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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________

Commission File Number: 001-39613

https://cdn.kscope.io/30222cdfb267d773c87b4d6f26a6c872-arry-20210630_g1.jpg

ARRAY TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)

Delaware83-2747826
(State or Other Jurisdiction)(I.R.S. Employer Identification No.)
3901 Midway Place NEAlbuquerqueNew Mexico87109
(Address of principal executive offices)(Zip Code)

(Registrant’s telephone number, including area code)(505)881-7567

(Former name, former address and former fiscal year, if changed since last report) N/A

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.001 par valueARRYNasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                     ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                                         ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
As of August 5, 2021, there were 126,994,467 shares of common stock, par value $0.001 per share, issued and outstanding.



Array Technologies, Inc.
Index to Form 10-Q

PART I - FINANCIAL INFORMATION
Item 1.Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Operations
Condensed Consolidated Statements of Changes in Member’s Equity/Stockholders’ Deficit
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
PART II - OTHER INFORMATION
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
3


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(in thousands, except per share and share amounts)
June 30, 2021December 31, 2020
ASSETS
Current assets
Cash and cash equivalents$17,682 $108,441 
Accounts receivable, net153,610 118,694 
Inventories, net137,666 118,459 
Income tax receivables9,657 17,158 
Prepaid expenses and other11,597 12,423 
Total current assets330,212 375,175 
Property, plant and equipment, net9,763 9,774 
Goodwill69,727 69,727 
Other intangible assets, net186,507 198,260 
Other assets26,109 3,088 
Total assets$622,318 $656,024 
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable$81,377 $82,755 
Accounts payable - related party610 2,232 
Accrued expenses and other19,129 29,164 
Accrued warranty reserve2,968 3,049 
Income tax payable 8,814 
Deferred revenue51,458 149,821 
Current portion of contingent consideration1,908 8,955 
Current portion of term loan4,300 4,313 
Other current liabilities6,379  
Total current liabilities168,129 289,103 
Long-term liabilities
Deferred tax liability14,472 13,114 
Contingent consideration, net of current portion10,108 10,736 
Other long-term liabilities4,273  
Long-term debt, net of current portion, debt discount and issuance costs493,945 423,970 
Total long-term liabilities522,798 447,820 
Total liabilities690,927 736,923 
Commitments and contingencies (Note 12)
1


June 30, 2021December 31, 2020
Preferred stock of 0.001 par value - 5,000,000 shares authorized; none issued as of June 30, 2021 and December 31, 2020
  
Common stock of $0.001 par value - 1,000,000,000 shares authorized; 126,994,467 shares issued as of June 30, 2021 and December 31, 2020
127 127 
Additional paid-in capital149,893 140,473 
Accumulated deficit(218,629)(221,499)
Total stockholders’ deficit(68,609)(80,899)
Total liabilities and stockholders’ deficit$622,318 $656,024 

The accompanying notes are an integral part of these condensed consolidated financial statements.
2


Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (unaudited)
(in thousands, except per share amounts)

Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Revenue$202,796 $114,916 $448,728 $552,634 
Cost of revenue176,009 92,714 378,083 412,016 
Gross profit26,787 22,202 70,645 140,618 
Operating expenses
General and administrative15,113 11,192 39,786 22,899 
Contingent consideration(13)3,430 135 2,417 
Depreciation and amortization5,981 6,369 11,965 12,743 
Total operating expenses21,081 20,991 51,886 38,059 
Income from operations5,706 1,211 18,759 102,559 
 
Other expense
Other expense, net(122)(2,242)(200)(2,134)
Interest expense(6,651)(2,411)(15,660)(7,640)
Total other expense(6,773)(4,653)(15,860)(9,774)
Income (loss) before income tax expense(1,067)(3,442)2,899 92,785 
Income tax expense (benefit)(1,050)(5,834)29 16,708 
Net income (loss)$(17)$2,392 $2,870 $76,077 
Earnings (loss) per share
Basic$ $0.02 $0.02 $0.63 
Diluted$ $0.02 $0.02 $0.63 
Weighted average number of shares
Basic126,994 119,994 126,994 119,994 
Diluted126,994 119,994 127,203 119,994 



The accompanying notes are an integral part of these condensed consolidated financial statements.
3


Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Member’s Equity/Stockholders’ Deficit
(unaudited)
(in thousands)


For the Three Months Ended June 30, 2021

Preferred StockCommon StockAdditional
SharesAmountSharesAmountpaid-in capitalRetained earningsTotal Stockholders’ Deficit
Balance, March 31, 2021— $— 127 148,370 (218,612)$(70,115)
Equity-based compensation— — — — 1,523 — 1,523 
Net Income— — — — — (17)(17)
Balance, June 30, 2021— $— — $127 $149,893 $(218,629)$(68,609)

For the Three Months Ended June 30, 2020
Units (*)Total Members’ Equity
Balance, March 31, 20201 $380,594 
Equity-based compensation653 
Net Income— 2,392 
Balance, June 30, 20201 $383,639 
(*) See note 2 - Summary of Significant Accounting Policies - corporate conversion and stock split












4



Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Member’s Equity/Stockholders’ Deficit (continued)
(unaudited)
(in thousands)


For the Six Months Ended June 30, 2021
Preferred StockCommon StockAdditional
SharesAmountSharesAmountpaid-in capitalRetained deficitTotal Stockholders’ Deficit
Balance, December 31, 2020— $— 126,994 $127 $140,473 $(221,499)$(80,899)
Equity-based compensation— — — — 9,420 — 9,420 
Net Income— — — — — 2,870 2,870 
Balance, June 30, 2021— $— 126,994 $127 $149,893 $(218,629)$(68,609)


For the Six Months Ended June 30, 2020

Units (*)Total Members’ Equity
Balance, December 31, 20191 $305,151 
Equity-based compensation2,411 
Net Income— 76,077 
Balance, June 30, 20201 $383,639 
(*) See note 2 - Summary of Significant Accounting Policies - corporate conversion and stock split.     


The accompanying notes are an integral part of these condensed consolidated financial statements.

5


Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Six Months Ended
June 30,
20212020
Cash flows used in operating activities
Net income$2,870 $76,077 
Adjustments to reconcile net income to net cash used in operating activities:
Provision for (recovery of) bad debts(551)223 
Deferred tax benefit1,358 (1,376)
Depreciation and amortization12,964 13,724 
Amortization of debt discount and issuance costs5,118 2,160 
Interest paid-in-kind 3,073 
Equity-based compensation9,467 2,411 
Contingent consideration135 2,417 
Warranty provision425 597 
Provision for inventory obsolescence1,236 221 
Changes in operating assets and liabilities
Accounts receivable(34,365)(2,590)
Inventories(20,443)42,523 
Income tax receivables7,501 (18,689)
Prepaid expenses and other826 7,183 
Accounts payable(1,378)(99,396)
Accounts payable - related party(1,622) 
Accrued expenses and other(10,541)(4,365)
Income tax payable(8,814)35,824 
Lease liabilities68  
Deferred revenue(98,363)(307,917)
Net cash used in operating activities(134,109)(247,900)
Cash flows used in investing activities
Purchase of property, plant and equipment(1,200)(265)
Investment in equity security(11,975) 
Net cash used in investing activities(13,175)(265)
Cash flows from financing activities
Proceeds from revolving credit facility102,000 4,330 
Principal payments on term loan facility(31,075)(57,702)
Payments on related party loans (21,736)
Contingent consideration(7,810) 
Debt issuance costs(6,590) 
Net cash provided by (used in) financing activities56,525 (75,108)
Net decrease in cash, cash equivalents and restricted cash(90,759)(323,273)
Cash, cash equivalents and restricted cash, beginning of period108,441 361,257 
Cash, cash equivalents, and restricted cash, end of period$17,682 $37,984 

6



The accompanying notes are an integral part of these condensed consolidated financial statements.
7

Array Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

1.    Organization and Business

Array Technologies, Inc. (the “Company”) formerly ATI Intermediate Holdings, LLC, is a Delaware corporation formed in December 2018 as a wholly owned subsidiary of ATI Investment Parent, LLC (“Former Parent”). On October 14, 2020, the Company converted from a Delaware limited liability company to a Delaware corporation and changed the Company’s name to Array Technologies, Inc. The Company is headquartered in Albuquerque, New Mexico, and manufactures and supplies solar tracking systems and related products for customers across the United States and internationally. The Company, through its wholly-owned subsidiary, ATI Investment Holdings, Inc. (“ATI Investment”) owns two other subsidiaries through which it conducts substantially all operations; Array Tech, Inc. and Array Technologies Patent Holdings Co., LLC (collectively “AT”).

The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of results for the interim periods reported. The results for the three and six months ended June 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021 or any other interim periods, or any future year or period. The balance sheet as of December 31, 2020 included herein was derived from the audited financial statements as of that date. Certain disclosures have been condensed or omitted from the interim financial statements. These financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s 10-K filed with SEC on March 10, 2021.

Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.


2.    Summary of Significant Accounting Policies

Recently Adopted Accounting Pronouncements

On January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02 (Topic 842) “Leases” which supersedes the lease recognition requirements in ASC Topic 840, “Leases”. Under ASU No. 2016-02, lessees are required to recognize assets and liabilities on the consolidated balance sheets for most leases and provide enhanced disclosures. For companies that are not emerging growth companies (“EGCs”), the ASU was effective for fiscal years beginning after December 15, 2018. For EGCs, the ASU is effective for fiscal years beginning after December 15, 2021. The Company early adopted the new standard using the modified retrospective method by recording a right-of-use asset of $13.2 million, short-term portion of lease liabilities of $6.3 million and long-term portion of lease liabilities of $7.2 million as of the effective date. Prior periods will not be restated and will continue to be reported under Topic 840 guidance in effect during those periods. The Company applied the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. The adoption did not have a material impact on its consolidated statements of
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operations or its consolidated statements of cash flows. See Note 13, Leases, for further information and disclosures related to the adoption of this standard.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU No. 2019-12”), which is intended to simplify various aspects of the accounting for income taxes. ASU No. 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. This standard is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company has adopted the pronouncement and it did not have a material impact on its consolidated financial statements and related disclosures.

Corporate Conversion and Stock Split
On October 14, 2020, prior to the issuance of any of our shares of common stock in our initial public offering (the “IPO”), we converted from a Delaware limited liability company to a Delaware corporation. In connection with the corporate conversion, we converted all 1,000 of our outstanding member units into 100,000,000 shares of common stock and then completed a stock split of 1.19994-for-1. The corporate conversion and stock split representing 119,994,467 shares of common stock have been adjusted retroactively for the purposes of calculating basic and diluted earnings per share.

Principles of Consolidation
The condensed consolidated financial statements include the accounts of Array Technologies, Inc. and its Subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation.

Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates include impairment of goodwill, impairment of long-lived assets, fair value of contingent consideration, allowance for doubtful accounts, reserve for excess or obsolete inventories, valuation of deferred tax assets and warranty reserve. Due to the COVID-19 pandemic, there has been and will continue to be uncertainty and disruption in the global economy and financial markets. Management has made estimates and assumptions taking into consideration certain possible impacts due to COVID-19. These estimates may change, as new events occur, and additional information is obtained. Actual results may differ from previously estimated amounts, and such differences may be material to the condensed consolidated financial statements; however, management believes that these estimates and assumptions provide a reasonable basis for the fair presentation of the consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur.

Impact of COVID-19 Pandemic
In December 2019, a novel strain of coronavirus, SARS-CoV-2, which causes coronavirus disease 2019, or COVID-19, surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. Due to economic conditions our industry has seen rapid commodity price increases and strained logistics, causing us to experience temporary decreased margins and thus decreased cash from operations. We have taken, and continue to take, mitigating steps to overcome the economic challenges and, therefore, believe the impact to be temporary, but cannot be certain the timing of when we will achieve better margins. We have sufficient
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liquidity and financing options available, and we expect to have sufficient liquidity to operate for the next 12 months.

The Company has implemented adjustments to its operations designed to keep employees safe and comply with federal, state and local guidelines, including those regarding social distancing. The extent to which COVID19 may further impact the Company’s business, results of operations, financial condition and cash flows will depend on future developments, which are highly uncertain and cannot be predicted with confidence. In response to COVID-19, the United States government has passed legislation and taken other actions to provide financial relief to companies and other organizations affected by the pandemic.

Equity-Based Compensation

On October 14, 2020, the Company’s 2020 Equity Incentive Plan (the “2020 Plan”) became effective. Under the 2020 Plan, the Company may grant (i) restricted stock units (RSU’s) to its employees and non-employee directors in connection with their service on the board of directors, and (ii) performance stock units (“PSUs”) to certain of its executive officers and members of management. The PSUs contain performance and market conditions. The RSUs are valued at the closing stock price on the date of grant and recognized on a straight-line basis over vesting term. 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.

In the case of Class B units (the “Class B Units”) and Class C units (the “Class C Units” and, together with the Class B Units, the “Units”) of the Former Parent granted to certain employees and directors of the Company, the determination of the fair value of equity awards issued to employees of the Company was based upon the underlying share price and a number of assumptions, including volatility, performance period, risk-free interest rate and expected dividends. The Class B Units fully vested upon the completion of the Company’s follow-on offering of its common stock in March 2021 (the “2021 Follow-on Offering”) as it was considered a sale of the Former Parent and the Company recognized the remaining unamortized compensation expense of $6.3 million.

New Accounting Standards
To be adopted

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In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses, which was subsequently amended by ASU No. 2018-19 and ASU No. 2019-10, requires the measurement of expected credit losses for financial instruments carried at amortized cost held at the reporting date based on historical experience, current conditions and reasonable forecasts. The updated guidance also amends the current other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The standard is effective for EGCs the fiscal year beginning after December 15, 2022, or December 15, 2021 if we were to lose EGC status in 2021. The Company will continue to assess the possible impact of this standard, but currently does not expect the adoption of this standard will have a significant impact on its consolidated financial statements and its limited history of bad debt expense relating to trade accounts receivable.




3.    Inventories

Inventories consist of the following (in thousands):
June 30,December 31,
20212020
Raw materials$46,993 $39,051 
Finished goods98,096 85,833 
Reserve for excess or obsolete inventory(7,423)(6,425)
Total$137,666 $118,459 


4.    Property, Plant and Equipment

Property, plant and equipment consisted of the following (in thousands):
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Estimated Useful Lives (Years)June 30,December 31,
20212020
LandN/A$1,340 $1,340 
Buildings and land improvements
15-39
2,486 2,486 
Manufacturing equipment713,513 13,261 
Furniture, fixtures and equipment
5-7
477 443 
Vehicles5161 140 
Hardware and software
3-5
1,603 887 
Machinery in progress178  
Total19,758 18,557 
Less: accumulated depreciation(9,995)(8,783)
Property, plant and equipment, net$9,763 $9,774 


Depreciation expense was $0.6 million and $0.6 million for the three months ended June 30, 2021 and 2020, respectively, of which $0.5 million and $0.5 million, respectively, has been allocated to cost of revenue and $0.1 million and $0.1 million, respectively, is included in depreciation and amortization in the accompanying condensed consolidated statements of operations for the three months ended June 30, 2021 and 2020.

Depreciation expense was $1.2 million and $1.2 million for the six months ended June 30, 2021 and 2020, respectively, of which $1.0 million and $1.0 million, respectively, has been allocated to cost of revenue and $0.2 million and $0.2 million, respectively, is included in depreciation and amortization in the accompanying consolidated statements of operations for the six months ended June 30, 2021 and 2020.

5.    Goodwill and Other Intangible Assets

Goodwill

Goodwill relates to the Former Parent’s acquisition of AT (the “Acquisition”) in 2016. As of July 8, 2016 (the “Acquisition Date”), goodwill was $121.6 million. As of June 30, 2021 and December 31, 2020 goodwill totaled $69.7 million, net of accumulated impairment of $51.9 million and is not deductible for tax purposes.

Other Intangible Assets

Other intangible assets consisted of the following (in thousands):
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Estimated Useful Lives (Years)June 30,December 31,
20212020
Amortizable:
Costs:
Developed technology14$203,800 $203,800 
Customer relationships1089,500 89,500 
Internal-use software modification2.54,356 4,356 
Total amortizable intangibles297,656 297,656 
Accumulated amortization:
Developed technology72,510 65,233 
Customer relationships44,583 40,107 
Internal-use software modification costs4,356 4,356 
Total accumulated amortization121,449 109,696 
Total amortizable intangibles, net176,207 187,960 
Non-amortizable costs:
Trade name10,300 10,300 
Total other intangible assets, net$186,507 $198,260 


Amortization expense related to intangible assets amounted to $5.9 million for the three months ended June 30, 2021 and 2020, and $11.8 million for the six months ended June 30, 2021 and 2020, respectively.


6.    Investment in Equity Security

The Company made a $10.0 million and $2.0 million investment in preferred stock of a private company in February 2021 and April 2021, respectively. The investment is accounted for in accordance with ASC 321 at its cost less any impairment. The investment balance as of June 30, 2021 is $12.0 million and is recorded in other assets on the condensed consolidated balance sheet. There is no impairment recorded for the three and six months ended June 30, 2021.

7.    Income Taxes

The Company follows guidance under ASC Topic 740-270, Interim Reporting, which requires that an estimated annual effective tax rate is applied to year-to-date ordinary income. At the end of each interim period, the Company estimates the effective tax rate expected to be applicable for the full fiscal year. The tax effect of discrete items is recorded in the quarter in which the discrete events occur.

The Company recorded income tax expense (benefit) of $(1.1) million and $(5.8) million for the three months ended June 30, 2021 and 2020, respectively, and income tax expense of $29 thousand and $16.7 million for the six months ended June 30, 2021 and 2020. The tax benefit in the three months ended June 30, 2021 is unfavorably impacted by non-deductible amounts for equity-based compensation and Follow-on Offering costs. The tax benefit in the three months ended June 30, 2020 was favorably impacted by a tax benefit related to an
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NOL carryback as a result of the CARES Act. The tax expense in the six months ended June 30, 2021 was unfavorably impacted by non-deductible amounts for equity-based compensation and Follow-on Offering costs. The tax expense in the six months ended June 30, 2020 was favorably impacted by a tax benefit related to an NOL carryback as a result of the CARES Act.

For the three and six months ended June 30, 2021 and 2020, no reserves for uncertain tax positions have been recorded. The Company will continue to monitor this position each interim period.

8.    Long-Term Debt

June 30,December 31,
20212020
Term loan facility$428,925 $460,000 
Revolving credit facility102,000  
530,925 460,000 
Less discount and issuance costs
(32,680)(31,717)
Long term debt, net of debt discount and issuance costs498,245 428,283 
Less current portion of long-term debt(4,300)(4,313)
Long-term debt, net of current portion, debt discount and issuance costs$493,945 $423,970 

Senior Secured Credit Facility
On October 14, 2020, the Company entered into a senior secured credit facility consisting of (i) a $575 million senior secured seven-year term loan facility (the “Term Loan Facility”) and (ii) a $150 million senior secured 5-year revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Secured Credit Facility”). As of June 30, 2021, the Term Loan Facility had a balance of $428.9 million. On February 23, 2021 the Company entered into the First Amendment (“First Amendment”) to its Senior Secured Credit Facility. The First Amendment, in the case of the Eurocurrency borrowings, lowers the London interbank offered rate floor to 50 basis points from 100 basis points and lowers the applicable margin to 325 basis points from 400 basis points per annum. This resulted in the current rate on the Term Loan Facility of 3.75%. On February 26, 2021, we entered into the incremental facility amendment No. 2 (the “Second Amendment”) to the Senior Secured Credit Facility. The Second Amendment increases the $150.0 million Revolving Credit Facility from $150.0 million to $200.0 million. The balance of the Term Loan Facility is presented in the accompanying condensed consolidated balance sheets net of debt discount and issuance costs of $32.7 million at June 30, 2021. The debt discount and issuance costs are being amortized using the effective interest method and the rate as of June 30, 2021 is 5.01%. The Term Loan Facility has an annual excess cash flow calculation beginning with the year ended December 31, 2021 which could require the Company to make advance principal payments.

Revolving Credit Facility
Under the Revolving Credit Facility, the Company had $102.0 million outstanding balance, $11.0 million in standby letters of credit and availability of $87.0 million as of June 30, 2021.


9.    Related Party Loan

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The Company had a senior secured promissory note, as amended, with a unit holder of Former Parent that had a balance, net of debt discount and issuance costs as of June 30, 2020 of $41.8 million for which the Company paid interest expense for the three and six months ended June 30, 2020 of $1.7 million and $3.5 million, which consisted of cash interest, PIK interest and amortization of the debt discount. The note was no longer outstanding as of June 30, 2021 and had no balance or interest expense for the three months ended June 30, 2021.

10.    Revenue

Based on Topic 606 provisions, the Company disaggregates its revenue from contracts with customers by those sales recorded over-time and sales recorded at a point in time. The following table presents the Company’s revenue disaggregated by sales recorded over-time and sales recorded at a point in time (in thousands):

Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Over-time revenue$189,622 $98,637 $421,475 $516,598 
Point in time revenue13,174 16,279 27,253 36,036 
Total revenue$202,796 $114,916 $448,728 $552,634 

Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and deferred revenue (contract liabilities) on the consolidated balance sheets. The majority of the Company’s contract amounts are billed as work progresses in accordance with agreed-upon contractual terms, which generally coincide with the shipment of one or more phases of the project. Billing sometimes occurs subsequent to revenue recognition, resulting in contract assets. The changes in contract assets (i.e. unbilled receivables) and the corresponding amounts recorded in revenue relate to fluctuations in the timing and volume of billings for the Company’s revenue recognized over-time. Contract assets consisting of unbilled receivables are recorded within accounts receivable on the consolidated balance sheets on a contract-by-contract basis at the end of the reporting period and consisted of the following (in thousands):
June 30, 2021December 31, 2020
Unbilled receivables$37,567 $18,073 

The Company also receives advances or deposits from its customers, before revenue is recognized, resulting in contract liabilities. The changes in contract liabilities (i.e. deferred revenue) relate to advanced orders and payments received by the Company. Contract liabilities consisting of deferred revenue recorded on a contract-by-contract basis at the end of each reporting period were as follows (in thousands):
June 30, 2021December 31, 2020
Deferred revenue$51,458 $149,821 

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During the six months ended June 30, 2021, the Company converted $149.8 million deferred revenue to revenue which represented 100.0% of the prior years deferred revenue balance.

Remaining Performance Obligations
As of June 30, 2021, the Company had $197.5 million of remaining performance obligations. The Company expects to recognize revenue on 100% of these performance obligations in the next twelve months.


