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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, 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/4f2491701572c70340f47960f4fb2bd0-arry-20220630_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 8, 2022, there were 150,326,317 shares of common stock, par value $0.001 per share, issued and outstanding.




Array Technologies, Inc.
Index to Form 10-Q

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, 2022December 31, 2021
ASSETS
Current assets
Cash and cash equivalents$51,046 $367,670 
Accounts receivable, net457,900 236,009 
Inventories, net329,951 205,653 
Income tax receivables16,217 9,052 
Prepaid expenses and other52,831 33,649 
Total current assets907,945 852,033 
Property, plant and equipment, net17,802 10,692 
Goodwill378,706 69,727 
Other intangible assets, net421,862 174,753 
Deferred tax assets18,521 9,345 
Other assets30,573 26,429 
Total assets$1,775,409 $1,142,979 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable$231,798 $91,392 
Accounts payable - related party478 610 
Accrued expenses and other51,072 38,494 
Accrued warranty reserve2,911 3,192 
Income tax payable3,034 60 
Deferred revenue167,556 99,575 
Current portion of contingent consideration 1,773 
Current portion of debt51,494 4,300 
Other current liabilities6,949 5,909 
Total current liabilities515,292 245,305 
Long-term liabilities
Deferred tax liability84,819  
Contingent consideration, net of current portion7,686 12,804 
Other long-term liabilities9,723 5,557 
Long-term warranty4,056  
Long-term debt, net of current portion793,557 711,056 
Total long-term liabilities899,841 729,417 
Total liabilities1,415,133 974,722 
1

Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited) (continued)
(in thousands, except per share and share amounts)
June 30, 2022December 31, 2021
Commitments and contingencies (Note 16)
Series A Redeemable Perpetual Preferred Stock of $0.001 par value - 500,000 authorized; 412,606 and 350,000 shares issued as of June 30, 2022 and December 31, 2021, respectively; liquidation preference of $413.0 million and $350.0 million as of June 30, 2022 and December 31, 2021, respectively
293,974 237,462 
Stockholders’ equity (deficit)
Preferred stock of $0.001 par value - 4,500,000 shares authorized; none issued as of June 30, 2022 and December 31, 2021
  
Common stock of $0.001 par value - 1,000,000,000 shares authorized; 150,279,160 and 135,026,940 shares issued as of June 30, 2022 and December 31, 2021, respectively
150 135 
Additional paid-in capital401,614 202,562 
Accumulated deficit(296,733)(271,902)
Accumulated other comprehensive income(38,729) 
Total stockholders’ equity (deficit)66,302 (69,205)
Total liabilities, redeemable perpetual preferred stock and stockholders’ equity$1,775,409 $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
June 30,
Six Months Ended
June 30,
2022202120222021
Revenue$424,929 $196,516 $725,515 $444,756 
Cost of revenue377,553 176,009 651,552 378,083 
Gross profit47,376 20,507 73,963 66,673 
Operating expenses
General and administrative31,509 15,113 71,336 39,786 
Contingent consideration(1,678)(13)(5,409)135 
Depreciation and amortization24,389 5,981 47,041 11,965 
Total operating expenses54,220 21,081 112,968 51,886 
Income (loss) from operations(6,844)(574)(39,005)14,787 
Other expense
Other income (expense), net(371)(122)372 (200)
Foreign currency gain (loss)(1,736) 2,127  
Interest expense(8,021)(6,651)(14,963)(15,660)
Total other expense(10,128)(6,773)(12,464)(15,860)
Loss before income tax benefit(16,972)(7,347)(51,469)(1,073)
Income tax benefit(14,195)(1,830)(26,638)(132)
Net loss(2,777)(5,517)(24,831)(941)
Preferred dividends and accretion12,182  23,788  
Net loss to common shareholders$(14,959)$(5,517)$(48,619)$(941)
Loss per common share
Basic$(0.10)$(0.04)$(0.33)$(0.01)
Diluted$(0.10)$(0.04)$(0.33)$(0.01)
Weighted average number of common shares
Basic150,203 126,994 149,246 126,994 
Diluted150,203 126,994 149,246 126,994 

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



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

Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Net loss$(2,777)$(5,517)$(24,831)$(941)
Change in foreign currency translation adjustments(29,718) (38,729) 
Comprehensive loss$(32,495)$(5,517)$(63,560)$(941)

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 June 30, 2022
Temporary EquityPermanent Equity
Series A Redeemable Perpetual Preferred StockPreferred StockCommon Stock
SharesAmountSharesAmountSharesAmountAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders’ Equity (Deficit)
Balance at March 31, 2022400 $281,792 — $— 150,174 $150 $411,232 $(293,956)$(9,011)$108,415 
Equity-based compensation— — — — 105 — 2,944 — — 2,944 
Issuance of Series A Redeemable Perpetual Preferred Stock, net of fees— — — — — — (380)— — (380)
Preferred cumulative dividends plus accretion13 12,182 — — — — (12,182)— — (12,182)
Net loss— — — — — — — (2,777)— (2,777)
Other comprehensive income— — — — — — — — (29,718)(29,718)
Balance at June 30, 2022413 $293,974 — $— 150,279 $150 $401,614 $(296,733)$(38,729)$66,302 

5



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

Three Months Ended June 30, 2021
Preferred StockCommon Stock
SharesAmountSharesAmountAdditional Paid-In CapitalAccumulated DeficitTotal Stockholders’ Equity (Deficit)
Balance at March 31, 2021— $— 126,994 $127 $148,370 $(216,923)$(68,426)
Equity-based compensation— — — — 1,523 — 1,523 
Net loss— — — — — (5,517)(5,517)
Balance at June 30, 2021— $— 126,994 $127 $149,893 $(222,440)$(72,420)

6



Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (Deficit) (continued)
(unaudited)
(in thousands)
Six Months Ended June 30, 2022
Temporary EquityPermanent Equity
Series A Redeemable Perpetual Preferred StockPreferred StockCommon Stock
SharesAmountSharesAmountSharesAmountAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders’ Equity (Deficit)
Balance at December 31, 2021350 $237,462 — $— 135,027 $135 $202,562 $(271,902)$ $(69,205)
Equity-based compensation— — — — — — 7,357 — — 7,357 
Issuance of Series A Redeemable Perpetual Preferred Stock, net of fees50 32,724 — — 15,252 15 215,483 — — 215,498 
Issuance of common stock, net— — — — — — — — — — 
Preferred cumulative dividends plus accretion13 23,788 — — — — (23,788)— — (23,788)
Net loss— — — — — — — (24,831)— (24,831)
Other comprehensive income— — — — — — — — (38,729)(38,729)
Balance at June 30, 2022413 $293,974 — $— 150,279 $150 $401,614 $(296,733)$(38,729)$66,302 



7



Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (Deficit) (continued)
(unaudited)
(in thousands)
Six Months Ended June 30, 2021
Preferred StockCommon Stock
SharesAmountSharesAmountAdditional Paid-In CapitalAccumulated DeficitTotal Stockholders’ Equity (Deficit)
Balance at December 31, 2020— $— 126,994 $127 $140,473 $(221,499)$(80,899)
Equity-based compensation— — — — 9,420 — 9,420 
Net loss— — — — — (941)(941)
Balance at June 30, 2021— $— 126,994 $127 $149,893 $(222,440)$(72,420)


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

8



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

Six Months Ended
June 30,
20222021
Cash flows from operating activities
Net loss$(24,831)$(941)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for (recovery of) bad debts510 (551)
Deferred tax expense(19,984)(538)
Depreciation and amortization47,579 12,964 
Amortization of debt discount and issuance costs3,286 5,118 
Equity-based compensation7,472 9,467 
Contingent consideration(5,409)135 
Warranty provision1,215 425 
Provision for inventory obsolescence409 1,236 
Changes in operating assets and liabilities, net of business acquisition
Accounts receivable(111,612)(30,393)
Inventories(77,191)(20,443)
Income tax receivables(7,062)9,236 
Prepaid expenses and other(376)826 
Accounts payable74,645 (1,378)
Accounts payable - related party(132)(1,622)
Accrued expenses and other3,356 (10,541)
Income tax payable(4,602)(8,814)
Lease liabilities4,700 68 
Deferred revenue47,263 (98,363)
Net cash used in operating activities(60,764)(134,109)
Cash flows from investing activities
Purchase of property, plant and equipment(3,895)(1,200)
Acquisition of STI, net of cash acquired(373,818) 
Investment in equity security (11,975)
Net cash used in investing activities(377,713)(13,175)
Cash flows from financing activities
Proceeds from Series A issuance33,098  
Proceeds from common stock issuance15,885  
Series A equity issuance costs(575) 
Common stock issuance costs(450) 
Payments on revolving credit facility(33,000) 
Proceeds from issuance of other debt30,599  
Proceeds from revolving credit facility101,000 102,000 
Principal payments on debt(22,377)(31,075)
Contingent consideration(1,483)(7,810)
Debt issuance costs (6,590)
9



Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited) (continued)
(in thousands)
Six Months Ended
June 30,
20222021
Net cash provided by financing activities122,697 56,525 
Effect of exchange rate changes on cash and cash equivalent balances(844) 
Net change in cash and cash equivalents(316,624)(90,759)
Cash and cash equivalents, beginning of period367,670 108,441 
Cash and cash equivalents, end of period$51,046 $17,682 
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.
10

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 “Acquisition Date”), the Company acquired 100% of the share capital of Soluciones Técnicas Integrales Norland, S.L.U., a Spanish private limited liability Company, and its subsidiaries (collectively, “STI”) with cash and common stock of the Company (the “STI Acquisition”). The STI Acquisition was accounted for as a business combination. See Note 3 – Acquisition of STI.

After the acquisition of STI, the Company began operating as two reportable operating segments. The Array legacy operating segment (the “Array Legacy Operations”) and the newly acquired operations (the “STI Operations”) pertaining to STI.

2.    Summary of Significant Accounting Policies

Basis of Accounting and Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), pursuant to the rules and regulations of the 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, 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, as amended by the Form 10-K/A filed with the SEC on April 6, 2022 (the “2021 Annual Report”).

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.

11


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 evaluation for any impairment of goodwill, impairment of long-lived assets, fair value of contingent consideration, Series A Redeemable Perpetual 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, the Company’s industry has seen rapid commodity price increases and strained logistics, causing the Company to experience decreased margins and thus decreased cash from operations which has adversely impacted the Company’s business. In addition, due to global tightening of supply chain and strained logistics issues the Company has experienced an increase in unbilled revenues and in some instances incurred liquidated damages. The Company has taken, and continues to take, mitigating steps to overcome the economic challenges and, therefore, believes the impact to be temporary, but cannot be certain the timing of when it will achieve better margins. The extent to which the COVID-19 pandemic and recent supply chain constraints and price increases 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.

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 (as defined below). The Company also has $100 million in delayed draw ability under the Series A Redeemable Perpetual Preferred Stock (as defined below) 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 $96.7 million of availability; however, the Company may have limited ability to draw on the funds due to existing debt covenants.

Impact of the Ongoing Conflict in Ukraine
The ongoing conflict in Ukraine has reduced the availability of material that can be sourced in Europe and, as a result, increased logistics costs for the procurement of certain inputs and materials used in our products. We do not know ultimate severity or duration of the conflict in Ukraine, but we are continuously monitoring the
12


situation and evaluating our procurement strategy and supply chain as to reduce any negative impact on our business, financial condition and results of operations.

Inflation
The Company could see an impact from inflationary pressures. Inflation has continued to accelerate in the wake of Russia’s invasion of Ukraine, driving up energy prices, freight premiums, and other operating costs. Interest rates, notably mature market government bond yields, remain low by historical standards but are rising as central banks around the world tighten monetary policy in response to inflation pressures, while government deficits and debt remain at high levels in many major markets. The eventual implications of higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital during our forecast period.

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 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. The standard was applied to the acquisition accounting for STI. A review of the deferred revenue of
13


the acquiree of $20.3 million was reviewed for consistency in application with the Company’s policies and U.S. GAAP and the contract liability balance was carried over at its carrying value.

3.    Acquisition of STI

On the Acquisition Date, the Company completed the STI Acquisition pursuant to the purchase agreement, dated November 10, 2021, by and among Amixa Capital, S.L. and Aurica Trackers, S.L., each a company duly organized under the laws of the Kingdom of Spain (together, the “Sellers”) and Mr. Javier Reclusa Etayo (the “STI Purchase Agreement”). The STI Acquisition was funded primarily with borrowings from the Convertible Notes (as defined below) and the issuance of Series A redeemable perpetual preferred stock of the Company, par value $0.001 per share (the “Series A Redeemable Perpetual Preferred Stock”). The STI Acquisition provided the Company with an immediate presence in Brazil, Western Europe and South Africa. 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 six months ended June 30, 2022. In accordance with the STI Purchase Agreement, the Company paid closing consideration to the Sellers 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 has performed a valuation of the acquisition assets and liabilities and determined the related accounting impact.

The purchase price consideration to acquire STI consisted of the following (in thousands):

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 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.

14


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

Preliminary Fair Value of Net Assets Acquired and Liabilities Assumed: Acquisition DateMeasurement AdjustmentJune 30, 2022
Cash and cash equivalents$36,725 $— $36,725 
Accounts receivable110,789 — 110,789 
Inventories47,517 — 47,517 
Prepaid expenses and other23,399 — 23,399 
Property, plant and equipment4,434 — 4,434 
Other intangible assets318,365 — 318,365 
Other assets325 — 325 
Total assets acquired$541,554 $— $541,554 
Accounts payable65,761 — 65,761 
Deferred revenue20,345 — 20,345 
Short-term debt44,338 — 44,338 
Other liabilities10,115 — 10,115 
Income tax payable7,576  7,576 
Deferred tax liability93,823 7,611 101,434 
Other long-term liabilities4,524 — 4,524 
Long-term debt12,053 — 12,053 
Total liabilities assumed$258,535 $7,611 $266,146 
Preliminary fair value of net assets acquired283,019 275,408 
Preliminary allocation to goodwill$327,748 $335,359 

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. For assets and liabilities excluded from the scope of the intangible asset and property, plant and equipment valuation, the Company considered net book value to be a reasonable proxy as of the acquisition close date.

15


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

Estimated Fair ValueEstimated 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). Significant inputs using the Excess Earnings Method include estimated revenue, expenses based on actuals and forecast, and a discount rate based on a weighted average cost of capital for customer relationships of 15% for Spain, 16.5% for Brazil and 14.0% for Spain foreign sourced projects and for order backlog of 8.5% for Spain, 9.5% for Brazil and 7.5% for Spain foreign sourced projects. Significant inputs to the Relief from Royalty method model include estimates of future revenue, economic life, estimated royalty rate of 1.25%, and a discount rate based on a weighted average cost of capital 15.2%. 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 through June 30, 2022 are $122.6 million and $10.9 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 including amortization of intangibles, debt financing expenses and tax benefits. 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, 2021.

Three Months Ended
June 30,
Six Months Ended
June 30,
(in millions)2022202120222021
Revenue
$424.9 $263.1 $733.4 $536.9 
Net income (loss)
$(2.8)$5.0 $(23.9)$(7.3)

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4.    Accounts Receivable

Accounts receivable consists of the following (in thousands):
June 30, 2022December 31, 2021
Accounts receivable$458,438 $236,149 
Less: allowance for doubtful accounts(538)(140)
Accounts receivable, net$457,900 $236,009 

5.    Inventories

Inventories consist of the following (in thousands):
June 30, 2022December 31, 2021
Raw materials$195,600 $85,470 
Finished goods142,402 127,598 
Reserve for excess or obsolete inventory(8,051)(7,415)
Total$329,951 $205,653 

6.    Property, Plant and Equipment

Property, plant and equipment consisted of the following (in thousands, except useful lives):
Estimated Useful Lives (Years)June 30, 2022December 31, 2021
LandN/A$1,550 $1,340 
Buildings and land improvements
15-39
6,433 2,451 
Manufacturing equipment717,265 13,924 
Furniture, fixtures and equipment
5-7
1,405 476 
Vehicles5266 161 
Hardware and software
3-5
2,305 1,683 
Assets in progress1,263 1,880 
Total30,487 21,915 
Less: accumulated depreciation(12,685)(11,223)
Property, plant and equipment, net$17,802 $10,692 

Depreciation expense was $0.6 million and $0.6 million for the three months ended June 30, 2022 and 2021, respectively, of which $0.4 million and $0.5 million, respectively, was allocated to cost of revenue and $0.2 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 June 30, 2022 and 2021.

Depreciation expense was $1.2 million and $1.2 million for the six months ended June 30, 2022 and 2021, respectively, of which $0.9 million and $1.0 million, respectively, was allocated to cost of revenue and $0.3 million and $0.2 million, respectively, was included in depreciation and amortization in the accompanying condensed consolidated statements of operations for the six months ended June 30, 2022 and 2021.

17


7.    Goodwill and Other Intangible Assets

Goodwill
Prior to the STI Acquisition, goodwill, related to Former Parent’s acquisition of the Company, was recorded as $121.6 million and was subsequently impaired. Total accumulated impairment as of June 30, 2022 was $51.9 million.

With the STI Acquisition in January 2022, the Company recorded an additional $335.4 million of goodwill as a result of the STI acquisition and the Company’s reporting units became Array Legacy Operations and the newly acquired STI Operations, which had goodwill of $69.7 million and $309.0 million, respectively, at June 30, 2022 and $69.7 million and zero, respectively, at December 31, 2021. Goodwill is not deductible for tax purposes.

Changes in the carrying amount of goodwill by operating segment during the six months ended June 30, 2022 are shown below (in thousands):
Array Legacy Operations Segment
STI Operations SegmentTotal
Beginning Balance
$69,727 $ $69,727 
Acquisition of STI
 335,359 $335,359 
Foreign currency impact (26,380)$(26,380)
Ending Balance
$69,727 $308,979 $378,706 

Each quarter the Company evaluates if facts and circumstances indicate that it is more-likely-than-not that the fair value of its reporting units is less than their carrying value, which would require the Company to perform an interim goodwill impairment test. During the quarter ended March 31, 2022, the Company determined it was necessary to perform an interim goodwill impairment test for the Array Legacy Operations reporting unit. The Company performed a quantitative goodwill impairment test and determined the estimated fair value of the reporting unit exceeded the carrying value assigned to that reporting unit; as a result, goodwill was not impaired.
18



Other Intangible Assets
Other intangible assets consisted of the following (in thousands, except useful lives):
Estimated Useful Lives (Years)June 30, 2022December 31, 2021
Amortizable:
Costs:
Developed technology14$203,800 $203,800 
Customer relationships10309,601 89,500 
Backlog147,165  
Trade name2026,203  
Total amortizable intangibles586,769 293,300 
Accumulated amortization:
Developed technology87,069 79,790 
Customer relationships64,310 49,057 
Backlog23,099  
Trade name729  
Total accumulated amortization175,207 128,847 
Total amortizable intangibles, net411,562 164,453 
Non-amortizable costs:
Trade name10,300 10,300 
Total other intangible assets, net$421,862 $174,753 

Amortization expense related to intangible assets amounted to $24.1 million and $5.9 million for the three months ended June 30, 2022 and 2021, respectively, and $46.7 million and $11.8 million for the six months ended June 30, 2022 and 2021, respectively.

Estimated future annual amortization expense for the above amortizable intangible assets for the remaining periods through June 30, as follows (in thousands):
Amount
2022$47,086 
202348,402 
202447,007 
202547,007 
202642,700 
Thereafter179,360 
$411,562 
19



Long-lived assets, including intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable.

During the quarter ended March 31, 2022, the Company determined it was necessary to review long-lived assets, including intangible assets related to the Array Legacy Operations reporting unit, for impairment. The Company determined the undiscounted cash flows expected to result from the use of the asset group and its eventual disposition were greater than the carrying amount and therefore concluded there was no impairment.

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 June 30, 2022 was $12.0 million and is recorded in other assets on the condensed consolidated balance sheets. There is no impairment recorded for the six months ended June 30, 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 benefit of $14.2 million and $1.8 million for the three months ended June 30, 2022 and 2021, respectively, and income tax benefit of $26.6 million and $0.1 million for the six months ended June 30, 2022 and 2021, respectively. The tax benefit in the three months ended June 30, 2022 was favorably impacted by non-taxable contingent income, lower transaction costs and mix of income. The tax benefit in the three months ended June 30, 2021 was unfavorably impacted by non-deductible amounts for equity-based compensation and Follow-on Offering costs. The tax benefit in the six months ended June 30, 2022 was favorably impacted by mix of earnings in foreign jurisdictions offset by non-deductible amounts for officers’ compensation and transaction costs. The tax benefit in the six months ended June 30, 2021 was unfavorably impacted by non-deductible equity based compensation as well as initial public offering and secondary offering costs.

For the three and six months ended June 30, 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 Credit Facility

Long-term senior secured credit facility consisted of the following (in thousands):
June 30, 2022December 31, 2021
Term loan facility$324,625 $326,775 
Revolving credit facility68,000  
392,625 326,775 
Less discount and issuance costs
(21,206)(23,291)
Long-term portion, net of debt discount and issuance costs371,419 303,484 
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$367,119 $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 (the “First Amendment”) and again on February 26, 2021 (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”). The First Amendment, in the case of Eurocurrency borrowings, lowered the London interbank offered rate floor to 50 basis points from 100 basis points and lowered 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. The Second Amendment increased 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 $68.0 million and no outstanding balance as of June 30, 2022 and December 31, 2021, respectively, $35.3 million and $13.6 million in standby letters of credit at June 30, 2022 and December 31, 2021, respectively, and availability of $96.7 million and $186.4 million at June 30, 2022 and December 31, 2021, respectively. The Revolving Credit Facility pays interest depending on the contracted rate for the loan which is either for the Eurocurrency Rate Loans at LIBOR plus 3.25% and for Base Rate Loans at the higher of the Prime Rate, 1/2 of 1% above the Federal Funds Rate or the Eurocurrency rate for the Dollar deposits for one month Interest Period, after giving effect to any floor plus 1%, plus 2.25%.

Term Loan Facility
The Term Loan Facility had a balance of $324.6 million and $326.8 million as of June 30, 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 $21.2 million and $23.3 million as of June 30, 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 June 30, 2022 is 6.03%. 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 six months ended June 30, 2022 and 2021.

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11.    Convertible Debt

Convertible debt consisted of the following (in thousands):
June 30, 2022December 31, 2021
1.00% Senior unsecured convertible notes
$425,000 $425,000 
Less: unamortized discount and issuance costs(12,192)(13,137)
1.00% Senior unsecured convertible notes, net (1)
$412,808 $411,863 
(1) Effective interest rate for the Convertible Notes as of June 30, 2022 and December 31, 2021 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 six months ended June 30, 2022 and none have been converted to date. Also, given that the average market price of the Company’s common stock has not exceeded the exercise price since inception, there was no dilutive impact for the six months ended June 30, 2022.

Capped Calls

In connection with the issuances of the Convertible Notes, the Company paid $52.9 million, in aggregate, to enter into capped call option agreements to reduce the potential dilution to holders of the Company’s common stock after a conversion of the Convertible Notes. Specifically, upon the exercise of the capped call instruments issued pursuant to the agreements (the “Capped Calls”), the Company would receive shares of its common stock equal to approximately 17.8 million shares (a) multiplied by (i) the lower of $36.0200 or the then-current market price of its common stock, less (ii) the applicable exercise price, and (b) divided by the then-current market price of its common stock. The results of this formula are that the Company would receive more shares as the market price of its common stock exceeds the exercise price and approaches the cap, which was initially $36.0200 per share.

Consequently, if the Convertible Notes are converted, then the number of shares to be issued by the Company would be effectively partially offset by the shares of common stock received by the Company under the Capped Calls as they are exercised. The formula above would be adjusted in the event of certain specified extraordinary events affecting the Company, including a merger; a tender offer; nationalization, insolvency or delisting of the Company’s common stock; changes in law; failure to deliver; insolvency filing; stock splits, combinations, dividends, repurchases or similar events; or an announcement of certain of the preceding actions.

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The Company can also elect to receive the equivalent value of cash in lieu of shares of common stock upon settlement, except in certain circumstances. The Capped Calls expire on December 1, 2028 and terminate upon the occurrence of certain extraordinary events such as a merger, tender offer, nationalization, insolvency, delisting, event of default, a change in law, failure to deliver, an announcement of certain of these events, or an early conversion of the Convertible Notes. Although intended to reduce the net number of shares of common stock issued after a conversion of the Convertible Notes, the Capped Calls were separately negotiated transactions, are not a part of the terms of the Convertible Notes, and do not affect the rights of the holders of the Convertible Notes. The Capped Calls meet the criteria for equity classification because they are indexed to the Company’s common stock and the Company has discretion to settle the Capped Calls in shares or cash. As a result, the amount paid for the Capped Calls was recorded as a reduction to additional paid-in capital. The Capped Calls are excluded from the calculation of diluted net income (loss) per share attributable to common stockholders as their effect is antidilutive.

12.     Other Debt

In connection with the STI Acquisition, the Company assumed debt obligations of STI. As of June 30, 2022, related debt balances were $47.0 million in short-term debt and $