UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Earliest Event Reported: August 8, 2023
(Exact Name of Registrant as Specified in its Charter)
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (505 ) 881-7567
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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. ☐
Item 2.02 Results of Operations and Financial Condition
On August 8, 2023, Array Technologies, Inc. (the “Company”) issued a press release setting forth its financial results for the quarter ended June 30, 2023. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference herein. The information included in Item 2.02 of this Current Report on Form 8-K (this “Current Report”), including Exhibit 99.1,is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any other filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, regardless of any general incorporation language in any such filing, except as shall be expressly set forth by specific reference in such a filing.
Item 7.01 Regulation FD Disclosure
On August 8, 2023, at 5:00 p.m. Eastern Time, the Company will make a presentation about its second quarter 2023 earnings as noted in the press release described in Item 2.02 above. A copy of the presentation slides is attached hereto as Exhibit 99.2. Additionally, the Company has posted the presentation on its website at www.arraytechinc.com. The information included in Item 7.01 of this Current Report, including Exhibit 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section, nor shall it be incorporated by reference in any other filing under the Securities Act, or the Exchange Act, regardless of any general incorporation language in any such filing, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| Exhibit No. | Exhibit Title or Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Array Technologies, Inc. | ||||||||||||||
| Date: August 8, 2023 | By: | /s/ Tyson Hottinger | ||||||||||||
| Name: Tyson Hottinger | ||||||||||||||
| Title: Chief Legal Officer | ||||||||||||||
August 8, 2023
Array Technologies, Inc. Reports Financial Results for the Second Quarter 2023 – Strong execution delivers revenue of $507.7 million and record gross margin of 29.6%
Second Quarter 2023 Highlights
•Revenue of $507.7 million
•Net income to common shareholders of $52.0 million
•Adjusted EBITDA(1) of $115.6 million
•Basic and diluted net income per share of $0.34
•Adjusted diluted net income per share(1) of $0.47
•Executed contracts and awarded orders at June 30, 2023 totaling $1.7 billion
(1) A reconciliation of the most comparable GAAP measure to its Non-GAAP measure is included below.
ALBUQUERQUE, NM — (GLOBE NEWSWIRE) — Array Technologies (NASDAQ: ARRY) (“Array” or “the Company”), a leading provider of tracker solutions and services for utility-scale solar energy projects, today announced financial results for its second quarter ended June 30, 2023.
“Array delivered another strong performance in the second quarter as we exceeded expectations across the board. Revenue grew 21% from the prior year, anchored by 124% year-over-year growth in our STI segment. Gross margin at 29.6% was particularly strong as we took advantage of cost-saving opportunities in the quarter and an increase in higher-margin non-tracker sales. Capitalizing on the strong margin performance, Adjusted EBITDA was $116 million for the second quarter, which was a $95 million improvement from the prior year. And finally, we generated $57 million of free cash flow in the first half of 2023, leaving us with an ending cash balance at June 30, 2023 of $156 million, which represents an improvement of $105 million from June 30, 2022,” said Kevin Hostetler, Chief Executive Officer.
Mr. Hostetler continued, “We also saw a meaningful increase in our sequential bookings, winning approximately $600 million in the quarter. We were happy to see the preliminary guidance come out on IRA domestic content which led to an improved momentum in our conversion of pipeline to orders. That said, we did see a larger proportion of these bookings represent 2024 deliveries than we had expected going into the quarter. This fact, combined with larger than anticipated pushouts due to module availability, further IRA clarity, and permitting issues, has negatively impacted anticipated revenue for 2023. However, it is important to note that despite a lower outlook for revenue, we are increasing our forecasted Adjusted EBITDA and Adjusted EPS as we have increased our full-year gross margin expectation. Further, by delivering more earnings on less revenue, we are able to drive better than forecasted free cash flow performance this year, which we will use to accelerate our deleveraging.”
Mr. Hostetler concluded, “While we are disappointed in the progression of the elements we cannot control, we steadfastly remain focused on the execution of our strategy. That includes delivering a strong 2023 while positioning ourselves for success as the industry moves into its next phase of growth. We will enter 2024 with strong bookings momentum, a much-improved balance sheet, a multi-product offering enabling us to expand our target market while delivering industry-leading gross margin, and a stronger operating system that will continue to improve shareholder returns.”
1
Second Quarter 2023 Financial Results
Revenue increased 21% to $507.7 million, compared to $419.9 million for the prior-year period resulting from both an increase in the total number of MWs shipped and an increase in ASP due to improved pass-through pricing to our customers.
