liquidity needs in the next 12 months and beyond.

As of December 31, 2024, our cash balance was $363.0 million, of which $36.6 million was held outside the U.S., and net working capital was $560.9 million.

We had outstanding borrowings of $233.9 million under our $575 million Term Loan Facility and $172.0 million available to us under our $200.0 million Revolving Credit Facility.

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

Management believes that the Company’s ability to generate operating cash flows in the future and available borrowing capacity under its Senior Secured Credit Facility will be sufficient to meet its future liquidity needs.

Cash Flows from Operating Activities

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

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

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

Cash Flows from Investing Activities

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

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

net of cash acquired, the Company paid $373.8 million in cash as part of the purchase price consideration.

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

Cash Flows from Financing Activities

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

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

We continually monitor and review our liquidity position and funding needs.

Management believes that our ability to generate operating cash flows in the future and available borrowing capacity under our Senior Secured Credit Facility will be sufficient to meet our future short-term liquidity needs.

Operating Activities

For the year ended December 31, 2024, cash provided by operating activities was $154.0 million attributable to non-cash adjustments of $367.7 million, mainly consisting of goodwill and long-lived asset impairment charges, depreciation and amortization expense and equity-based compensation and a net cash inflow of $26.6 million from changes in our operating assets and liabilities, partially offset by a net loss of $240.4 million.

Investing Activities

For the year ended December 31, 2024, cash used in investing activities was $9.6 million, of which $7.3 million related to purchases of property, plant and equipment, $3.0 related to an investment in a Simple Agreement of Future Equity (“SAFE”) and $11.3 million related to the cash payment to acquire certain right-of-use assets, partially offset by $12.0 million in proceeds from the sale of an equity investment in a private company.

Financing Activities

For the year ended December 31, 2024, net cash used in financing activities was $11.8 million, driven by a $4.4 million net reduction of other debt and a $4.3 million payments on our Term Loan Facility, as well as $1.4 million in TRA payments issued during the year ended December 31, 2024.

Discussion of Historical Cash Flows for Year Ended December 31, 2023 and 2022

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

A discussion and analysis covering historical cash flows for the year ended December 31, 2023 and 2022, is included in our annual report on Form 10-K filed with the SEC on February 28, 2024.

Contractual Obligations and Commitments

The following table summarizes our commitments to settle contractual obligations as of December 31, 2024 (in thousands):

Payments due by period

Less than 1 year

More than 5 years

Debt obligations, including interest

$ 692,917 $ 30,959 $ 661,958 $ — $ —

Lease commitments (1)

28,457 5,156 6,003 6,030 11,268

Purchase obligations (2)

78,168 75,664 2,504 — —

Other obligations (3)

2,000 — 2,000 — —

$ 801,542 $ 111,779 $ 672,465 $ 6,030 $ 11,268

(1) Represents commitments under our non-cancelable office and facility leases.

The lease for our new facility in Albuquerque, New Mexico, is currently expected to commence during the fourth quarter of 2025.

For further information see Note 19 – Leases .

Future minimum lease payments for this facility for the initial term of the lease and the one term consecutive extension of the lease for an additional ten years are approximately $105.0 million, which have been excluded from the table above.

(2) Purchase obligations primarily relate to commitments with certain suppliers under firm purchase orders or supply agreements to purchase raw materials or parts.

(3) Other obligations represent a commitment of the Company to invest an additional $2.0 million in future SAFEs with a technology company upon the achievement of defined milestones.

Critical Accounting Estimates

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

To the extent that

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

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

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

Revenue Recognition

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

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

These assumptions include the cost and availability of materials.

The cost estimation process for recognizing revenues over time under the cost-to-cost method is based on the professional knowledge and experience of the Company’s project managers, engineers and finance professionals.

The Company reviews and updates its contract-related estimates on an ongoing basis and recognizes adjustments for any project specific facts and circumstances that could impact the measurement of the extent of progress, such as the total costs to complete the contracts, under the cumulative catch-up method.

Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified.

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

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

Business Combinations

The Company completed one business combination for an aggregate purchase price of $610.8 million during the year ended December 31, 2022.

We completed one business combination for an aggregate purchase price of $610.8 million during the year ended December 31, 2022.

In accordance with Topic 805 Business Combinations, total consideration was first allocated to the fair value of assets acquired and liabilities assumed, with the excess being recorded as Goodwill.

The fair value of the identifiable intangible assets has been estimated using the Excess Earnings Method (customer relationships and backlog) and Relief from Royalty Method (trade name).

Significant inputs using the Excess Earnings Method and Level 3 inputs in the fair value hierarchy include estimated revenue, expenses based on actuals and forecast.

The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date.

Significant inputs

using the Excess Earnings Method and Level 3 inputs in the fair value hierarchy include estimated revenue, expenses based on actuals and forecast.

