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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 March 31, 2022

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/f7cc84238d4531c15e2a7742b38fcb7c-arry-20220331_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 May 10, 2022, there were 150,175,189 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 Comprehensive Income (Loss)
Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (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
(in thousands, except per share and share amounts)

March 31, 2022December 31, 2021
(unaudited)
ASSETS
Current assets
Cash and cash equivalents$49,491 $367,670 
Accounts receivable, net390,921 236,009 
Inventories, net299,010 205,653 
Income tax receivables31,079 9,052 
Prepaid expenses and other46,495 33,649 
Total current assets816,996 852,033 
Property, plant and equipment, net16,878 10,692 
Goodwill379,840 69,727 
Other intangible assets, net470,690 174,753 
Deferred tax assets 9,345 
Other assets31,314 26,429 
Total assets$1,715,718 $1,142,979 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable$187,466 $91,392 
Accounts payable - related party478 610 
Accrued expenses and other54,837 38,494 
Accrued warranty reserve3,201 3,192 
Income tax payable6,452 60 
Deferred revenue121,624 99,575 
Current portion of contingent consideration 1,773 
Current portion of debt48,180 4,300 
Other current liabilities10,886 5,909 
Total current liabilities433,124 245,305 
Long-term liabilities
Deferred tax liability92,931  
Contingent consideration, net of current portion9,363 12,804 
Other long-term liabilities7,102 5,557 
Long-term warranty4,743  
Long-term debt, net of current portion778,248 711,056 
Total long-term liabilities892,387 729,417 
1

Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (continued)
(in thousands, except per share and share amounts)
March 31, 2022December 31, 2021
(unaudited)
Total liabilities1,325,511 974,722 
Commitments and contingencies (Note 16)
Series A Redeemable Perpetual Preferred Stock of $0.001 par value - 500,000 authorized; 400,000 and 350,000 shares issued as of March 31, 2022 and December 31, 2021; liquidation preference of $400.0 million and $350.0 million as of March 31, 2022 and December 31, 2021
281,792 237,462 
Stockholders’ equity (deficit)
Preferred stock of $0.001 par value - 4,500,000 shares authorized; none issued as of March 31, 2022 and December 31, 2021
  
Common stock of $0.001 par value - 1,000,000,000 shares authorized; 150,173,507 and 135,026,940 shares issued as of March 31, 2022 and December 31, 2021
150 135 
Additional paid-in capital411,232 202,562 
Accumulated deficit(293,956)(271,902)
Accumulated other comprehensive income(9,011) 
Total stockholders’ equity (deficit)108,415 (69,205)
Total liabilities, redeemable perpetual preferred stock and stockholders’ equity (deficit)$1,715,718 $1,142,979 

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
March 31,
20222021
Revenue$300,586 $248,240 
Cost of revenue273,999 202,074 
Gross profit26,587 46,166 
Operating expenses
General and administrative39,827 24,673 
Contingent consideration(3,731)148 
Depreciation and amortization22,652 5,984 
Total operating expenses58,748 30,805 
Income (loss) from operations(32,161)15,361 
Other expense
Other income (expense), net743 (78)
Foreign currency gain3,863  
Interest expense(6,942)(9,009)
Total other expense(2,336)(9,087)
Income (loss) before income tax expense (benefit)(34,497)6,274 
Income tax expense (benefit)(12,443)1,698 
Net income (loss)(22,054)4,576 
Preferred dividends and accretion11,606  
Net income (loss) to common shareholders$(33,660)$4,576 
Earnings (loss) per share
Basic$(0.23)$0.04 
Diluted$(0.23)$0.04 
Weighted average number of shares
Basic148,288 126,994 
Diluted148,288 127,298 



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



Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)
(in thousands)

Three Months Ended
March 31,
20222021
Net income (loss)$(22,054)$4,576 
Foreign currency translation adjustments(9,011) 
Comprehensive income (loss)$(31,065)$4,576 

The accompanying notes are an integral part of these condensed consolidated financial statements.
4



Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (Deficit)
(unaudited)
(in thousands)

Three Months Ended March 31, 2022
Temporary EquityPermanent Equity
Series A Redeemable Perpetual Preferred StockPreferred StockCommon Stock
SharesAmountSharesAmountSharesAmountAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal Stockholders’ Equity (Deficit)
Balance, December 31, 2021350 $237,462 — $— 135,027 $135 $202,562 $(271,902)$ $(69,205)
Equity-based compensation— — — — — — 4,413 — — 4,413 
Issuance of Series A Redeemable Perpetual Preferred Stock, net of fees50 32,724 — — — — (200)— — (200)
Issuance of common stock, net— — — — 15,147 15 216,063 — — 216,078 
Preferred cumulative dividends plus accretion— 11,606 — — — — (11,606)— — (11,606)
Net loss— — — — — — — (22,054)— (22,054)
Other comprehensive income— — — — — — — — (9,011)(9,011)
Balance, March 31, 2022400 $281,792 — $— 150,174 $150 $411,232 $(293,956)$(9,011)$108,415 



5



Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (Deficit)
(unaudited)
(in thousands)
Three Months Ended March 31, 2021
Preferred StockCommon Stock
SharesAmountSharesAmountAdditional paid-in capitalAccumulated deficitTotal Stockholders’ Equity (Deficit)
Balance, December 31, 2020— $— 126,994 $127 $140,473 $(221,499)$(80,899)
Equity-based compensation— — — — 7,897 — 7,897 
Net income— — — — — 4,576 4,576 
Balance, March 31, 2021— $— 126,994 $127 $148,370 $(216,923)$(68,426)


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

6



Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)

Three Months Ended
March 31,
20222021
Cash flows from operating activities
Net income (loss)$(22,054)$4,576 
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Provision for (recovery of) bad debts145 (535)
Deferred tax benefit (expense)6,649 (109)
Depreciation and amortization23,023 6,481 
Amortization of debt discount and issuance costs1,710 3,586 
Equity-based compensation4,508 7,911 
Contingent consideration(3,731)148 
Warranty provision594 302 
Provision for inventory obsolescence409  
Changes in operating assets and liabilities, net of business acquisition
Accounts receivable(44,268)(5,000)
Inventories(46,250)(6,246)
Income tax receivables(21,924)13,003 
Prepaid expenses and other5,960 (3,216)
Accounts payable59,551 (10,556)
Accounts payable - related party(132) 
Accrued expenses and other7,027 5,134 
Income tax payable(8,760)2,067 
Lease liabilities6,085 247 
Deferred revenue(18,639)(59,941)
Net cash used in operating activities(50,097)(42,148)
Cash flows from investing activities
Purchase of property, plant and equipment(2,357)(570)
Acquisition of STI, net of cash acquired(373,816) 
Investment in equity security (10,000)
Net cash used in investing activities(376,173)(10,570)
Cash flows from financing activities
Proceeds from Series A issuance33,098  
Proceeds from common stock issuance15,885  
Series A equity issuance costs(175) 
Common stock issuance costs(450) 
Proceeds from revolving credit facility52,000  
Proceeds from issuance of other debt6,229  
Principal payments on debt(4,368)(30,000)
Contingent consideration(1,483) 
Debt issuance costs (6,590)
7



Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited) (continued)
(in thousands)
Three Months Ended
March 31,
20222021
Net cash provided by (used in) financing activities100,736 (36,590)
Effect of exchange rate changes on cash and cash equivalent balances7,355  
Net change in cash and cash equivalents(318,179)(89,308)
Cash and cash equivalents, beginning of period367,670 108,441 
Cash and cash equivalents, end of period$49,491 $19,133 
Supplemental Cash Flow Information
Stock consideration paid for acquisition of STI$200,224 $ 


The accompanying notes are an integral part of these condensed consolidated financial statements.
8

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 Sub, Inc. (“ATI Investment”) owns subsidiaries through which it conducts substantially all operations.
Acquisition of STI
On January 11, 2022, the Company acquired 100% of the share capital of Soluciones Tecnicas Integrales Norland, S.L. a Spanish private limited liability Company, and its subsidiaries (collectively “STI”) with cash and common stock of the Company. The acquisition was accounted for as a business combination. See Note 3 – Acquisition of STI.

2.    Summary of Significant Accounting Policies

Basis of Accounting and Presentation
The accompanying condensed consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), pursuant to the rules and regulations of the 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 months ended March 31, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022 or any other interim periods, or any future year or period. The balance sheet as of December 31, 2021 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 Annual Report on Form 10-K filed with the SEC on April 6, 2022.

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.

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Use of Estimates
The preparation of 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, Series A Redeemable Preferred Stock and the related future tranche, allowance for credit losses, reserve for excess or obsolete inventories, valuation of deferred tax assets and warranty reserve. 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, (“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 which has adversely impacted our business. In addition, due to global tightening of supply chain and strained logistics issues we have experienced an increase in our unbilled revenues and also in some instances incurred liquidated damages. 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.

The Company believes it has sufficient liquidity and financing options available and expects to have sufficient liquidity to operate for the next 12 months. The Company expects to use cash generated from operations and if needed, can access funds from the Revolving Credit Facility. The Company also has $100 million in delayed draw ability under the Series A Redeemable Perpetual Preferred Stock future draw commitment; however, such a draw would increase the Company’s dividend obligations and outstanding common stock and failure to draw the delayed commitments will result in interest expense payable by the company. See Note 13 – Redeemable Perpetual Preferred. The Revolving Credit Facility has $114.8 million of availability; however the Company may have limited ability to draw on the funds due to existing debt covenants. 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 COVID-19 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.

Business Combinations
The Company accounts for its business acquisitions under the acquisition method of accounting in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 805 Business Combinations (“ASC 805”). The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and
10


assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives, and market multiples, amongst other items.

Foreign Currency Translation
For non-U.S. subsidiaries that operate in a local currency environment, assets and liabilities are translated into the U.S. dollar at period end exchange rates. Income, expense and cash flow items are translated at average exchange rates prevailing during the period. Translation adjustments for these subsidiaries are accumulated as a separate component of accumulated other comprehensive income in equity. For non-U.S. subsidiaries that use 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. Inventories charged to cost of sales and depreciation are remeasured at historical rates, and all other 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.

Recent Accounting Pronouncements
Adopted
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 requires the company acquiring contract assets and contract liabilities obtained in a business combination to recognize and measure them in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). At the Acquisition Date, the company acquiring the business should record related revenue, as if it had originated the contract. Before the recent update, such amounts were recognized by the acquiring company at fair value. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. The Company early adopted ASU 2021-08 as of January 1, 2022. See Note 3 – Acquisition of STI for further information and disclosures related to the STI Acquisition.