Gross profit increased 276% to $150.0 million compared to $39.9 million in the prior year period, driven by both higher volume and an increase in gross profit as a percent of revenue. Gross margin increased to 29.6% from 9.5% driven by an improvement in pass-through pricing to customers, cost-saving opportunities, and an increase in non-tracker sales.
Operating expenses increased to $53.8 million compared to $53.3 million during the same period in the prior year. The increase is primarily related to higher census and professional fees, partly offset by $13.4 million in lower amortization expense in 2023 compared to 2022, which had elevated amortization costs related to the STI acquisition.
Net income to common stockholders was $52.0 million compared to a net loss of $17.2 million during the same period in the prior year, and basic and diluted income per share was $0.34 compared to basic and diluted loss per share of $0.11 during the same period in the prior year.
Adjusted EBITDA increased to $115.6 million, compared to $20.9 million for the prior-year period.
Adjusted net income was $71.1 million compared to adjusted net income of $12.9 million during the same period in the prior year and adjusted basic and diluted adjusted net income per share was $0.47 compared to adjusted diluted net income per share of $0.09 during the same period in the prior year.
Executed Contracts and Awarded Orders
Total executed contracts and awarded orders at June 30, 2023 were $1.7 billion, with $1.4 billion from our Array Legacy Operations segment and $0.3 billion from STI Norland.
Full Year 2023 Guidance
For the year ending December 31, 2023, the company expects:
•Revenue to be in the range of $1,650 million to $1,725 million
•Adjusted EBITDA(2) to be in the range of $280 million to $295 million
•Adjusted net income per share(2) to be in the range of $1.00 to $1.07
(2) A reconciliation of projected adjusted EBITDA and adjusted net income per share, which are forward-looking measures that are not prepared in accordance with GAAP, to the most directly comparable GAAP financial measures, is not provided because we are unable to provide such reconciliation without unreasonable effort. The inability to provide a quantitative reconciliation is due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the components of the applicable GAAP measures and non-GAAP adjustments may be recognized. The GAAP measures may include the impact of such items as non-cash share-based compensation, revaluation of the fair-value of our contingent consideration, and the tax effect of such items, in addition to other items we have historically excluded from adjusted EBITDA and adjusted net income per share. We expect to continue to exclude these items in future disclosures of these non-GAAP measures and may also exclude other similar items that may arise in the future (collectively, “non-GAAP adjustments”). The decisions and events that typically lead to the recognition of non-GAAP adjustments are inherently unpredictable as to if or when they may occur. As such, for our 2023 outlook, we have not included estimates for these items and are unable to address the probable significance of the unavailable information, which could be material to future results.
2
Conference Call Information
Array management will host a conference call today at 5:00 p.m. Eastern Time to discuss the Company’s financial results.
The conference call can be accessed live over the phone by dialing (877)-451-6152 (domestic) or (201)-389-0879 (international). A telephonic replay will be available approximately three hours after the call by dialing (844)-512-2921, or for international callers, (412)-317-6671. The passcode for the live call and the replay is 13739433. The replay will be available until 11:59 p.m. (ET) on August 22, 2023.
Interested investors and other parties can listen to a webcast of the live conference call by logging onto the Investor Relations section of the Company's website at http://ir.arraytechinc.com. The online replay will be available for 30 days on the same website immediately following the call.
To learn more about Array Technologies, please visit the company's website at http://ir.arraytechinc.com.
About Array Technologies, Inc.
Array Technologies (NASDAQ: ARRY) is a leading American company and global provider of utility-scale solar tracker technology. Engineered to withstand the harshest conditions on the planet, Array’s high-quality solar trackers and sophisticated software maximize energy production, accelerating the adoption of cost-effective and sustainable energy. Founded and headquartered in the United States, Array relies on its diversified global supply chain and customer-centric approach to deliver, commission and support solar energy developments around the world, lighting the way to a brighter, smarter future for clean energy. For more news and information on Array, please visit arraytechinc.com.
Investor Relations Contact:
Array Technologies, Inc.
Investor Relations
505-437-0010
investors@arraytechinc.com
Forward-Looking Statements
This press release 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 projected future results of operations, business strategies, and industry and regulatory environment. 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.