We use our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date.

Intangible assets have been recognized apart from goodwill whenever an acquired intangible asset arises from contractual or other legal rights, or whenever it is capable of being separated or divided from the acquired entity.

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

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

There were no business combinations during the year ended December 31, 2024 and 2023.

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

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

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

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

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

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

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

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

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

Product Warranty

The Company offers an assurance type warranty for its products against manufacturer defects and does not contain a service element.

For these assurance type warranties, a provision for estimated future costs related to warranty expense is recorded when they are probable and reasonably estimable, which is typically when products are delivered.

This provision is based on historical information on the nature, frequency and average cost of claims for each product line.

When little or no experience exists for an immature product line, the estimate is based on comparable product lines.

These estimates are re-evaluated on an ongoing basis using best-available information and revisions to estimates are made as necessary.

Tax Receivable Agreement

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

entered into the TRA with a former indirect stockholder.

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

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

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

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

We may use either a qualitative or quantitative approach when testing a reporting unit’s goodwill for impairment on an annual basis during the fourth quarter of each year, and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

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

During the quarters ended September 30, 2024 and December 31, 2024, the Company experienced a sustained decline in its stock price, which hit a 52-week low during the third quarter of 2024 and again during the fourth quarter of 2024, resulting in a decrease in market capitalization.

In addition, the Company updated its long-term projections for the Company’s reporting units as of September 30, 2024 and December 31, 2024 and evaluated the execution risk associated with the Company’s projections and market conditions.

As a result, the Company identified indicators of impairment related to the Company’s reporting units during the third and fourth quarters of 2024.

Management, with the assistance of a third-party valuation specialist, performed quantitative goodwill impairment tests of the Legacy Array Operations and STI Operations reporting units as of September 30, 2024 and December 31, 2024.

As a result of these tests, the Company recorded impairments of STI Operation’s goodwill totaling $236.0 million during the year ended December 31, 2024.

The estimated fair value of the Array Legacy Operations reporting unit was significantly higher than the carrying balance of the reporting unit as of each of the testing dates.

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 significant assumptions used in determining the fair value of the Company’s reporting units 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 Guideline Public Company method (“GPC”), the selection of EBITDA multiples 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 over a sustained period of time could be an indication that there has been a further decrease in the fair value of the Company’s reporting units.

The most significant assumption used in determining the estimated fair value of STI Operations is the discount rate assumption.

A 50-basis point increase in the discount rate would potentially result in an incremental goodwill impairment of $10 million as of December 31, 2024.

Refer also to Note 7 - Goodwill, Long-Lived Assets, and Other Intangible Assets for further information.

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 estimated fair value of the asset group is determined.

An impairment loss is recognized based on the difference between the carrying value of the asset group and its estimated fair value.

The loss is allocated to the long-lived assets of the group on a pro-rata basis using the relative carrying amounts of those assets.

The Company identified indicators of impairment associated with the STI Operations asset groups, and as a result, performed an undiscounted cash flow tests on the same dates that the reporting unit goodwill was tested for impairment.

The sum of the undiscounted cash flows was less than the carrying balance for one of the STI operations assets groups as of the December 31, 2024 testing date.

As a result, with the assistance of a third-party valuation specialist, management estimated the fair value of the asset group as of December 31, 2024, and recorded an impairment loss of $91.9 million, which was allocated to the long-lived assets of the group on a pro rata basis on the difference between the estimated fair value of the asset group and its carrying value.

In determining the fair value of the asset group, the Company used a DCF analysis using the income approach with the resulting value compared to Guideline publicly traded companies (“GPC”) marketplace EBITDA multiples to corroborate the fair value of the reporting unit.

The significant assumptions used in determining the fair value of the asset group are similar to the significant assumptions used in determining the fair value the Company’s reporting units.

Refer also Note 7 - Goodwill, Long-Lived Assets, and Other Intangible Assets for further information.

Equity-Based Compensation

The Company granted restricted stock units (“RSUs”) to employees and Performance Stock Units (“PSUs”) to certain executives.

We granted restricted stock units (“RSUs”) to employees and Performance Stock Units (“PSUs”) to certain executives.

The PSUs contain performance and market conditions.

The PSU grants were valued using the Monte Carlo simulation method and the assigned fair value on grant date will be recognized on a straight-line basis over the vesting term of the awards.

The probability of the awards meeting the performance related vested conditions is not included in the grant date fair value, but rather will be estimated quarterly and the Company will true-up the expense recognition accordingly upon any probability to vest revision.

The Company accounts for forfeitures as they occur.

The probability of the awards meeting the performance related vested conditions is not included in the grant date fair value, but rather will be estimated quarterly and we will true-up the expense recognition accordingly upon any probability to vest revision.

We account for forfeitures as they occur.

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis