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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 September 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/99dbb5f40235eee015f1371f05079977-arry-20220930_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 November 7, 2022, there were 150,490,517 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)

September 30, 2022December 31, 2021
ASSETS
Current assets
Cash and cash equivalents$62,778 $367,670 
Accounts receivable, net485,174 236,009 
Inventories, net269,775 205,653 
Income tax receivables12,765 9,052 
Prepaid expenses and other41,309 33,649 
Total current assets871,801 852,033 
Property, plant and equipment, net20,024 10,692 
Goodwill359,629 69,727 
Other intangible assets, net384,084 174,753 
Deferred tax assets18,785 9,345 
Other assets27,502 26,429 
Total assets$1,681,825 $1,142,979 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable$199,358 $91,392 
Accounts payable - related party478 610 
Accrued expenses and other91,102 38,494 
Accrued warranty reserve4,237 3,192 
Income tax payable10,587 60 
Deferred revenue154,692 99,575 
Current portion of contingent consideration 1,773 
Current portion of debt47,686 4,300 
Other current liabilities4,981 5,909 
Total current liabilities513,121 245,305 
Long-term liabilities
Deferred tax liability74,139  
Contingent consideration, net of current portion7,113 12,804 
Other long-term liabilities9,113 5,557 
Long-term warranty3,852  
Long-term debt, net of current portion725,109 711,056 
Total long-term liabilities819,326 729,417 
Total liabilities1,332,447 974,722 
1

Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited) (continued)
(in thousands, except per share and share amounts)
September 30, 2022December 31, 2021
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 September 30, 2022 and December 31, 2021, respectively; liquidation preference of $400.0 million and $350.0 million as of September 30, 2022 and December 31, 2021, respectively
287,561 237,462 
Stockholders’ equity (deficit)
Preferred stock of $0.001 par value - 4,500,000 shares authorized; none issued as of September 30, 2022 and December 31, 2021
  
Common stock of $0.001 par value - 1,000,000,000 shares authorized; 150,334,261 and 135,026,940 shares issued as of September 30, 2022 and December 31, 2021, respectively
150 135 
Additional paid-in capital392,862 202,562 
Accumulated deficit(258,360)(271,902)
Accumulated other comprehensive income(72,835) 
Total stockholders’ equity (deficit)61,817 (69,205)
Total liabilities, redeemable perpetual preferred stock and stockholders’ equity$1,681,825 $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
September 30,
Nine Months Ended
September 30,
2022202120222021
Revenue$515,024 $188,686 $1,235,475 $633,442 
Cost of revenue434,801 182,789 1,088,719 560,872 
Gross profit80,223 5,897 146,756 72,570 
Operating expenses
General and administrative38,911 18,493 107,881 58,279 
Contingent consideration(572)936 (5,981)1,071 
Depreciation and amortization23,364 5,984 70,405 17,949 
Total operating expenses61,703 25,413 172,305 77,299 
Income (loss) from operations18,520 (19,516)(25,549)(4,729)
Other income (expense)
Other expense, net(399)(297)(27)(497)
Legal settlement42,750  42,750  
Foreign currency gain (loss)(159) 1,968  
Interest expense(8,746)(13,109)(23,709)(28,769)
Total other income (expense)33,446 (13,406)20,982 (29,266)
Income (loss) before income tax (benefit) expense51,966 (32,922)(4,567)(33,995)
Income tax (benefit) expense11,144 (5,361)(18,109)(5,493)
Net income (loss)40,822 (27,561)13,542 (28,502)
Preferred dividends and accretion12,257 5,479 36,045 5,479 
Net income (loss) to common shareholders$28,565 $(33,040)$(22,503)$(33,981)
Income (loss) per common share
Basic$0.19 $(0.25)$(0.15)$(0.26)
Diluted$0.19 $(0.25)$(0.15)$(0.26)
Weighted average number of common shares
Basic150,322 130,955 149,604 128,315 
Diluted151,382 130,955 149,604 128,315 

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
September 30,
Nine Months Ended
September 30,
2022202120222021
Net income (loss)$40,822 $(27,561)$13,542 $(28,502)
Change in foreign currency translation adjustments(34,106) (72,835) 
Comprehensive income (loss)$6,716 $(27,561)$(59,293)$(28,502)

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 September 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 June 30, 2022413 $293,974 — $— 150,279 $150 $401,614 $(299,182)$(38,729)$63,853 
Equity-based compensation— — — — 55 — 4,097 — — 4,097 
Issuance of Series A Redeemable Perpetual Preferred Stock, net of fees— — — — — — (592)— — (592)
Preferred cumulative dividends plus accretion— 12,257 — — — — (12,257)— — (12,257)
Dividends paid(13)(18,670)— — — — — — — — 
Net income— — — — — — — 40,822 — 40,822 
Other comprehensive loss— — — — — — — — (34,106)(34,106)
Balance at September 30, 2022400 $287,561 — $— 150,334 $150 $392,862 $(258,360)$(72,835)$61,817 

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 September 30, 2021
Temporary EquityPermanent Equity
Series A Redeemable Perpetual Preferred StockPreferred StockCommon Stock
SharesAmountSharesAmountSharesAmountAdditional Paid-In CapitalAccumulated DeficitTotal Stockholders’ Equity (Deficit)
Balance at June 30, 2021 $ — $— 126,994 $127 $149,893 $(222,440)$(72,420)
Equity-based compensation— — — — — — 2,160 — 2,160 
Issuance of Series A Redeemable Perpetual Preferred Stock, net of fees350 229,799 — — — — — — — 
Issuance of common stock, net— — — — 7,875 8 104,756 — 104,764 
Preferred cumulative dividends plus accretion— 5,479 — — — — (5,479)— (5,479)
Net loss— — — — — — — (27,561)(27,561)
Balance at September 30, 2021350 $235,278 — $— 134,869 $135 $251,330 $(250,001)$1,464 

6



Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (Deficit) (continued)
(unaudited)
(in thousands)
Nine Months Ended September 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 — $— 135,026 $135 $202,562 $(271,902)$ $(69,205)
Equity-based compensation— — — — 161 — 11,454 — — 11,454 
Issuance of Series A Redeemable Perpetual Preferred Stock, net of fees50 32,724 — — — — (1,172)— — (1,172)
Issuance of common stock, net— — — — 15,147 15 216,063 — — 216,078 
Preferred cumulative dividends plus accretion13 36,045 — — — — (36,045)— — (36,045)
Dividends paid(13)(18,670)— — — — — — — — 
Net income— — — — — — — 13,542 — 13,542 
Other comprehensive loss— — — — — — — — (72,835)(72,835)
Balance at September 30, 2022400 $287,561 — $— 150,334 $150 $392,862 $(258,360)$(72,835)$61,817 



7



Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders’ Equity (Deficit) (continued)
(unaudited)
(in thousands)
Nine Months Ended September 30, 2021
Temporary EquityPermanent Equity
Series A Redeemable Perpetual Preferred StockPreferred StockCommon Stock
SharesAmountSharesAmountSharesAmountAdditional Paid-In CapitalAccumulated DeficitTotal Stockholders’ Equity (Deficit)
Balance at December 31, 2020 $ — $— 126,994 $127 $140,473 $(221,499)$(80,899)
Equity-based compensation— — — — — — 11,580 — 11,580 
Issuance of Series A Redeemable Perpetual Preferred Stock, net of fees350 229,799 — — — — — — — 
Issuance of common stock, net— — — — 7,875 8 104,756 — 104,764 
Preferred cumulative dividends plus accretion— 5,479 — — — — (5,479)— (5,479)
Net loss— — — — — — — (28,502)(28,502)
Balance at September 30, 2021350 $235,278 — $— 134,869 $135 $251,330 $(250,001)$1,464 


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)

Nine Months Ended
September 30,
20222021
Cash flows from operating activities
Net income (loss)$13,542 $(28,502)
Adjustments to reconcile net income (loss) to net cash provided by, (used in) operating activities:
Provision for (recovery of) bad debts660 (574)
Deferred tax expense(30,928)(7,036)
Depreciation and amortization71,207 19,454 
Amortization of debt discount and issuance costs5,003 13,653 
Equity-based compensation11,677 11,706 
Contingent consideration(5,981)1,071 
Warranty provision4,341 305 
Provision for inventory obsolescence(2,333)654 
Changes in operating assets and liabilities, net of business acquisition
Accounts receivable(139,036)(50,840)
Inventories(14,273)(55,321)
Income tax receivables(3,610)9,676 
Prepaid expenses and other11,146 (5,770)
Accounts payable42,205 1,948 
Accounts payable - related party(132)(1,622)
Accrued expenses and other41,271 1,683 
Warranty payments(373) 
Income tax payable2,951 (8,185)
Lease liabilities1,914 337 
Deferred revenue34,772 (68,474)
Net cash provided by, (used in) operating activities44,023 (165,837)
Cash flows from investing activities
Purchase of property, plant and equipment(6,690)(2,252)
Acquisition of STI, net of cash acquired(373,816) 
Investment in equity security (11,975)
Net cash used in investing activities(380,506)(14,227)
Cash flows from financing activities
Proceeds from Series A issuance33,098 224,987 
Proceeds from common stock issuance15,885 120,645 
Series A equity issuance costs(1,167)(7,195)
Common stock issuance costs(450)(3,873)
Dividends paid on Series A Preferred(18,670) 
Payments on revolving credit facility(116,000)(102,000)
Proceeds from issuance of other debt39,219  
Proceeds from revolving credit facility116,000 102,000 
9