11.    Earnings (loss) per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share amounts):

Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Net (loss) income $(17)$2,392 $2,870 $76,077 
Basic:
Weighted-average shares126,994 119,994 126,994 119,994 
Earnings (loss) per share$ $0.02 $0.02 $0.63 
Diluted:
Weighted-average shares126,994 119,994 126,994 119,994 
Equity compensation dilutive securities  209  
Weighted average dilutive shares126,994 119,994 127,203 119,994 
Earnings (loss) per share$ $0.02 $0.02 $0.63 

Potentially dilutive common shares issuable pursuant to equity-based awards were not included for the three months ended June 30, 2021 as their potential effect was anti-dilutive as the Company generated a net loss.


12.    Commitments and Contingencies

Litigation
The Company, in the normal course of business, is subject to claims and litigation. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company would accrue a liability for the estimated loss.

On May 14, 2021, a putative class action was filed in the Southern District of New York against the Company and certain officers and directors alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, promulgated thereunder, and Sections 11, 12(a)(2) and 15 of the Securities Exchange Act of 1933 (“Plymouth Action”). The Plymouth Action alleges misstatements and/or omissions in the Company’s registration statements and prospectuses related to the Company’s October 2020 initial public
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offering, the Company’s December 2020 offering, and the Company’s March 2021 offering during the putative class period of October 14, 2020 through May 11, 2021. Lead plaintiff motions were filed on July 13, 2021, and the Court is expected to appoint a lead plaintiff by August 12, 2021. The Court has not yet set a schedule for the filing of an amended complaint or defendants’ anticipated motion to dismiss.

On June 30, 2021, a second putative class action was filed in the Southern District of New York against the Company and certain officers and directors alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, promulgated thereunder, and Sections 11 and 15 of the Securities Exchange Act of 1933 alleging misstatements and/or omissions in certain of the Company’s registration statements and prospectuses related to the Company’s October 2020 initial public offering, the Company’s December 2020 offering, and the Company’s March 2021 offering during the putative class period of October 14, 2020 through May 11, 2021. On July 6, 2021, the Court entered an order, based on the record before the Court, that this action was in all material respects substantially similar to the Plymouth Action and both actions arise out of the same or similar operative facts, and that the parties are substantially the same parties. The Court consolidated this action with the Plymouth Action for all pretrial purposes, ordered all filings in connection with this Action to be made in the Plymouth Action, and removed this action from the docket.

On July 16, 2021, a verified derivative complaint was filed against certain officers and directors of the Company. The complaint alleges: (1) violations of Section 14(a) of the Securities Exchange Act of 1934 for misleading proxy statements, (2) breach of fiduciary duty, (3) unjust enrichment, (4) abuse of control, (5) gross mismanagement, (6) corporate waste, (7) aiding and abetting breach of fiduciary duty, and (8) contribution under sections 10(b) and 21D of the Securities Exchange Act of 1934. On July 21, 2021, the Court entered an order, based on the record before the Court, that this action was in all material respects substantially similar to the Plymouth Action and both actions arise out of the same or similar operative facts, and that the parties are substantially the same parties. The Court consolidated this action with the Plymouth Action for all pretrial purposes, ordered all filings in connection with this Action to be made in the Plymouth Action, and removed this action from the docket.

On July 30, 2021, a second and related verified derivative complaint was filed against certain officers and directors of the Company. The complaint alleges: (1) violations of Section 14(a) of the Securities Exchange Act of 1934 for causing the issuance of a false/misleading proxy statement, (2) breach of fiduciary duty, and (3) aiding and abetting breaches of fiduciary duty. The Court has not yet entered an order consolidating this case with the Plymouth case.

At this time the Company believes that the likelihood of any material loss related to these matters is remote given the preliminary stage of the claims and strength of the Company’s defenses. The Company has not recorded any material loss contingency in the Condensed Consolidated Balance Sheets as of June 30, 2021.

Contingent Consideration
Taxes Receivable Agreement
Concurrent with the Acquisition, Array Tech, Inc. (f/k/a Array Technologies, Inc.) entered into a Taxes Receivable Agreement (“TRA”) with the former majority shareholder of Array. The TRA is valued based on the future expected payments under the agreement. The TRA provides for the payment by Array Tech, Inc. to the former owners for certain federal, state, local and non-U.S. tax benefits deemed realized in post-closing taxable periods by Array, from the use of certain deductions generated by the increase in the tax value of the developed technology. The TRA is accounted for as contingent consideration and subsequent changes in fair value of the contingent liability are recognized in contingent consideration in the accompanying consolidated
17


statements of operations. As of June 30, 2021 and December 31, 2020, the fair value of the TRA was $12.0 million and $19.7 million, respectively.

Estimating the amount of payments that may be made under the TRA is by nature imprecise. The significant fair value inputs used to estimate the future expected TRA payments to the former owners include the timing of tax payments, a discount rate, book income projections, timing of expected adjustments to calculate taxable income and the projected rate of use for attributes defined in the TRA.

Payments made under the TRA consider tax positions taken by the Company and are due within 125 days following the filing of the Company’s U.S. federal and state income tax returns under procedures described in the agreement. The current portion of the TRA liability is based on tax returns. The TRA will continue until all tax benefit payments have been made or the Company elects early termination under the terms described in the TRA.

Earn-Out Liability
The Company had a liability to the selling stockholders of Array for contingent consideration consisting of earn-out payments in the form of cash upon the occurrence of certain events, including the sale, transfer, assignment, pledge, encumbrance, distribution or disposition of shares held by the acquirer to a third party; initial public offering of the equity securities of Former Parent, acquirer or the Company; the sale of equity securities or assets of Former Parent, acquirer or the Company to a third-party; or a merger, consolidation, recapitalization or reorganization of Former Parent, acquirer or the Company. The maximum aggregate earn-out consideration was $25.0 million. The earn-out liability was paid off in the fourth quarter of the fiscal year ended December 31, 2020.

The fair value of the earn-out liability was initially determined as of the Acquisition Date using unobservable inputs. These inputs include the estimated amount and timing of future cash flows, the probability of a qualifying event occurring, and a risk-free rate used to adjust the probability-weighted cash flows to their present value. Subsequent to the Acquisition Date, at each reporting period, the earn-out liability was re-measured to fair value with changes in fair value recorded in contingent consideration in the accompanying condensed consolidated statements of operations.

The following table summarizes the liability related to the estimated contingent consideration (in thousands):

TRAEarn-Out LiabilityContingent Consideration
Balance, March 31, 2021$19,839 $ $19,839 
Payments(7,810)(7,810)
Fair value adjustment(13) (13)
Balance, June 30, 2021$12,016 $ $12,016 
Balance, March 31, 2020$17,113 $124 $17,237 
Fair value adjustment1,732 1,698 3,430 
Balance, June 30, 2020$18,845 $1,822 $20,667 

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TRAEarn-Out LiabilityContingent Consideration
Balance, December 31, 2020$19,691 $ $19,691 
Payments(7,810) (7,810)
Fair value adjustments135  135 
Balance, June 30, 2021$12,016 $ $12,016 
Balance, December 31, 2019$17,808 $442 $18,250 
Fair value adjustment1,037 1,380 2,417 
Balance, June 30, 2020$18,845 $1,822 $20,667 

The TRA and earn-out liabilities require significant judgment and are classified as Level 3 in the fair value hierarchy.


13.    Equity-Based Compensation

Equity Incentive Plan
On October 14, 2020, the Company’s 2020 Plan became effective. The 2020 Plan authorized 6,683,919 new shares, subject to adjustments pursuant to the 2020 Plan.

