Array Technologies, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and other financial information included in Part I, “Item 1. Financial Statements” of this Quarterly Report on Form 10-Q (this “Quarterly Report”), as well as our audited financial statements and notes thereto as of and for the year ended December 31, 2024, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Annual Report”). Each of the terms the “Company,” “Array,” “we,” or “us” as used herein refers collectively to Array Technologies, Inc. and its wholly owned subsidiaries, unless otherwise stated. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. 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 captioned “Forward-Looking Statements” and “Risk Factors” in this Quarterly Report and our 2024 Annual Report. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This report contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing and investment plans, competitive position, industry and regulatory environment, including potential regulatory reform related to energy credits, uncertainty relating the implementation of tariffs and changes in trade policy, ability to provide 100% domestic content trackers, expectations regarding the macroeconomic environment and geopolitical developments, including the effects of tariffs, potential growth opportunities and the effects of competition. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would,” “designed to” or similar expressions and the negatives of those terms. Our actual results and the timing of events could materially differ from those anticipated in such forward-looking statements as a result of certain risks, uncertainties and other factors, including without limitation: changes in the cost and availability of raw materials as a result of tariffs and other geopolitical uncertainty, changes in growth or rate of growth in demand for solar energy projects; competitive pressures within our industry; factors affecting viability and demand for solar energy, including but not limited to, the retail price of electricity, availability of in-demand components like high voltage breakers, various policies related to the permitting and interconnection costs of solar plants, and the availability of incentives for solar energy and solar energy production systems, which makes it difficult to predict our future prospects; competition from conventional and renewable energy sources; a loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment; a drop in the price of electricity derived from the utility grid or from alternative energy sources; fluctuations in our results of operations across fiscal periods, which could make our future performance difficult to predict and could cause our results of operations for a particular period to fall below expectations; any increase in interest rates, or a reduction in the availability of tax equity or project debt capital in the global financial markets, which could make it difficult for customers to finance the cost of a solar energy system; existing electric utility industry policies and regulations, and any subsequent changes or new related policies and regulations, may present technical, regulatory and economic barriers to the purchase and use of solar energy systems, which may significantly reduce demand for our products or harm our ability to compete; the interruption of the flow of materials from international vendors, which could disrupt our supply chain, including as a result of the imposition of new and/or additional duties, tariffs and other charges or restrictions on imports and exports; changes in the global trade environment, including the imposition of import tariffs or other import restrictions; geopolitical, macroeconomic and other market conditions unrelated to our operating performance including but not limited interest rates; our ability to convert our orders in backlog into revenue; the reduction, elimination or expiration, or our failure to optimize the benefits of government 26 incentives for, or regulations mandating the use of, renewable energy and solar energy, particularly in relation to our competitors; failure to, or incurrence of significant costs in order to, obtain, maintain, protect, defend or enforce, our intellectual property and other proprietary right; delays in construction projects and any failure to manage our inventory; significant changes in the cost of raw materials; disruptions to transportation and logistics, including increases in shipping costs; defects or performance problems in our products, which could result in loss of customers, reputational damage and decreased revenue; delays, disruptions or quality control problems in our product development operations; our ability to retain our key personnel or failure to attract additional qualified personnel; additional business, financial, regulatory and competitive risks due to our continued planned expansion into new markets; cybersecurity or other data incidents, including unauthorized disclosure of personal or sensitive data or theft of confidential information; a failure to maintain an effective system of integrated internal controls over financial reporting; our substantial indebtedness, risks related to actual or threatened public health epidemics, pandemics, outbreaks or crises; changes to laws and regulations, including changes to tax laws and regulations, that are applied adversely to us or our customers, including our ability to optimize those changes brought about by the passage of the Inflation Reduction Act (“IRA”) or any repeal thereof; and the other risks and uncertainties described in more detail in the section captioned “Risk Factors” in this Quarterly Report and our 2024 Annual Report. Given these uncertainties, you should not place undue reliance on forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. You should read this report with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Overview 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 Levelized Cost of Energy than projects that use “fixed tilt” mounting systems, which do not move. The vast majority of ground mounted solar systems in the U.S. use trackers. Our flagship tracker uses a patented design that allows one motor to drive multiple rows of solar panels through articulated driveline joints. To avoid infringing on our U.S. patent, our competitors must use designs that we believe are inherently less efficient and reliable. For example, our largest competitor’s design requires one motor for each row of solar panels. As a result, we believe our products have greater reliability, lower installation costs, reduced maintenance requirements and competitive manufacturing costs. Our core U.S. patent is on a linked-row, single-driving apparatus that rotates a plurality of tracker rows connected by an articulating drive shaft. This patent does not expire until February 5, 2030. With our acquisition of Soluciones Técnicas Integrales Norland, S.L.U. and its subsidiaries (collectively, “STI”) in January 2022, we added a dual-row tracker design to our product portfolio. 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 27 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. Our corporate headquarters are located in Albuquerque, New Mexico. We sell our products to engineering, procurement and construction firms (“EPCs”) that build solar energy projects and to large solar developers, independent power producers and utilities, often under master supply agreements or multi-year procurement contracts. During the three months ended March 31, 2025, we derived 65% and 35% of our revenues from customers in the U.S. and the rest of the world, respectively. As of March 31, 2025, we had shipped approximately 87 gigawatts of trackers to customers worldwide. Research and Development We incur research and development (“R&D”) costs during our 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 $4.4 million and $4.3 million during the three months ended March 31, 2025 and 2024, respectively, of which $2.4 million and $1.9 million were related to R&D activities performed by the Company during the same periods, respectively. 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 and make the timing of revenue difficult to forecast. Our end-users’ ability to install solar energy systems has been affected by a number of factors including: • Weather . 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 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 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 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 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 28 attractive for our customers. Many of the developers in Brazil of these projects continue to signal 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. As a result, we are focused on reducing costs and better aligning our organization, including the size thereof, in Brazil with the current market conditions. It is uncertain what impact new or existing tariffs, trade restrictions or retaliatory actions may have on us, the solar industry and our customers. An escalation in trade tensions or the implementation of broader tariffs, trade restrictions or retaliatory measures on our products or components originating from countries outside the U.S. could adversely impact our ability to source necessary components, manufacture products at competitive cost, or sell our products at prices customers are willing to pay. Any such developments could materially and adversely affect our business operations, results of operations and cash flows. • Local permitting . If our customers cannot receive permitting for their projects, they are unable to begin and ultimately complete them in a timely manner. A dramatic increase in solar and battery storage sites has increased the average permitting time in many geographies in which our customers operate. Impact of IRA While solar power is cost-competitive with conventional forms of generation in many U.S. states even without the ITC, we believe step-downs in the ITC have influenced the timing and quantity of some customers’ orders. With the passage of the Inflation Reduction Act (“IRA”) in August 2022, the ITC was raised to 30% with no step downs before 2032. Accordingly, as of March 31, 2025 we do not anticipate the ITC rate to impact our seasonality during that timeframe. If these financial benefits vary significantly from our assumptions or if the program gets changed or repealed during the current legislative cycle, our business, financial condition, and results of operations could be adversely affected. 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 condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion on how we account for these incentives and amounts recognized for the periods presented. If these financial benefits vary significantly from our assumptions, our business, financial condition, and results of operations could be adversely affected. 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 29 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. If these financial benefits vary significantly from our assumptions, our business, financial condition, and results of operations could be adversely affected. Structured Cost Management We actively manage the risk from certain types of customer contracts, including, for example, multi-year contracts that require fixed pricing or pricing tied to certain commodity indices. Depending on the totality of the circumstances and our ability to mitigate risk, we may or may not pursue such contractual arrangements. Where we decline, this may have the effect of driving certain customers or projects to our competitors. We believe this is the right way to manage a high-quality portfolio and drive consistent margins over time. Impact of 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 Lanes 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. Inflation Inflationary pressures 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 