3.    Acquisition of STI

On January 11, 2022 (the “Closing Date”) the Company completed the acquisition of 100% of the share capital of STI (the “STI Acquisition”). The STI Acquisition was funded primarily with borrowings from Senior unsecured convertible notes and the issuance of Series A Redeemable Perpetual Preferred Stock. The STI Acquisition provided the Company with an immediate presence in Brazil and Western Europe. Transaction expenses incurred in connection with the acquisition are $5.6 million recorded in the General and administrative line item on the condensed consolidated statement of operations for the three months ended March 31, 2022. In accordance with the Purchase Agreement, the Company paid closing consideration to STI consisting of $410.5 million in cash and 13,894,800 shares of the Company’s common stock. The fair value of the purchase consideration was $610.8 million and resulted in the Company owning 100% of the interests in STI. The Company is in the process of performing a valuation of the acquisition assets and liabilities and the related accounting impact.
11



The purchase price consideration to acquire STI consisted of the following:

Cash consideration for STI $409,647 
Cash consideration for transaction expenses of STI896 
Total cash consideration 410,543 
Non-cash equity consideration200,224 
Total consideration transferred610,767 
Total purchase price consideration$610,767 

The STI Acquisition was accounted for as a business combination applying ASC 805. The equity consideration transferred consisted of the Company’s common stock and was measured at fair value based on the closing stock price on the date the STI Acquisition was consummated (the “Acquisition Date”). The purchase price was allocated to the assets acquired and liabilities assumed based on management’s estimate of the respective fair values at the Acquisition Date. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of goodwill were the expected synergies of the combined entities that are expected to be realized from the STI Acquisition. None of the goodwill is expected to be deductible for income tax purposes.

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The following table summarizes the preliminary estimates of fair values of the assets acquired and liabilities assumed as of the Acquisition Date:

Preliminary fair value of net assets acquired and liabilities assumed: Acquisition Date
Cash and cash equivalents$36,725 
Accounts receivable110,789 
Inventories47,517 
Prepaid expenses and other23,399 
Property, plant and equipment4,434 
Other intangible assets318,365 
Other assets325 
Total assets acquired$541,554 
Accounts payable65,761 
Deferred revenue20,345 
Short-term debt44,338 
Other liabilities10,115 
Income tax payable7,576 
Deferred tax liability93,823 
Other long-term liabilities4,524 
Long-term debt12,053 
Total liabilities assumed$258,535 
Preliminary fair value of net assets acquired283,019 
Preliminary allocation to goodwill$327,768 

The preliminary purchase price allocation was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement period (defined as the twelve months following the Acquisition Date). The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the valuation of identifiable intangible assets acquired, the fair value of certain tangible assets acquired and liabilities assumed as well as the tax impact. The Company expects to continue to obtain information for the purpose of determining the fair value of the assets acquired and liabilities assumed on the Acquisition Date throughout the remainder of the measurement period. The purchase price allocation is subject to further adjustment until all pertinent information regarding the assets acquired is fully evaluated by the Company, including but not limited to, the fair value accounting.

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The preliminary purchase price allocation includes $318.4 million of acquired identifiable intangible assets.

Estimated Fair Value
(in USD)
Estimated Weighted Average Useful Life in Years
(in thousands, except useful lives)
Backlog$51,165 1
Customer relationships238,770 10
Trade name28,430 20
Total$318,365 

The preliminary fair value of the identifiable intangible assets has been estimated using the Excess Earnings Method (Customer relationships and Backlog) and Relief from Royalty Method (Trade name). The intangible assets are being amortized over their estimated useful lives on a straight-line basis that reflects the economic benefit of the asset. The determination of the useful lives is based upon various industry studies, historical acquisition experience, economic factors, and future forecasted cash flows of the Company following the STI Acquisition.

The amounts of revenue and net loss of STI included in the Company’s consolidated statement of operations from the Acquisition Date of January 11, 2022 through March 31, 2022 are $49.9 million and a loss of $0.8 million, respectively.

Pro Forma Financial Information (Unaudited)
The following unaudited pro forma financial information presents the combined results of operations of the Company and STI as if the acquisition had occurred on January 1, 2021, after giving effect to certain unaudited pro forma adjustments. The unaudited pro forma adjustments reflected herein include only those adjustments that are directly attributable to the STI Acquisition and factually supportable. The unaudited pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the STI Acquisition and is not necessarily indicative of the operating results that would have actually occurred had the STI Acquisition been consummated on January 1, 2022. These results are prepared in accordance with U.S. GAAP.

Three Months Ended March 31,
2022
2021
Revenue
$308,936 $273,803 
Net income
$(23,562)$(12,283)

4.    Accounts Receivable

Accounts receivable consists of the following (in thousands):
March 31, 2022December 31, 2021
Accounts receivable$391,196 $236,149 
Less: allowance for doubtful accounts(275)(140)
Accounts receivable, net$390,921 $236,009 

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5.    Inventories

Inventories consist of the following (in thousands):
March 31, 2022December 31, 2021
Raw materials$155,561 $85,470 
Finished goods151,273 127,598 
Reserve for excess or obsolete inventory(7,824)(7,415)
Total$299,010 $205,653 

6.    Property, Plant and Equipment

Property, plant and equipment consisted of the following (in thousands):
Estimated Useful Lives (Years)March 31, 2022December 31, 2021
LandN/A$1,567 $1,340 
Buildings and land improvements
15-39
3,973 2,451 
Manufacturing equipment716,454 13,924 
Furniture, fixtures and equipment
5-7
591 476 
Vehicles5275 161 
Hardware and software
3-5
2,338 1,683 
Assets in progress3,576 1,880 
Total28,774 21,915 
Less: accumulated depreciation(11,896)(11,223)
Property, plant and equipment, net$16,878 $10,692 

Depreciation expense was $0.6 million and $0.6 million for the three months ended March 31, 2022 and 2021, respectively, of which $0.5 million and $0.5 million, respectively, was allocated to cost of revenue and $0.1 million and $0.1 million, respectively, was included in depreciation and amortization in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021.