In the six months ended June 30, 2021, the Company granted an aggregate of 513,463 RSU’s to employees and board of director members and 177,472 Performance Stock Units (PSUs) to certain executives. The PSUs cliff vest after three years and upon meeting certain revenue and adjusted EPS targets. The PSUs also contain a modifier based on the total stock return (TSR) compared to a certain Index which modifies the number of PSUs that vest.

Activity under the 2020 Plan was as follows:
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Number of SharesWeighted Average Grant Date Fair Value
RSU
Unvested, December 31, 2020500,006 $22.00 
Granted513,463 25.35 
Vested  
Forfeited(43,045)28.36 
Unvested, June 30, 2021970,424 $23.49 
PSUNumber of SharesWeighted Average Grant Date Fair Value
Unvested, December 31, 2020 $ 
Granted177,472 28.25 
Vested  
Forfeited(14,379)30.74 
Unvested, June 30, 2021163,093 $28.03 

Class B Units
The Company accounted for equity grants to employees of Class B Units of Former Parent (the “Units”) as equity-based compensation under ASC 718, Compensation-Stock Compensation. The Units contained vesting provisions as defined in the agreement. Equity-based compensation cost was measured at the grant date fair value and recognized on a straight-line basis over the requisite service period, including those units with graded vesting with a corresponding credit to additional paid-in capital as a capital contribution from Former Parent; however, the amount of equity-based compensation at any date is equal to the portion of the grant date value of the award that is vested.

The Units issued to employees were measured at fair value on the grant date using an option pricing model. The Company utilizes the estimated weighted average of the Company’s expected fund life dependent on various exit scenarios to estimate the expected term of the awards. Expected volatility is based on the average of historical and implied volatility of a set of comparable companies, adjusted for size and leverage. The risk-free rates are based on the yields of U.S. Treasury instruments with comparable terms. Actual results may vary depending on the assumptions applied within the model.

On March 23, 2021, in connection with the closing of the 2021 Follow-on Offering, all of the outstanding Class B Units of Former Parent were immediately vested per the terms of the equity awards, resulting in the Company accelerating the recognition of the remaining unamortized compensation expense of $6.3 million in the three months ended March 31, 2021.

For the three and six months ended June 30, 2021, the Company recognized $4.1 million and $12.0 million in equity-based compensation, respectively. For the three and six months ended June 30, 2020, the Company recognized $0.7 million and $2.4 million in equity-based compensation, respectively. As of June 30, 2021, the Company had $19.1 million of unrecognized compensation costs which is expected to be recognized over a period of 2.5 years. There were 57,424 forfeitures during both of the three and six months ended June 30, 2021 and no forfeitures during the three and six month ended June 30, 2020.

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14.    Leases

Effective January 1, 2021, the Company adopted ASC 842 Leases using the modified retrospective approach. The Company elected the use of the package of practical expedients permitted under the transition guidance which allows the Company not to reassess whether a contract contains a lease, carry forward the historical lease classification and not reassess initial direct lease costs. The Company also elected to apply the short-term measurement and recognition exemption in which the right-of-use (“ROU”) assets and lease liabilities are not recognized for short-term leases. Adoption of this standard resulted in recording of net operating lease ROU assets and corresponding operating lease liabilities of $13.2 million and $13.5 million, respectively. The standard did not materially affect the condensed consolidated statements of income and had no impact on the condensed consolidated statements of cash flows.

The following table summarizes the balances as it relates to leases at the end of the period (in thousands):

(*)June 30, 2021
ROU AssetOther assets$10,537 
Lease liability, current portionOther current liabilities$6,379 
Lease liability, long-term portionOther long-term liabilities4,227 
Total lease liability$10,606 
(*) Location on the condensed consolidated balance sheet

The Company determines if an arrangement is a lease at its inception. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease ROU assets also include any initial direct costs and prepayments less lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. As the Company’s leases generally do not provide an implicit rate, the Company uses its collateralized incremental borrowing rate based on the information available at the lease commencement date, including lease term, in determining the present value of lease payments. Lease expense for these leases is recognized on a straight-line basis over the lease term.

Operating lease arrangements are comprised primarily of real estate and equipment agreements for which the right-of-use assets are included in other assets and the corresponding lease liabilities, depending on their maturity, are included in accrued liabilities or other long-term liabilities in the condensed consolidated balance sheets.

The details of the Company’s operating leases are as follows (in thousands):

Three Months Ended
June 30, 2021
Operating lease expense$1,651 
Variable lease expense 91 
Short-term lease expense 
Total lease expense$1,742 
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The following table presents the maturities of lease liabilities as of June 30, 2021 (in thousands):
Fiscal year ending June 30, Operating Leases
2021$3,333 
20226,071 
2023896 
2024794 
202519 
Thereafter 
Total lease payments11,113 
Less: Imputed lease interest(507)
Total lease liabilities$10,606 

The following table represents future minimum lease obligations under non-cancelable operating leases as of December 31, 2020 (in thousands):

Fiscal year ending December 31, Operating Leases
2021$6,663 
20226,073 
2023893 
2024791 
202515 
Thereafter 
Total$14,435 

The Company’s weighted-average remaining lease-term and weighted-average discount rate are as follows (in thousands):

Three Months Ended
June 30, 2021
Weighted average remaining lease-term2.0 years
Weighted average discount rate5 %



Supplemental cash flow and other information related to operating leases are as follows:
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Three Months Ended
June 30, 2021
Operating cash flows from operating leases$1,465 
Non cash investing activities:
Lease liabilities arising from obtaining right-of-use assets as of January 1, 2021$13,464 

15.    Related Party Transactions

Accounts Payable-Related Party
The Company had $0.6 million and $2.2 million as of June 30, 2021 and December 31, 2020, respectively, of accounts payable - related party with the former shareholders of Array. The payables relate to a federal tax refund related to the pre-Acquisition periods, restricted cash at Acquisition Date which were due to the sellers of Array upon release of the restriction offset by a receivable related to a sales/use tax audit from the pre-Acquisition period for which the seller provided the Company with indemnification.

Related Party Loan - see Note 9

Contingent Consideration - see Note 12

16.    Subsequent Events

Securities Purchase Agreement
On August 10, 2021, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with BCP Helios Aggregator L.P., a Delaware limited partnership (the “Purchaser”), an investment vehicle of funds affiliated with Blackstone Inc. Pursuant to the Securities Purchase Agreement, on August 11, 2021, the Company issued and sold to the Purchaser 350,000 shares of a newly designated Series A Perpetual Preferred Stock of the Company, par value $0.001 per share (the “Series A Perpetual Preferred Stock”), having the powers, designations, preferences, and other rights set forth in the Certificate of Designations (as defined below), and 7,098,765 shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), for an aggregate purchase price of $346.0 million (the “Initial Closing”). Further, pursuant to the Securities Purchase Agreement, and subject to the terms and conditions set forth therein, including the expiry or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the Company has agreed to issue and sell to the Purchaser 776,235 shares of Common Stock for an aggregate purchase price of $776. The Company intends to use the net proceeds from the Initial Closing to repay all of the outstanding amounts under the Company’s existing revolving credit facility and to prepay at least $100 million under the Company’s term loan and for general corporate purposes. Pursuant to the Securities Purchase Agreement, the Purchaser is entitled to designate one representative (the “Series A Director”) to be appointed to the Company’s board of directors (the “Board”), and to appoint three non-voting observers to the Board, in each case until such time as the Purchaser and its Permitted Transferees (as defined in the Securities Purchase Agreement) no longer beneficially own shares of the Series A Perpetual Preferred Stock with at least $100 million aggregate Liquidation Preference (as defined below).