crystalline solar photovoltaic (“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 antidumping and countervailing duty (“AD/CVD”) orders on CSPV cells and modules from China that have been in place since 30 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. U.S. Trade Policy and Executive Orders On February 1, 2025, President Trump issued 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. On March 3, 2025, the announced 25% tariff on Canadian and Mexican goods took effect and the tariff on Chinese goods was doubled to 20%. On March 12, 2025 tariffs on steel and aluminum increased from 25% to 50% on all steel and aluminum coming from Canada. On April 2, 2025, President Trump introduced tariffs on most countries of a baseline rate of 10%, and individualized rates on some countries of up to 50%. On April 9, 2025, President Trump increased tariffs for Chinese goods to 125% and subsequently to 145%, while the tariffs announced on April 2, 2025, for all other countries, were reduced to a baseline rate of 10% for the next 90 days. We are currently evaluating the potential impact of the imposition of the announced tariffs, and any additional or retaliatory tariffs, to our business and financial condition. While we do not believe that the tariffs announced by the U.S. in 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 For non-U.S. subsidiaries that operate in a local currency environment, assets and liabilities are translated into U.S. dollars at period-end exchange rates. Income, expense, and cash flow items are translated at average exchange rates prevailing during the period. For non-U.S. subsidiaries that operate in a U.S. dollar functional currency, local currency inventories and property, plant and equipment are translated into U.S. dollars at rates prevailing when acquired, and all other assets and liabilities are translated at period-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the period. Gains and losses which result from remeasurement are included in earnings. Performance Measures In managing our business and assessing financial performance, we supplement the information provided by the financial statements with other operating metrics. These operating metrics are utilized by our management 31 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 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 project’s 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. These metrics enable us to evaluate trends in pricing, manufacturing cost, and customer profitability. Key Components of Our Results of Operations The following discussion describes certain line items in our condensed consolidated statements of operations. Revenue 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. For each individual solar project, we enter into a contract with our customers covering the price, specifications, delivery dates, and warranty for the products being purchased, among other things. Our contractual delivery period for the tracker system and parts can vary from days to several months. Contracts can range in value from hundreds of thousands to tens of millions of dollars. 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, 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 where 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 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 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 32 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. 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. 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 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 during the three months ended March 31, 2025 and 2024, were in the U.S.; however, we also 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. Contingent consideration consists of the changes in fair value of the TRA entered into with a former indirect stockholder, concurrent with the acquisition of Array Technologies Patent Holdings Co., LLC by ATI Investment Parent, LLC. The TRA liability was recorded at fair value as of July 8, 2016 and subsequent changes in the fair value are recognized in earnings. For discussion and analysis of the TRA see Note 11 – Commitments and Contingencies . 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 consists of the expense recognized over the expected period of use of our customer relationships, contractual backlog, and 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. We are subject to U.S. federal, state and non-U.S. income taxes. As we expand into additional foreign markets, we may be subject to additional foreign tax. 33 Reportable Segments Subsequent to the acquisition of STI, we began reporting our results of operations in two segments; the Array Legacy Operations segment and the acquired STI Operations segment. The segment amounts included in this Item 2. Management’s Discussion and Analysis are presented on a basis consistent with our internal management reporting. Additional information on our reportable segments is contained in Note 15 – Segment Reporting in the accompanying notes to the condensed consolidated financial statements. Results of Operations The following table sets forth our consolidated statement of operations (in thousands, except percentages): Three Months Ended March 31, Increase/(Decrease) 2025 2024 $ % Revenue $ 302,363 $ 153,403 $ 148,960 97 % Cost of revenue Cost of product and service revenue 222,296 94,674 127,622 135 % Amortization of developed technology 3,639 3,639 — — % Total cost of revenue 225,935 98,313 127,622 130 % Gross profit 76,428 55,090 21,338 39 % Operating expenses General and administrative 43,945 37,784 6,161 16 % Change in fair value of contingent consideration (150) (735) 585 80 % Depreciation and amortization 5,349 9,627 (4,278) (44) % Total operating expenses 49,144 46,676 2,468 5 % Income from operations 27,284 8,414 18,870 224 % Other expense, net 23 814 (791) (97) % Interest income 3,319 3,680 (361) (10) % Foreign currency gain (loss), net 689 (499) 1,188 238 % Interest expense (8,035) (8,940) 905 10 % Total other expense, net (4,004) (4,945) 941 19 % Income before income tax expense 23,280 3,469 19,811 571 % Income tax expense 6,534 1,304 5,230 401 % Net income $ 16,746 $ 2,165 $ 14,581 673 % 34 The following table provides details on our operating results by reportable segment for the respective periods (in thousands, except percentages): Three Months Ended March 31, Increase/(Decrease) 2025 2024 $ % Revenue Array Legacy Operations $ 213,214 $ 114,381 $ 98,833 86 % STI Operations 89,149 39,022 50,127 128 % Total $ 302,363 $ 153,403 $ 148,960 97 % Gross Profit Array Legacy Operations $ 65,681 $ 49,086 $ 16,595 34 % STI Operations 10,747 6,004 4,743 79 % Total $ 76,428 $ 55,090 $ 21,338 39 % Comparison of the three months ended March 31, 2025 and 2024 Revenue Consolidated revenue increased $149.0 million, or 97%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily driven by higher revenue from Array Legacy Operations of 86% and STI Operations of 128%. Array Legacy Operations revenue increased by $98.8 million, or 86%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily driven by an increase of approximately 116% in volume, partially offset by a decrease of approximately 14% in average selling prices. Revenue from STI Operations increased by $50.1 million, or 128% for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The increase was primarily driven by an increase of approximately 212% in volume, partially offset by a decrease of approximately 17% in average selling prices and an unfavorable foreign currency impact of approximately 10%. Cost of Revenue and Gross Profit Consolidated cost of revenue increased by $127.6 million, or 130%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, in line with higher revenues, partially offset by lower input cost per watt resulting from the realization of 45X benefits by Array Legacy Operations and from supply chain efficiencies. Consolidated gross profit increased by $21.3 million, or 39%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Gross Margin decreased to 25.3% for the three months ended March 31, 2025, as compared to 35.9% during the same period in the prior year. Array Legacy Operations gross profit increased by $16.6 million, or 34%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Gross margin decreased to 31% from 43% for the three months ended March 31, 2025 and 2024, respectively. The decrease in gross margin was driven by a 14% decrease in average selling prices and a 2% reduction in margin from lower 45x benefits. In addition, gross margin during the three months ended March 31, 2024, included a one-time benefit of $4.0 million 35 related to a settlement with a supplier, which was recorded as a reduction to cost of product and service revenue. STI Operations gross profit increased by $4.7 million, or 79%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Gross margin for STI Operations decreased to 12% from 15% for the three months ended March 31, 2025 and 2024, respectively, driven primarily by a 17% reduction in average selling prices, partially offset by a 14% reduction in cost per watt. Operating Expenses Consolidated general and administrative expenses for the three months ended March 31, 2025 increased by $6.2 million, or 16%, compared to the three months ended March 31, 2024. The increase was primarily due to an increase of $3.2 million in personnel expenses, a $1.7 million allowance for credit risk related to one customer and an increase in facility, infrastructure and other costs of $1.3 million. Change in the fair value of contingent consideration for the three months ended March 31, 2025 resulted in a gain of $0.6 million, compared to the three months ended March 31, 2024, due to the fair value remeasurement of the TRA liability. Consolidated depreciation and amortization expense for the three months ended March 31, 2025 decreased by $4.3 million, or 44%, compared to the three months ended March 31, 2024. The decrease was primarily due to certain assets acquired becoming fully amortized or fully impaired at December 31, 2024. Other (Expense) Income, Net Other expense for the three months ended March 31, 2025 and 2024 totaled $23 thousand and $0.8 million, respectively, and consisted primarily of other non-income taxes and miscellaneous income/expense. Interest Income Consolidated interest income for the three months ended March 31, 2025 decreased by $0.4 million, or 10%, compared to the three months ended March 31, 2024, primarily as a result of lower yields on our cash management program. Interest Expense Consolidated interest expense for the three months ended March 31, 2025 decreased by $0.9 million, or 10%, compared to the three months ended March 31, 2024, primarily due to lower interest rates on our variable rate obligations. Income Tax Expense (Benefit) Consolidated income tax expense for the three months ended March 31, 2025 increased by $5.2 million, or 401%, compared to the three months ended March 31, 2024. The Company recorded income tax expense of $6.5 million and $1.3 million for the three months ended March 31, 2025 and 2024, respectively. Our effective tax rate was 28.1% and 37.6% for the three months ended March 31, 2025 and 2024, respectively. Tax expense for the three months ended March 31, 2025, was favorably impacted by lower profits in non-US jurisdictions and additional tax credits recorded during the period. Additionally, tax expense of $1.0 million related to equity-based compensation, was recorded discretely. Tax expense for the three months ended March 31, 2024 was unfavorably impacted by higher income reported in non-U.S. jurisdictions and tax expense of $0.4 million related to equity-based compensation recorded discretely. 