7.    Goodwill and Other Intangible Assets

Goodwill
Prior to the STI Acquisition, goodwill related to Former Parent’s acquisition of the Company. At the Acquisition Date, goodwill was recorded as $121.6 million and was subsequently impaired. Total accumulated impairment as of March 31, 2022 was $51.9 million.

During 2022, the Company recorded an additional $327.8 million of goodwill as a result of the STI Acquisition. As of March 31, 2022 and December 31, 2021 goodwill totaled $379.8 million and $69.7 million, net of
15


accumulated impairment of $51.9 million and is not deductible for tax purposes. Changes in the carrying amount of goodwill during the three months ended March 31, 2022 are shown below (in thousands):
Goodwill as of March 31, 2022
Beginning Balance
$69,727 
Acquisition of STI
327,768 
Foreign currency impact(17,655)
Ending Balance
$379,840 

Other Intangible Assets
Other intangible assets consisted of the following (in thousands):
Estimated Useful Lives (Years)March 31, 2022December 31, 2021
Amortizable:
Costs:
Developed technology14$203,800 $203,800 
Customer relationships10328,270 89,500 
Backlog151,165  
Trade name2028,430  
Total amortizable intangibles611,665 293,300 
Accumulated amortization:
Developed technology83,430 79,790 
Customer relationships56,254 49,057 
Backlog11,278  
Trade name313  
Total accumulated amortization151,275 128,847 
Total amortizable intangibles, net460,390 164,453 
Non-amortizable costs:
Trade name10,300 10,300 
Total other intangible assets, net$470,690 $174,753 

Amortization expense related to intangible assets amounted to $22.5 million and $5.9 million for the three months ended March 31, 2022 and 2021.

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Estimated future annual amortization expense for the above amortizable intangible assets for the remaining periods through March 31, as follows (in thousands):
Amount
2022$75,291 
202350,318 
202448,805 
202548,805 
202644,499 
Thereafter192,672 
$460,390 

8.    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 Topic 321 Investments—Equity Securities at its cost, less any impairment. The investment balance as of March 31, 2022 was $12.0 million and is recorded in other assets on the condensed consolidated balance sheets. There is no impairment recorded for the three months ended March 31, 2022.

9.    Income Taxes

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

The Company recorded income tax expense (benefit) of $(12.4) million and $1.7 million for the three months ended March 31, 2022 and 2021, respectively. The tax (benefit) in the three months ended March 31, 2022 was favorably impacted by mix of earnings in foreign jurisdictions offset by non-deductible amounts for officers’ compensation and transaction costs. The tax expense in the three months ended March 31, 2021 was unfavorably impacted by non-deductible equity based compensation as well as initial public offering and secondary offering costs.

For the three months ended March 31, 2022 and 2021, no reserves for uncertain tax positions have been recorded. The Company will continue to monitor this position each interim period.

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10.    Senior Secured Facility

Long-term senior secured credit facility consisted of the following (in thousands):
March 31, 2022December 31, 2021
Term loan facility$325,700 $326,775 
Revolving credit facility52,000  
377,700 326,775 
Less discount and issuance costs
(22,247)(23,291)
Long-term portion, net of debt discount and issuance costs355,453 303,484 
Less current portion of credit facility(4,300)(4,300)
Long-term senior secured facility debt, net of current portion, debt discount and issuance costs$351,153 $299,184 

Senior Secured Credit Facility
On October 14, 2020, the Company entered into a senior secured credit facility which was amended on February 23, 2021 by the First Amendment and on February 26, 2021 by the Second Amendment. The senior secured facility consisted originally of (i) a $575 million senior secured 7-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”). 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 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 decreasing to 3.75% down from 5% prior to the First Amendment. On February 26, 2021, the Company 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.

Revolving Credit Facility
Under the Revolving Credit Facility, the Company had $52.0 million and no outstanding balance as of March 31, 2022 and December 31, 2021, respectively, $33.2 million and $13.6 million in standby letters of credit at March 31, 2022 and December 31, 2021, respectively, and availability of $114.8 million and $186.4 million at March 31, 2022 and December 31, 2021, respectively.

Term Loan Facility
The Term Loan Facility had a balance of $325.7 million and $326.8 million as of March 31, 2022 and December 31, 2021, respectively. The balance of the Term Loan Facility is presented in the accompanying condensed consolidated balance sheets, net of debt discount and issuance costs of $22.2 million and $23.3 million as of March 31, 2022 and December 31, 2021, respectively. The debt discount and issuance costs are being amortized using the effective interest method and the rate as of March 31, 2022 is 5.03%. The Term Loan Facility has an annual excess cash flow calculation, for which the prescribed formula did not result in requiring the Company to make any advance principal payments for the three months ended March 31, 2022 and 2021.

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11.    Convertible Debt

Convertible debt consisted of the following (in thousands):
March 31, 2022December 31, 2021
1.00% Senior unsecured convertible notes
$425,000 $425,000 
Less: unamortized discount and issuance costs(12,689)(13,137)
1.00% Senior unsecured convertible notes, net (1)
$412,311 $411,863 
(1) Effective interest rate for the Convertible Notes as of March 31, 2022 was 1.5%.

On December 3, 2021 and December 9, 2021, the Company completed a private offering of $375 million and $50 million over allotment, respectively, in aggregate principal amount of 1.00% Convertible Senior Notes due 2028 (the “Convertible Notes”) resulting in proceeds of $364.7 million and $48.6 million, respectively, after deducting the original issue discount of 2.75%. The Convertible Notes were issued pursuant to an indenture, dated December 3, 2021 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee.