Dividends

On or prior to the fifth anniversary of the Initial Closing, the Company may pay dividends on the Series A Perpetual Preferred Stock either in cash at the then-applicable Cash Regular Dividend Rate, through accrual to the Liquidation Preference at the Accrued Regular Dividend Rate (the “Permitted Accrued Dividends”), or a combination thereof. Folloing the fifth anniversary of the Initial Closing, dividends shall be payable only in
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cash. To the extent the Comany does not declare such dividends and pay in cash following the fifth anniversary of the Initial Closing, such dividends shall accrue to the Liquidation Preference (“Default Accrued Dividends”, and together with Permitted Accrued Dividends, “Accrued Dividends”) at the then-applicable Cash Regular Dividend Rate plus 200 basis points. In the event there are Default Accrued Dividends outstanding for six consecutive quarters, the Company, at the option of the holder of the Series A Perpetual Preferred Stock (each a “holder”), will pay 100% of the amount of Default Accrued Dividends by delivering to the Holder a number of shares of Common Stock equal to the quotient of (i) the amount of Default Accrued Dividends) divided by (ii) 95% of the 30-day VWAP of the Common Stock (“Non-Cash Dividend”).
As used herein, “Cash Regular Dividend Rate” with respect to the Series A Perpetual Preferred Stock means (i)
initially, 5.75% per annum on the Liquidation Preference and (ii) increased by (a) 50 basis points on each of the fifth, sixth and seventh anniversaries of the Initial Closing and (b) 100 basis points on each of the eighth, ninth and tenth anniversaries of the Initial Closing. The “Accrued Regular Dividend Rate” with respect to the Series A Perpetual Preferred Stock means 6.25% per annum on the Liquidation Preference.

Additional Closings
Pursuant to the Securities Purchase Agreement, until June 30, 2023, the Company, subject to the terms and conditions set forth therein, shall have the option to require the Purchaser to purchase, in the aggregate, in one or more additional closings (the “Additional Closings”), up to 150,000 shares (the “Delayed Draw Commitment”) of the Series A Perpetual Preferred Stock and up to 3,375,000 shares of Common Stock (or up to 6,100,000 shares of Common Stock in the event of certain price-related adjustments) (subject to certain equitable adjustments pursuant to any stock dividend, stock split, stock combination, reclassification or similar transaction) for an aggregate purchase price up to $148 million.

Fees
Until June 30, 2023, the Company will pay the Purchaser a cash commitment premium on the unpurchased portion of Delayed Draw Commitment as follows:
a.0% through the six-month anniversary of the Initial Closing;
b.1.5% from the six-month anniversary of the Initial Closing through the 12-month anniversary of the initial closing; and
c.3.0% from the 12-month anniversary of the Initial Closing through June 30, 2023.

The Company may terminate some or all of the Delayed Draw Commitment, from time to time, at its sole discretion.

Customary Covenants
The Securities Purchase Agreement, Certificate of Designations and Registration Rights Agreement (as defined below) contain other customary covenants and agreements, including certain standstill provisions and customary preemptive rights. The Delayed Draw Commitment is subject to certain customary anti-dilution adjustments provided under the Securities Purchase Agreement and Certificate of Designations, including for stock splits, reclassifications, combination’s and dividends or distributions made by the Company on the Common Stock.

Transfer Restrictions
After the Initial Closing, subject to certain customary exceptions including transfers to Permitted Transferees (as defined in the Securities Purchase Agreement), the Purchaser will be restricted from transferring the Series A Perpetual Preferred Stock and Common Stock until the one-year anniversary of the Initial Closing.

Ranking and Liquidation Preference
The Series A Perpetual Preferred Stock ranks senior to the Common Stock with respect to dividend rights and rights upon the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company (a “Liquidation”). Upon a Liquidation, each share of Series A Perpetual Preferred Stock would be entitled to
24


receive an amount per share (the “Liquidation, Redemption or Repurchase Amount”) equal to the greater of (i) the Liquidation Preference of such share, plus all accrued and unpaid dividends (including any Accrued Dividends) thereon and (ii) an amount in cash equal to the sum of (a) 130.0% of the Initial Liquidation Preference of such share, minus (b) the cumulative amount of cash dividends paid in respect of such share prior to such payment. As used herein, “Liquidation Preference” means, with respect to any share of the Series A Perpetual Preferred Stock, the initial liquidation preference of $1,000 per share (the “Initial Liquidation Preference”) plus any Accrued Dividends of such share as of the time of determination.

Redemption Rights
The Company may redeem all or any portion of the Series A Perpetual Preferred Stock (in increments of not less than $200 million based on the Liquidation Preference of such shares of Series A Perpetual Preferred Stock to be redeemed at such time (or such lesser amount to the extent the Company chooses to redeem all of the outstanding shares of Series A Perpetual Preferred Stock)) for an amount in cash equal to the Liquidation, Redemption or Repurchase Amount. Upon a “Fundamental Change” (involving a change of control, bankruptcy, insolvency or liquidation of the Company as further described in the Certificate of Designations), each Holder shall have the right to require the Company to redeem all or any part of the Holder’s Series A Perpetual Preferred Stock for an amount in cash equal to the Liquidation, Redemption or Repurchase Amount.

Voting and Consent Rights
Each Holder of Series A Perpetual Preferred Stock will have one vote per share on any matter on which Holders of Series A Perpetual Preferred Stock are entitled to vote separately as a class (as described below), whether at a meeting or by written consent. The Holders of shares of Series A Perpetual Preferred Stock do not otherwise have any voting rights. The consent of the Holders of a majority of the outstanding shares of Series A Perpetual Preferred Stock will be required for so long as the Threshold Amount remains outstanding for (i) amendments to the Company’s organizational documents that have an adverse effect on the holders of Series A Perpetual Preferred Stock, (ii) issuances by the Company of securities that are senior to, or equal in priority with, the Series A Perpetual Preferred Stock, (iii) entrance into, or amendments to, transactions with affiliates of the Company, (iv) incurrence by the Company of indebtedness, unless the Consolidated Total Leverage Ratio (as defined in the Certificate of Designations) would not exceed 8.5-to-1 after giving effect to such incurrence (other than drawdowns by the Company under the Company’s current revolving credit facility) or (v) any payment of dividends or making of distributions on equity securities of the Company ranking junior to the Series A Perpetual Preferred Stock or redemptions, purchases or direct or indirect acquisitions of such equity securities ranking junior to or parity with the Series A Perpetual Preferred Stock by the Company, unless the Consolidated Total Leverage Ratio (as defined in the Certificate of Designations) would not exceed 8.5-to-1 after giving effect to such dividends, distributions, redemptions, purchases or acquisitions.

Registration Rights Agreement
In connection with the Securities Purchase Agreement, on August 10, 2021, the Company and the Purchaser entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which, among other things, the Company granted the Purchaser certain registration rights with respect to Common Stock purchased pursuant to the Securities Purchase Agreement and Non-Cash Dividend pursuant to the Certificate of Designations, including customary shelf registration rights and “piggyback” registration rights.



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed financial statements and the related notes and other financial information included in this Quarterly Report on Form 10-Q and our audited financial statements and notes thereto as of and for the years ended December 31, 2020, 2019 and 2018 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, including Critical Accounting Policies and Significant Judgements and Estimates, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission, or the SEC, on March 10, 2021. 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 on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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, technology developments, financing and investment plans, dividend policy, competitive position, industry and regulatory environment, 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” or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. 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.