Array Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited) (continued)
(in thousands)
Nine Months Ended
September 30,
20222021
Principal payments on debt(33,286)(132,150)
Contingent consideration(1,483)(7,810)
Debt issuance costs (6,590)
Net cash provided by financing activities33,146 188,014 
Effect of exchange rate changes on cash and cash equivalent balances(1,555) 
Net change in cash and cash equivalents(304,892)7,950 
Cash and cash equivalents, beginning of period367,670 108,441 
Cash and cash equivalents, end of period$62,778 $116,391 
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. 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 nine months ended September 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 the Company 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
The Company continues to closely monitor the ongoing impact of the COVID-19 pandemic in all the locations where it operates. The Company’s priority remains the welfare of its employees. The Company expects persistent waves of COVID-19, including variants of the virus, to remain a headwind into the near future. The duration and extent to which it will continue to adversely impact the Company’s business and results of operations remain uncertain and could be material.

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 Stock. The Revolving Credit Facility has $166.6 million of availability.

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

Inflation
The Company could see an impact from elevated inflation and other operating costs. Interest rates have increased quickly and substantially as central banks in developed countries raise interest rates in an effort to subdue inflation, while government deficits and debt remain at high levels in many global 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.

12


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 revenue 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 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
13


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 nine months ended September 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 AdjustmentSeptember 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 preliminary estimates of the fair values of the assets acquired and liabilities assumed were estimated to approximate carrying values since they are short term in nature, and they are receivable or payable on demand. These assets and liabilities were cash and cash equivalents, accounts receivable, prepaid expenses and other, accounts payable, other liabilities, and deferred revenue. 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 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 and Level 3 inputs in the fair value hierarchy 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 weighted average cost of capital was determined based on the Company’s capital structure, cost of capital, inherent business risk profile and long-term growth expectations. 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 September 30, 2022 are $237.2 million and $14.1 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
September 30,
Nine Months Ended
September 30,
(in millions)2022202120222021
Revenue
$515.0 $480.1 $1,243.0 $764.8 
Net income (loss)
$52.1 $(22.7)$48.7 $(44.6)

16


4.    Accounts Receivable

Accounts receivable consists of the following (in thousands):
September 30, 2022December 31, 2021
Accounts receivable$485,869 $236,149 
Less: allowance for doubtful accounts(695)(140)
Accounts receivable, net$485,174 $236,009 

5.    Inventories

Inventories consist of the following (in thousands):
September 30, 2022December 31, 2021
Raw materials$166,260 $85,470 
Finished goods108,597 127,598 
Reserve for excess or obsolete inventory(5,082)(7,415)
Total$269,775 $205,653 

6.    Property, Plant and Equipment

Property, plant and equipment consisted of the following (in thousands, except useful lives):
Estimated Useful Lives (Years)September 30, 2022December 31, 2021
LandN/A$1,563 $1,340 
Buildings and land improvements
15-39
7,318 2,451 
Manufacturing equipment717,893 13,924 
Furniture, fixtures and equipment
5-7
3,341 476 
Vehicles5527 161 
Hardware and software
3-5
2,487 1,683 
Assets in progress3,684 1,880 
Total36,813 21,915 
Less: accumulated depreciation(16,789)(11,223)
Property, plant and equipment, net$20,024 $10,692 

Depreciation expense was $0.7 million and $0.6 million for the three months ended September 30, 2022 and 2021, respectively, of which $0.4 million and $0.5 million, respectively, was allocated to cost of revenue and $0.3 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 September 30, 2022 and 2021.

Depreciation expense was $1.8 million and $1.8 million for the nine months ended September 30, 2022 and 2021, respectively, of which $1.2 million and $1.5 million, respectively, was allocated to cost of revenue and $0.6 million and $0.3 million, respectively, was included in depreciation and amortization in the accompanying condensed consolidated statements of operations for the nine months ended September 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 September 30, 2022 was $51.9 million.

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 $289.9 million, respectively, at September 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 nine months ended September 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 $335,359 
Foreign currency impact (45,457)$(45,457)
Ending Balance
$69,727 $289,902 $359,629 

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)September 30, 2022December 31, 2021
Amortizable:
Costs:
Developed technology14$203,800 $203,800 
Customer relationships10295,405 89,500 
Backlog144,132  
Trade name2024,518  
Total amortizable intangibles567,855 293,300 
Accumulated amortization:
Developed technology90,709 79,790 
Customer relationships70,606 49,057 
Backlog31,794  
Trade name962  
Total accumulated amortization194,071 128,847 
Total amortizable intangibles, net373,784