The Convertible Notes are senior unsecured obligations of the Company and will mature on December 1, 2028, unless earlier converted redeemed or repurchased. The Convertible Notes bear interest at a rate of 1.00% per year, payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2022.

The Convertible Notes were not convertible during the three months ended March 31, 2022 and none have been converted to date. Also, given that the average market price of the common stock has not exceeded the exercise price since inception, there was no dilutive impact for the three months ended March 31, 2022.

12.     Other Debt

In connection with the acquisition of STI, the Company assumed debt obligations of STI consisting of $43.9 million in short-term debt and $14.8 million in long-term debt. Interest rates range from 0.55% to 2.76% annually and maturities for the short term portion of loans range from April 2022 to March 2023. Maturities for the long term portion of loans are $5.3 million Euros ($5.9 million USD) due in 2024 and $8 million Euros ($8.9 million USD) due in March 2027.

13.    Redeemable Perpetual Preferred

Series A Redeemable Perpetual Preferred
On August 10, 2021, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) pursuant to which on August 11, 2021, the Company issued and sold to certain investors (the Purchasers”) 350,000 shares of a newly designated Series A redeemable perpetual preferred stock of the Company, par value $0.001 per share (the “Series A Redeemable Perpetual Preferred Stock”), 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, on September 27, 2021, the Company issued andz sold to the Purchasers 776,235 shares of Common Stock for an aggregate purchase price of $776 (the “Prepaid Forward Contract”). The Company used net proceeds from the Initial Closing to repay $102.0 million, which was the amount outstanding under the Company’s
19


existing Revolving Credit Facility, and prepaid $100 million under the Company’s Term Loan. The Purchasers are entitled to designate one representative to be appointed to the Company’s board of directors, and to appoint three non-voting observers to the Board, in each case until such time as the Purchasers no longer beneficially own shares of the Series A Redeemable Perpetual Preferred Stock with at least $100 million aggregate Liquidation Preference (as defined below). The Series Perpetual Preferred Stock has no maturity date.

On January 7, 2022, the Company issued and sold to the Purchasers 50,000 shares of Series A Redeemable Perpetual Preferred Stock and 1,125,000 shares of Common Stock, par value $0.001 per share, in an additional closing for an aggregate purchase price of $49,376,125 (the “Additional Closing”).

Additional Closings
The Securities Purchase Agreement gives the Company the option to require the Purchaser to purchase, in one or more additional closings, up to 150,000 shares of Series A Redeemable Perpetual Preferred Stock, until June 30, 2023, 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 (the “Delayed Draw Commitment”). This commitment has been reduced by the Additional Closing.

The Company evaluated the accounting for the instruments issued in the Securities Purchase Agreement and determined the Series A Redeemable Perpetual Preferred Stock and Common Stock issued in the Initial Closing, as well as the Prepaid Forward Contract, and Delayed Draw Commitment are freestanding instruments accounted for in equity.

The Series A Redeemable Perpetual Preferred Stock is recorded in temporary equity on the condensed consolidated balance sheets as it has redemption features upon certain triggering events that are outside the Company’s control, such as a fundamental change. The proceeds of the Series A Redeemable Perpetual Preferred Stock, transactions costs and discount of $334.6 million have been allocated to each instrument based on its relative fair value. At the Initial Closing date, $229.8 million was allocated to the Series A Redeemable Perpetual Preferred Stock, $105.4 million to Common Stock, $12.4 million to the Delayed Draw Commitment, which was recorded as a debit to additional paid-in capital, and $11.7 million for a Prepaid Forward Contract.

The Additional Closing carried issuance and original issuance discount costs of $1.3 million. The net proceeds were allocated amongst the Series A Redeemable Perpetual Preferred Stock and Common Stock based on the proceeds of $33.1 million and $15.9 million, respectively.

Dividends
On or prior to the fifth anniversary of the Initial Closing, the Company may pay dividends on the Series A Redeemable Perpetual Preferred Stock either in cash at the then-applicable Cash Regular Dividend Rate (as defined below), through accrual to the Liquidation Preference at the Accrued Regular Dividend Rate of 6.25% (the “Permitted Accrued Dividends”), or a combination thereof. Following the fifth anniversary of the Initial Closing, dividends shall be payable only in cash. To the extent the Company does not declare such dividends and pay in cash following the fifth anniversary of the Initial Closing, the dividends accrue to the Liquidation Preference (“Default Accrued Dividends”) at the then-applicable Cash Regular Dividend Rate plus 200 basis
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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 Redeemable 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”).

The “Cash Regular Dividend Rate” of the Series A Redeemable 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” on the Series A Redeemable Perpetual Preferred Stock means 6.25% per annum on the Liquidation Preference.

Dividends accrued as of March 31, 2022 were $6.3 million and dividends declared and paid as of December 31, 2021 were $8.2 million and $8.1 million, respectively.

The Series A Redeemable Perpetual Preferred Stock have similar characteristics of an “Increasing Rate Security” as described by SEC Staff Accounting Bulletin Topic 5Q, Increasing Rate Preferred Stock. As a result, the discount on Series A Redeemable Perpetual Preferred Stock is considered an unstated dividend cost that is amortized over the period preceding commencement of the perpetual dividend using the effective interest method, by charging imputed dividend cost against retained earnings, or additional paid in capital in the absence of retained earnings, and increasing the carrying amount of the Series A Redeemable Perpetual Preferred Stock by a corresponding amount. The discount of $120.2 million is therefore being amortized over five years using the effective yield method. The amortization in each period is the amount which, together with the stated dividend in the period, results in a constant rate of effective cost with regard to the carrying amount of the Series A Redeemable Perpetual Preferred Stock.