Important factors that could cause actual results to differ materially from our expectations include:

the impacts on our business due to component shortages, disruptions in transportation or other supply chain related constraints including as a result of the COVID-19 pandemic;
if demand for solar energy projects does not continue to grow or grows at a slower rate than we             anticipate, our business will suffer;
the viability and demand for solar energy are impacted by many factors outside of our control, which makes it difficult to predict our future prospects;
a loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment, could harm our business and negatively impact revenue, results of operations and cash flow;
a drop in the price of electricity derived from the utility grid or from alternative energy sources may harm our business, financial condition, results of operations and prospects;
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an increase in interest rates, or a reduction in the availability of tax equity or project debt capital in the global financial markets could make it difficult for customers to finance the cost of a solar energy system and could reduce the demand for our products;
existing electric utility industry policies and regulations, and any subsequent changes, 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 could disrupt our supply chain, including as a result of the imposition of additional duties, tariffs and other charges on imports and exports;
changes in the U.S. trade environment, including the imposition of import tariffs, could adversely affect the amount or timing of our revenues, results of operations or cash flows;
the reduction, elimination or expiration of government incentives for, or regulations mandating the use of, renewable energy and solar energy specifically could reduce demand for solar energy systems and harm our business;
if we fail to, or incur significant costs in order to, obtain, maintain, protect, defend or enforce, our intellectual property and other proprietary rights, our business and results of operations could be materially harmed;
we may need to defend ourselves against third-party claims that we are infringing, misappropriating or otherwise violating others’ intellectual property rights, which could divert management’s attention, cause us to incur significant costs and prevent us from selling or using the technology to which such rights relate;
significant changes in the cost of raw materials could adversely affect our financial performance;
we are dependent on transportation and logistics providers to deliver our products in a cost efficient manner. Disruptions to transportation and logistics, including increases in shipping costs, could adversely impact our financial condition and results of operations;
the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members and officers;
we face risks related to actual or threatened health epidemics, such as the COVID-19 pandemic, and other outbreaks, which could significantly disrupt our manufacturing and operations; and
certain provisions in our certificate of incorporation and our bylaws may delay or prevent a change of control.

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 one of the world’s largest manufacturers of ground-mounting systems used in solar energy projects. Our principal product is an integrated system 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 up to 25% more energy than projects that use “fixed tilt” mounting systems, which do not move.

Our trackers use 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 on a linked-row, rotating gear drive system does not expire until February 5, 2030.
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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. In the six months ended June 30, 2021, we derived 99% and 1% of our revenues from customers in the U.S. and rest of the world, respectively.

We are a U.S. company and our headquarters and principal manufacturing facility are in Albuquerque, New Mexico. As of June 30, 2021, we had 387 full-time employees.

Securities Purchase Agreement

On August 10, 2021, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with BCP Helios Aggregator L.P., a Delaware limited partnership (the “Purchaser”), an investment vehicle of funds affiliated with Blackstone Inc. Pursuant to the Securities Purchase Agreement, on August 11, 2021, the Company issued and sold to the Purchaser 350,000 shares of a newly designated Series A Perpetual Preferred Stock of the Company, par value $0.001 per share (the “Series A Perpetual Preferred Stock”), having the powers, designations, preferences, and other rights set forth in the Certificate of Designations (as defined below), and 7,098,765 shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), for an aggregate purchase price of $346.0 million (the “Initial Closing”). Further, pursuant to the Securities Purchase Agreement, and subject to the terms and conditions set forth therein, including the expiry or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the Company has agreed to issue and sell to the Purchaser 776,235 shares of Common Stock for an aggregate purchase price of $776. The Company intends to use the net proceeds from the Initial Closing to repay all of the outstanding amounts under the Company’s existing revolving credit facility and to prepay at least $100 million under the Company’s term loan and for general corporate purposes. Pursuant to the Securities Purchase Agreement, the Purchaser is entitled to designate one representative (the “Series A Director”) to be appointed to the Company’s board of directors (the “Board”), and to appoint three non-voting observers to the Board, in each case until such time as the Purchaser and its Permitted Transferees (as defined in the Securities Purchase Agreement) no longer beneficially own shares of the Series A Perpetual Preferred Stock with at least $100 million aggregate Liquidation Preference (as defined below).

Dividends

On or prior to the fifth anniversary of the Initial Closing, the Company may pay dividends on the Series A Perpetual Preferred Stock either in cash at the then-applicable Cash Regular Dividend Rate, through accrual to the Liquidation Preference at the Accrued Regular Dividend Rate (the “Permitted Accrued Dividends”), or a combination thereof. Folloing the fifth anniversary of the Initial Closing, dividends shall be payable only in cash. To the extent the Comany does not declare such dividends and pay in cash following the fifth anniversary of the Initial Closing, such dividends shall accrue to the Liquidation Preference (“Default Accrued Dividends”, and together with Permitted Accrued Dividends, “Accrued Dividends”) at the then-applicable Cash Regular Dividend Rate plus 200 basis points. In the event there are Default Accrued Dividends outstanding for six consecutive quarters, the Company, at the option of the holder of the Series A Perpetual Preferred Stock (each a “holder”), will pay 100% of the amount of Default Accrued Dividends by delivering to the Holder a number of shares of Common Stock equal to the quotient of (i) the amount of Default Accrued Dividends) divided by (ii) 95% of the 30-day VWAP of the Common Stock (“Non-Cash Dividend”).
As used herein, “Cash Regular Dividend Rate” with respect to the Series A Perpetual Preferred Stock means (i)
initially, 5.75% per annum on the Liquidation Preference and (ii) increased by (a) 50 basis points on each of the fifth, sixth and seventh anniversaries of the Initial Closing and (b) 100 basis points on each of the eighth, ninth and tenth anniversaries of the Initial Closing. The “Accrued Regular Dividend Rate” with respect to the Series A Perpetual Preferred Stock means 6.25% per annum on the Liquidation Preference.

Additional Closings
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Pursuant to the Securities Purchase Agreement, until June 30, 2023, the Company, subject to the terms and conditions set forth therein, shall have the option to require the Purchaser to purchase, in the aggregate, in one or more additional closings (the “Additional Closings”), up to 150,000 shares (the “Delayed Draw Commitment”) of the Series A Perpetual Preferred Stock and up to 3,375,000 shares of Common Stock (or up to 6,100,000 shares of Common Stock in the event of certain price-related adjustments) (subject to certain equitable adjustments pursuant to any stock dividend, stock split, stock combination, reclassification or similar transaction) for an aggregate purchase price up to $148 million.

Fees
Until June 30, 2023, the Company will pay the Purchaser a cash commitment premium on the unpurchased portion of Delayed Draw Commitment as follows:
0% through the six-month anniversary of the Initial Closing;
1.5% from the six-month anniversary of the Initial Closing through the 12-month anniversary of the initial closing; and
3.0% from the 12-month anniversary of the Initial Closing through June 30, 2023.

The Company may terminate some or all of the Delayed Draw Commitment, from time to time, at its sole discretion.

Registration Rights Agreement
In connection with the Securities Purchase Agreement, on August [9], 2021, the Company and the Purchaser entered into a Registration Rights Agreement pursuant to which, among other things, the Company granted the Purchaser certain registration rights with respect to Common Stock purchased pursuant to the Securities Purchase Agreement, including customary shelf registration rights and “piggyback” registration rights.

Update on the Impact of COVID-19

With the second wave of the pandemic including follow-on variants of COVID-19, we continue to closely monitor the situation in all the locations where we operate. Our priority remains the welfare of our employees. We expect persistent waves of COVID-19 to remain a headwind into the near future. Refer to “Risk Factors - The ongoing COVID-19 pandemic has materially and adversely affected our business and results of operations. The duration and extent to which it will continue to adversely impact our business and results of operations remains uncertain and could be material,” as disclosed in Part II, “Item 1A. Risk Factors.”