36 Liquidity and Capital Resources Cash Flows (in thousands) Three Months Ended March 31, 2025 2024 Net cash (used in) provided by operating activities $ (13,059) $ 47,502 Net cash used in investing activities (2,352) (2,386) Net cash used in financing activities (1,725) (4,575) Effect of exchange rate changes on cash and cash equivalents 2,488 (2,001) Net change in cash and cash equivalents $ (14,648) $ 38,540 Historically, we have financed our operations with the proceeds from operating cash flows, capital contributions and short and long-term borrowings. 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. 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 March 31, 2025, our cash balance was $348.3 million, of which $31.5 million was held outside the U.S., and our net working capital was $567.8 million. We had outstanding borrowings of $232.8 million under our $575 million Term Loan Facility and $161.3 million available to us under our $200 million Revolving Credit Facility. On May 1, 2025, Array Tech, Inc. and ATI Investment Sub, Inc., both wholly owned subsidiaries of the Company, entered into the Fourth Amendment to the Credit Agreement. The Fourth Amendment, among other things, (i) refinanced the Revolving Credit Facility with new revolving commitments and loans thereunder and (ii) revised the Consolidated First Lien Secured Leverage Ratio as applicable under Section 7.09 (Financial Covenant) of the Credit Agreement from 7.10:1.00 to 5.50:1.00. As amended by the Fourth Amendment, the Revolving Credit Facility has total commitments of $166 million and a maturity date of October 14, 2028; provided that if on July 15, 2027, the date that is P91D days prior to the stated maturity of the Term Loan Facility, all or any portion of the Term Loan Facility is outstanding, the Revolving Credit Facility will mature on such date. 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. Operating Activities For the three months ended March 31, 2025, cash used in operating activities was $13.1 million attributable to net income of $16.7 million and $19.0 million of non-cash adjustments, mainly consisting of depreciation and amortization expense and equity-based compensation, partially offset by a net cash outflow of $48.8 million from changes in our operating assets and liabilities. For the three months ended March 31, 2024, cash provided by operating activities was $47.5 million, attributable to net income of $2.2 million, $18.9 million of non-cash adjustments, mainly consisting of depreciation expense and equity-based compensation and a cash inflow of $26.5 million from changes in our operations assets and liabilities. 37 Investing Activities Cash used in investing activities for both the three months ended March 31, 2025 and 2024 was $2.4 million and related primarily to the purchase of property, plant and equipment. Financing Activities Cash used in financing activities for the three months ended March 31, 2025 was $1.7 million, driven primarily by a $1.1 million payment on our Term Loan Facility and $1.2 million in TRA payments issued during the three months ended March 31, 2025, partially offset a net increase in other debt of $0.6 million. Cash used in financing activities for the three months ended March 31, 2024 was $4.6 million, driven primarily by a $1.1 million payment on our Term Loan Facility, a net reduction of other debt of $1.5 million, as well as $1.4 million in TRA payments issued during the three months ended March 31, 2024. Contractual Obligations and Commitments Information regarding our debt obligations, lease commitments and other commitments is provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Annual Report on form 10-K. There were no material changes in our contractual obligations and commitments as of March 31, 2025. Series A Redeemable Perpetual Preferred Stock On August 10, 2021, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”), pursuant to which we issued 400,000 shares of its Series A Redeemable Perpetual Preferred Stock (the “Series A Shares”) and 9,000,000 shares of our common stock for an aggregate purchase price of approximately $395.4 million. For more information related to the Series A Shares, see Note 8 – Redeemable Perpetual Preferred Stock , to the accompanying condensed consolidated financial statements. Debt Obligations For a discussion of our debt obligations see Note 7 – Debt to our condensed consolidated financial statements included in this Quarterly Report. Surety Bonds 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. As of March 31, 2025, we posted surety bonds in the total amount of approximately $269.9 million. These off-balance sheet arrangements do not adversely impact our liquidity or capital resources. Critical Accounting Policies and Significant Management Estimates In preparing our condensed consolidated financial statements in conformity with U.S. GAAP, we make estimates and assumptions that affect the amounts of reported assets, liabilities, revenues, and expenses, as well as the disclosure of contingent liabilities. Some of our accounting policies require the application of significant judgment in the selection of the appropriate assumptions for making these estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. We base our judgments and estimates on our historical experience, our forecasts, and other available information as appropriate. We believe the judgments and estimates involved in accrued solar module collection and recycling, product warranties, and government grants have the greatest potential impact on our condensed consolidated financial 38 statements. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected. For a description of the accounting policies that require the most significant judgment and estimates in the preparation of our condensed consolidated financial statements, refer to our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes to our accounting policies during the three months ended March 31, 2025. Adoption of New and Recently Issued Accounting Pronouncements Refer to Note 2 – Summary of Significant Accounting Policies to our condensed consolidated financial statements for a discussion of adoption of new and recently issued accounting pronouncements.