The Company has presented the Series A Redeemable Perpetual Preferred Stock in temporary equity and is accreting the discount on the increasing rate dividends using the effective interest method. Such accretion totaled $5.4 million for the three months ended March 31, 2022.

The Company had $6.3 million in dividends accreted on the carrying value of the Series A Redeemable Perpetual Preferred Stock at an accrual rate of 6.25% as of March 31, 2022.

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.

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14.    Revenue

Based on ASC 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
March 31,
20222021
Over-time revenue$208,071 $117,850 
Point in time revenue92,515 130,390 
Total revenue$300,586 $248,240 

As discussed in the consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2021, filed with the SEC on April 6, 2022, ITC-related contracts were determined to have multiple performance obligations satisfied at a point in time instead of one performance obligation satisfied over time. The disaggregated revenue information above for the three months ended March 31, 2021 has been restated to correct this error, which resulted in $78.5 million of revenue being reclassified from over-time revenue to point in time revenue for the three months ended March 31, 2021.

Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and deferred revenue (contract liabilities) on the condensed consolidated balance sheets. The majority of the Company’s contract amounts are billed as work progresses in accordance with agreed-upon contractual terms, which generally coincide with the shipment of one or more phases of the project. Billing sometimes occurs subsequent to revenue recognition, resulting in contract assets. The changes in contract assets (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 condensed consolidated balance sheets on a contract-by-contract basis at the end of the reporting period and consisted of the following (in thousands):
March 31, 2022December 31, 2021
Unbilled receivables$135,997 $111,224 

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):
March 31, 2022December 31, 2021
Deferred revenue$121,624 $99,575 

During the three months ended March 31, 2022, the Company converted $60.0 million deferred revenue to revenue which represented 60% of the prior years deferred revenue balance.

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Remaining Performance Obligations
As of March 31, 2022, the Company had $301.3 million of remaining performance obligations. The Company expects to recognize revenue on 100% of these performance obligations in the next twelve months.

15.    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
March 31,
20222021
Net income (loss)$(22,054)$4,576 
Preferred dividends and accretion11,606  
Net income (loss) to common shareholders$(33,660)$4,576 
Basic:
Weighted-average shares148,288 126,994 
Earnings (loss) per share$(0.23)$0.04 
Diluted:
Weighted-average shares148,288 126,994 
Equity compensation dilutive securities 304 
Weighted average dilutive shares148,288 127,298 
Earnings (loss) per share$(0.23)$0.04 

Potentially dilutive common shares issuable pursuant to equity-based awards of 654,277 were not included for the three months ended March 31, 2022 as their potential effect was anti-dilutive as the Company generated a net loss. There were no potentially dilutive common shares issuable pursuant to the Convertible Notes as the stock price is below the strike price and the Company generated a net loss.

16.    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 U.S. District Court for the Southern District of New York (the “Southern District of New York” or the “Court”) 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 offering (“IPO”), the Company’s December 2020 offering (the “2020 Follow-On Offering”), and the Company’s March 2021 offering (the “2021 Follow-On Offering”) during the putative class period of October 14, 2020 through May 11, 2021.
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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 (“Keippel Action”). The Keippel Action similarly alleged misstatements and/or omissions in certain of the Company’s registration statements and prospectuses related to the Company’s IPO, the Company’s 2020 Follow-On Offering, and the Company’s 2021 Follow-On Offering during the putative class period of October 14, 2020 through May 11, 2021. On July 6, 2021, the Court entered an order that the Keippel Action was in all material respects substantially similar to the Plymouth Action that both actions arise out of the same or similar operative facts, and that the parties are substantially the same parties. The Court accordingly consolidated the Keippel Action with the Plymouth Action for all pretrial purposes and, ordered all filings to be made in the Plymouth Action.

On July 16, 2021, a verified derivative complaint was filed in the Southern District of New York against certain officers and directors of the Company (“First Derivative Action”). The complaint alleges: (1) violations of Section 14(a) of the Securities Exchange Act of 1934 for misleading proxy statements, (2) breach of fiduciary duty, (3) unjust enrichment, (4) abuse of control, (5) gross mismanagement, (6) corporate waste, (7) aiding and abetting breach of fiduciary duty, and (8) contribution under sections 10(b) and 21D of the Securities Exchange Act of 1934.

On July 30, 2021, a second and related verified derivative complaint was filed in the Southern District of New York against certain officers and directors of the Company (“Second Derivative Action”). The complaint alleges: (1) violations of Section 14(a) of the Securities Exchange Act of 1934 for causing the issuance of a false/misleading proxy statement, (2) breach of fiduciary duty, and (3) aiding and abetting breaches of fiduciary duty. On August 24, 2021, the Second Derivative Action was consolidated with the First Derivative Action, the Court appointed co-lead counsel, and the case was temporarily stayed pending the entry of an order on all motions to dismiss directed at the pleadings filed in the Plymouth Action. The stay shall remain in effect until the later of (a) the entry of an order on any motions to dismiss the Plymouth Action or, (b) to the extent the complaint in the Plymouth Action is amended, the entry of an order on any motions to dismiss any such amended complaints in the Plymouth Action.

On September 21, 2021, the Court in the Plymouth Action appointed a group comprised of institutional investors Plymouth County Retirement Association and Carpenters Pension Trust Fund for Northern California as lead plaintiff.