We are continuously evaluating our capital structure in response to the current environment and expect that our current financial condition, including our liquidity sources are adequate to fund future commitments. See additional discussion in the Liquidity and Capital Resources section below.

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 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 MW shipped from period to period specifically. MWs is measured for each individual project and is calculated based on the expected output of that project 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.
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Key Components of Our Results of Operations

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

Revenue
We generate revenue from the sale of solar tracking systems and parts. 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 product 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 amount of solar energy projects installed each year as well as our ability to increase our share of demand in each of the geographies where we compete, expand our global footprint to new 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.

Cost of Revenue and Gross Profit
Cost of revenue consists primarily of product costs, including purchased components, as well as costs related to shipping, tariffs, customer support, product warranty, personnel and depreciation of test and manufacturing equipment. Personnel costs in cost of revenue includes both direct labor costs as well as costs attributable to any individuals whose activities relate to the transformation of raw materials or component parts into finished goods or the transportation of materials to the customer. Our product costs are affected by the underlying cost of raw materials, including steel and aluminum; component costs, including electric motors and gearboxes; technological innovation; economies of scale resulting in lower component costs, and improvements in production processes and automation. We do not currently hedge against changes in the price of raw materials. Some of these costs, primarily personnel and depreciation of test and manufacturing equipment, are not directly affected by sales volume.

Gross profit may vary from quarter to quarter and is primarily affected by our ASPs, product costs, product mix, customer mix, geographical mix, shipping method, warranty costs and seasonality.

Operating Expenses
Operating expenses consist of general and administrative costs, contingent consideration, as well as depreciation and amortization expense. Personnel-related costs are the most significant component of our operating expenses and include salaries, benefits, payroll taxes and commissions. Our full-time employee headcount in our general and administrative departments has grown from approximately 150 as of December 31, 2019 to approximately 177 as of December 31, 2020 and 175 at June 30, 2021, and we expect to continue to hire new employees to support our growth. The timing of these additional hires could materially affect our operating expenses in any particular period, both in absolute dollars and as a percentage of revenue. We expect to continue to invest substantial resources to support our growth and continued technological
30


advancement and anticipate that general and administrative and depreciation expenses will increase in absolute dollar amounts for the foreseeable future.

General and administrative expenses
General and administrative expenses consist primarily of salaries, equity-based compensation, employee benefits and payroll taxes related to our executives, sales, finance, human resources, information technology, engineering and legal organizations, as well as travel, facilities costs, marketing, bad debt and fees for professional services. Professional services consist of audit, legal, tax, insurance, information technology and other costs. We expect an increase in the number of sales and marketing personnel in connection with the expansion of our global sales and marketing footprint, enabling us to penetrate new markets. The majority of our sales in 2020 were in the U.S.; however, during the year we expanded our international presence with additional global sales staff. We currently have a sales presence in the U.S., Australia, the U.K. and Brazil. We intend to continue to expand our sales presence and marketing efforts to additional countries. We also expect that as a public company we will incur additional audit, tax, accounting, legal and other costs related to compliance with applicable securities and other regulations, as well as additional insurance, investor relations and other costs associated with being a public company. We also anticipate an increase in our spend related to product innovation as we hire additional engineering resources and increase our external research & development spend.

Contingent Consideration
Contingent consideration consists of the changes in fair value of the earn-out and the Tax Receivable Agreement (“TRA”) entered into with Ron P. Corio, a former indirect stockholder, concurrent with the Acquisition of Array Technologies Patent Holdings Co., LLC (“Patent LLC”) by ATI Investment Parent, LLC (“Former Parent”) Former Parent’s acquisition of Patent LLC.

The earn-out liability was recorded at fair value as of July 8, 2016 (the “Acquisition Date”) and subsequent changes in the fair value are recognized in earnings. Fair value of the earn-out liability is measured based upon the expected return of investment of Former Parent, among other things. Cash payments related to the earn-out liability are required to be evaluated upon the occurrence of certain events, including the consummation of an initial public offering; the sale, transfer, assignment, pledge, encumbrance, distribution or disposition of shares of Former Parent held by Oaktree Power Opportunities Fund IV (Delaware) Holdings, L.P. and Oaktree ATI Investors, L.P. to a third party; the sale of equity securities or assets of Former Parent, ATI Investment Sub, Inc. (“Investment Sub”) or the Company to a third-party; or a merger, consolidation, recapitalization or reorganization of Former Parent, Investment Sub, or the Company. Our initial public offering of common stock (“IPO”), the cash distribution of $589 million that we paid to ATI Investment Parent, LLC upon the closing of our IPO and our Follow-on Offering of common stock in December 2020 (the “2020 Follow-on Offering”) required the Company to make a cash payment of $9.1 million in October 2020 and $15.9 million in December 2020. As a result of these payments our earn-out liability has been paid in full.

The TRA liability was recorded at fair value at the Acquisition Date and subsequent changes in the fair value are recognized in earnings. The TRA will generally provide for the payment by Array Tech, Inc. (f/k/a Array Technologies, Inc.) to Ron P. Corio for certain federal, state, local and non-U.S. tax benefits deemed realized in post-closing taxable periods by Array Tech, Inc. from the use of certain deductions generated by the increase in the tax value of the developed technology. Estimating fair value of the TRA is by nature imprecise. The significant fair value inputs used to estimate the future expected TRA payments to Ron P. Corio 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.

Depreciation
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Depreciation in our operating expense consists of costs associated with property, plant and equipment (“PP&E”) 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 will require some additional PP&E to support this growth resulting in additional depreciation expense.

Amortization
Amortization of intangibles consist of developed technology, customer relationships and internal-use software modifications over their expected period of use.

Non-Operating Expenses
Interest Expense
Interest expense consists of interest and other charges paid in connection with our Senior Secured Credit Facility and our Senior ABL Facility, interest on the Senior Secured Promissory Note, and interest on our Prior Term Loan Facility (as defined below), which was fully repaid on February 2, 2020.

Income Tax Expense
We are subject to federal and state income taxes in the United States. As we expand into foreign markets, we may be subject to foreign tax.

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Results of Operations

The following tables set forth our consolidated statement of operations (dollars in thousands):

Three Months Ended June 30,Increase/DecreaseSix Months Ended June 30,Increase/Decrease
20212020$%20212020$%
Revenue$202,796 $114,916 $87,880 76 %$448,728 $552,634 $(103,906)(19)%
Cost of revenue176,009 92,714 83,295 90 %378,083 412,016 (33,933)(8)%
Gross profit26,787 22,202 4,585 21 %70,645 140,618 (69,973)(50)%
Operating expenses
General and administrative15,113 11,192 3,921 35 %39,786 22,899 16,887 74 %
Contingent consideration(13)3,430 (3,443)(100)%135 2,417 (2,282)(94)%
Depreciation and amortization5,981 6,369 (388)(6)%11,965 12,743 (778)(6)%
Total operating expenses21,081 20,991 90 — %51,886 38,059 13,827 36 %
Income from operations5,706 1,211 4,495 371 %18,759 102,559 (83,800)(82)%
Other expense
Other income (expense), net(122)(2,242)2,120 (95)%(200)(2,134)1,934 (91)%
Interest expense(6,651)(2,411)(4,240)176 %(15,660)(7,640)(8,020)105 %
Total other expense(6,773)(4,653)(2,120)46 %(15,860)(9,774)(6,086)62 %
Income (loss) before income tax expense(1,067)(3,442)2,375 (69)%2,899 92,785 (89,886)(97)%
Income tax (benefit) expense(1,050)(5,834)4,784 (82)%29