On December 7, 2021, an amended class action complaint was filed by lead plaintiff in the Plymouth Action 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, on behalf of a putative class of persons and entities that purchased or otherwise acquired the Company’s securities during the period from October 14, 2020 through May 11, 2021 (the “Consolidated Amended Complaint”). The Consolidated Amended Complaint alleges misstatements and/or omissions in: (1) certain of the Company’s registration statements and prospectuses related to the Company’s IPO, the Company’s 2020 Follow-On Offering, and the Company’s 2021 Follow-On Offering; (2) in the Company’s annual report and associated press release announcing results for the fourth quarter and full fiscal year 2020; and (3) in the Company’s November 5, 2020 and March 9, 2021 earnings calls.

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Consistent with the individual rules of practice for the Court in the Plymouth Action, on January 24, 2022, the defendants in the Plymouth Action, including the Company and certain of its officers and directors named as defendants therein, served on lead plaintiff and the Court a letter outlining why the Consolidated Amended Complaint should be dismissed in its entirety. Lead plaintiff responded to that letter on February 23, 2022 disagreeing with the ground for dismissal outlined in the defendants’ initial letter and contending that its Consolidated Amended Complaint should not be dismissed. Because the parties could not agree that the Consolidated Amended Complaint was deficient in any respect, the defendants, including the Company, submitted a letter to the Court on March 21, 2022 setting forth the reasons why the Consolidated Amended Complaint should be dismissed and requesting the Court’s leave to file a motion to dismiss.

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 March 31, 2022 or December 31, 2021.

Contingent Consideration
Tax Receivable Agreement
Concurrent with the Acquisition, Array Tech, Inc. (f/k/a Array Technologies, Inc.) entered into a Tax 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 condensed consolidated statements of operations. As of March 31, 2022 and December 31, 2021, the fair value of the TRA was $9.4 million and $14.6 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.

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The following table summarizes the liability related to the estimated TRA (in thousands):
Three Months Ended
March 31,
20222021
Beginning balance$14,577 $19,691 
Payments(1,483) 
Fair value adjustment(3,731)148 
Ending balance$9,363 $19,839 

The TRA liability requires significant judgment and is classified as Level 3 in the fair value hierarchy.

Surety Bonds
As of March 31, 2022, the Company posted surety bonds in the total amount of approximately $168.5 million. The Company is required to provide surety bonds to various parties as required for certain transactions initiated during the ordinary course of business to guarantee the Company’s performance in accordance with contractual or legal obligations. These off-balance sheet arrangements do not adversely impact the Company’s liquidity or capital resources.

17.    Fair Value of Financial Instruments

The carrying values and the estimated fair values of debt financial instruments were as follows:
March 31, 2022December 31, 2021
Carrying ValueFair ValueCarrying ValueFair Value
Notes$412,311 $329,375 $411,863 $410,771 

The carrying values of the Company's Revolving Credit Facility recorded in long-term debt on the condensed consolidated balance sheets approximate fair value due to the variable interest rate. The fair value of the Convertible Notes is estimated using Level 2 inputs, as they are not registered securities nor listed on any securities exchange but may be traded by qualified institutional buyers.

18.    Equity-Based Compensation

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

During the three months ended March 31, 2022, the Company granted an aggregate of 1,000,503 restricted stock units (“RSUs”) to employees and board of director members and 290,598 Performance Stock Units (“PSUs”) to certain executives. The fair value of the RSUs is determined using the market value of common stock on the grant date. The PSUs cliff vest after three years and upon meeting certain revenue and adjusted EPS targets. The PSUs also contain a modifier based on the total stock return (TSR) compared to a certain Index which modifies the number of PSUs that vest. The PSUs were valued using a Monte-Carlo simulation method with a volatility assumption of 66%, risk free interest rate of 0.28% based on the United States Treasury Constant Maturity rates and no dividends paid assumption.

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Activity under the 2020 Plan was as follows:
RSUs
Number of SharesWeighted Average Grant Date Fair Value
Unvested, December 31, 2021
930,409 $22.39 
Granted1,000,503 $10.61 
Vested(138,466)$21.91 
Forfeited(39,600)$22.10 
Unvested, March 31, 2022
1,752,846 $15.43 
PSUs
Number of SharesWeighted Average Grant Date Fair Value
Unvested, December 31, 2021
147,687 $27.75 
Granted290,598 $11.54 
Vested $ 
Forfeited(20,027)$30.74 
Unvested, March 31, 2022
418,258 $16.34 

Class B Units and Class C Units of Former Parent
The Company accounted for equity grants to employees (Class B Units and Class C Units, collectively, “the Units,” of Former Parent) as equity-based compensation under ASC 718, Compensation-Stock Compensation. The Units contain vesting provisions as defined in the agreement. Vested Units do not forfeit upon termination and represent a residual interest in Former Parent. Equity-based compensation cost is measured at the grant date fair value and is 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 are 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 November 19, 2019 and May 19, 2020, Former Parent issued 22,326,653 and 4,344,941, respectively, Class B Units to certain employees of the Company. On March 28, 2020, Former Parent issued 1,000 Class C Units to a member of the board of directors of Array Technologies, Inc.

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
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Company accelerating the recognition of equity-based compensation of $8.9 million for the three months ended March 31, 2021.

For the three months ended March 31, 2022 and 2021, the Company recognized $4.4 million and $7.9 million in equity-based compensation, respectively. As of March 31, 2022, the Company had $24.7 million of unrecognized compensation costs related to RSUs which is expected to be recognized over a period of 2.4 years. There were 59,627 forfeitures during the three months ended March 31, 2022 and no forfeitures during the three months ended March 31, 2021.

19.    Related Party Transactions

Accounts Payable-Related Party
The Company had $0.5 million and $0.6 million as of March 31, 2022 and December 31, 2021, 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.

Tax Receivable Agreement
See Note 16 – Commitments and Contingencies – Tax Receivable Agreement.

20.    Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in accumulated other comprehensive income (loss), net of tax for the three months ended March 31, 2022 and 2021 (in thousands):

Foreign Currency Translation Adjustment
Balance as of December 31, 2021$ 
Change in foreign currency translation adjustment9,011 
Net other comprehensive income (loss)9,011 
Balance as of March 31, 2022$9,011 

21.    Segment Reporting

ASC 280 Segment Reporting establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Historically, the Company managed its business on the basis of one operating
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and reportable segment. During the three months ended March 31, 2022, we changed our reportable segments as a result of the STI Acquisition; the Company now operates as two segments; Array and STI.

The following table provides a reconciliation of certain financial information for our reportable segments to information presented in our condensed consolidated financial statements for the three months ended three months ended March 31, 2022 and 2021 and as of March 31, 2022 and December 31, 2021 (in thousands):

Three months ended March 31,
2022
ArraySTITotal
Revenue$250,652 $49,934 $300,586 
Gross Profit$21,268 $5,319 $26,587 

March 31, 2022
ArraySTITotal
Total assets$1,491,149 $224,569 $1,715,718 


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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 consolidated 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 year ended December 31, 2021 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Quarterly Report on Form 10-Q and our audited financial statements and notes thereto as of and for the year ended December 31, 2021 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K, as amended by Form 10-K/A for the year ended December 31, 2021 (collectively, “2021 Form 10-K”). 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 2021 Form 10-K.

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, 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 factors in “Summary Risk Factors” and the “Risk Factors” sections of this Quarterly Report on Form 10-Q. 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.

Summary Risk Factors

Our business is subject to a number of risks that if realized could materially and adversely affect our business, financial conditions, results of operations, cash flows and access to liquidity. These risks are discussed more fully in the “Risk Factors” section of this Quarterly Report on Form 10-Q. Our principal risks include the following:
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we may be unable to successfully integrate the business of STI (as defined below) into our business or achieve the anticipated benefits of the STI Acquisition (as defined below);
the capped call transactions may affect the value of our Convertible Notes (as defined below) and the market price of our common stock;
the fundamental change repurchase feature of the Convertible Notes may delay or prevent an otherwise beneficial attempt to acquire us;
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 failure to retain key personnel a failure to attract additional qualified personnel may affect our ability to achieve our anticipated level of growth adversely affect our business;
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;
defects or performance problems in our products could result in loss of customers, reputational damage and decreased revenue, and we may face warranty, indemnity and product liability claims arising from defective products;
developments in alternative technologies may have a material adverse effect on demand for our offerings;
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;
a negative determination by the U.S. Department of Commerce in its investigation of alleged circumvention of antidumping and countervailing duties on Chinese imports by crystalline silicon PV cells and module imports assembled and completed in southeast Asia could adversely affect the demand for our products;
the impact of the ongoing conflict in Ukraine on our supply chain and cost of logistics;
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;
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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 determination to restate prior period financial statement could negatively affect investor confidence and raise reputational issues;
our substantial indebtedness could adversely affect our financial condition; and
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.

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 more energy and deliver a lower LCOE than projects that use “fixed tilt” mounting systems, which do not move. The vast majority of ground mounted solar systems in the United States use trackers.

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.

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, 2022, we derived 83% and 17% of our revenues from customers in the United States and the 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 March 31, 2022, we had 1,348 full-time employees, up from 471 as of December 31, 2021, with the increase primarily due to the acquisition of STI.

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Acquisition of STI
On January 11, 2022 (the “Closing Date”) the Company closed the acquisition of Soluciones Técnicas Integrales Norland, S.L. and its subsidiaries (collectively, “STI”) (the “STI Acquisition”). In accordance with the Purchase Agreement, the Company paid closing consideration to STI consisting of $410.5 million in cash (the “Cash Consideration”) and 13,894,800 shares of the Company’s common stock (the “Stock Consideration”). The fair value of the purchase consideration was $610.8 million and resulted in the Company owning 100% of the interests in STI.

The STI Acquisition will provide the Company with an immediate presence in Brazil and Western Europe.

Update on the Impact of COVID-19
With the second wave of the pandemic including 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. The duration and extent to which it will continue to adversely impact our business and results of operations remains uncertain and could be material.

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

Impact of Potential Solar Module Supply Chain Disruptions
In February 2022, Auxin Solar Inc., a U.S. producer of crystalline silicon PV products, petitioned the U.S. Department of Commerce (“USDOC”) to investigate alleged circumvention of antidumping and countervailing duties on Chinese imports by crystalline silicon PV cells and module imports assembled and completed in Cambodia, Malaysia, Thailand, and Vietnam. On March 28, 2022, the USDOC announced that it would investigate the circumvention alleged in the petition. The investigation has created uncertainty related to the supply of solar modules and is expected to disrupt the solar panel supply chain in the near-term, which could negatively impact the global solar market as well as the timing and viability of solar projects to which we sell our products. This negative impact on the global solar market could, as a result, have a material adverse effect on our business, financial condition and results of operations.

Additionally, certain suppliers could be blocked from importing solar panels to the United States under the Uyghur Forced Labor Prevention Act (“UFLPA”). UFLPA seeks to block the import of products made with forced labor in certain areas of China. An inter-agency task force was established to produce a report by June 21, 2022 which,