Array’s actual results and the timing of events could materially differ from those anticipated in such forward-looking statements as a result of certain risks, uncertainties and other factors, including without limitation: changes in the demand for solar energy projects; a loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment; failure to retain key personnel or failure to attract additional qualified personnel; defects or performance problems in our products that could result in loss of customers, reputational damage, a loss of revenue, and warranty, indemnity and product liability claims; a drop in the price of electricity derived from the utility grid or from alternative energy sources; challenges in our ability to consolidate the financial reporting of our acquired foreign subsidiaries; delays, disruptions or quality control problems in our product development operations; the effects of a further increase in interest rates, or a reduction in the availability of tax equity or project debt capital in the global financial markets, which could make it difficult for customers to finance the cost of a solar energy system and could
3
reduce the demand for our products; changes to tax laws and regulations that are applied adversely to us or our customers; existing electric utility industry policies and regulations, and any subsequent changes, that may present technical, regulatory and economic barriers to the purchase and use of solar energy systems; the interruption of the flow of materials from international vendors, including as a result of the imposition of additional duties, tariffs and other charges or restrictions on imports and exports; changes in the global trade environment, including the imposition of import tariffs; economic, political and market conditions, including the Russian-Ukraine conflict, uncertain credit and global financial markets resulting from increasing inflation and interest rates along with recent bank failures, and the COVID-19 pandemic; the reduction, elimination or expiration of government incentives for, or regulations mandating the use of, renewable energy and solar energy specifically; our ability to, obtain, maintain, protect, defend or enforce, our intellectual property and other proprietary rights; significant changes in the costs of raw materials; the implementation of the IRA may not deliver as much growth as we are anticipating; our ability to remediate our material weaknesses on a timely basis or at all; the effect of our substantial indebtedness on our financial condition; the occurrence of cybersecurity incidents, including unauthorized disclosure of personal or sensitive data or theft of confidential information; and the other risks and uncertainties described in more detail in the Company’s most recent Annual Report on Form 10-K and other documents on file with the SEC, each of which can be found on our website www.arraytechinc.com.
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.
Non-GAAP Financial Information
This press release includes certain financial measures that are not presented in accordance with U.S. generally accepted accounting principles (“GAAP”), including Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share. We define Adjusted EBITDA as net income (loss) plus (i) other (income) expense, (ii) foreign currency (gain) loss, (iii) preferred dividends and accretion, (iv) interest expense, (v) income tax (benefit) expense, (vi) depreciation expense, (vii) amortization of intangibles, (viii) equity-based compensation, (ix) change in fair value of derivative assets, (x) change in fair value of contingent consideration, (xi) certain legal expense, (xii) certain acquisition costs, and (xiii) other costs. We define Adjusted Net Income as net income (loss) plus (i) amortization of intangibles, (ii) amortization of debt discount and issuance costs (iii) preferred accretion, (iv) equity-based compensation, (v) change in fair value of derivative assets, (vi) change in fair value of contingent consideration, (vii) certain legal expense, (viii) certain acquisition related costs, (ix) other costs, and (x) income tax (expense) benefit of adjustments. A detailed reconciliation between GAAP results and results excluding special items (“non-GAAP”) is included within this presentation. We calculate net income (loss) per share as net income (loss) to common shareholders divided by the basic and diluted weighted average number of shares outstanding for the applicable period and we define Adjusted Net Income per share as Adjusted Net Income (as detailed above) divided by the basic and diluted weighted average number of shares outstanding for the applicable period.
We believe that these non-GAAP financial measures are provided to enhance the reader’s understanding of our past financial performance and our prospects for the future. Our management team uses these non-GAAP financial measures in assessing the Company’s performance, as well as in planning and forecasting future periods. The non-GAAP financial information is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies.
Among other limitations, Adjusted EBITDA and Adjusted Net Income do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; do not reflect income tax expense or benefit; and other companies in our industry may calculate Adjusted EBITDA and Adjusted Net Income differently than
4
we do, which limits their usefulness as comparative measures. Because of these limitations, Adjusted EBITDA and Adjusted Net Income should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA and Adjusted Net Income on a supplemental basis. You should review the reconciliation of net income (loss) to Adjusted EBITDA and Adjusted Net Income below and not rely on any single financial measure to evaluate our business.
5
Array Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets (unaudited)
(in thousands, except per share and share amounts)
| June 30, 2023 | December 31, 2022 | ||||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 155,966 | $ | 133,901 | |||||||
| Accounts receivable, net of allowance of $1,651 and $1,888, respectively | 502,363 | 421,183 | |||||||||
| Inventories | 206,857 | 233,159 | |||||||||
| Income tax receivables | 312 | 3,532 | |||||||||
| Prepaid expenses and other | 42,740 | 39,434 | |||||||||
| Total current assets | 908,238 | 831,209 | |||||||||
| Property, plant and equipment, net | 30,674 | 23,174 | |||||||||
| Goodwill | 441,255 | 416,184 | |||||||||
| Other intangible assets, net | 375,527 | 386,364 | |||||||||
| Deferred income tax assets | — | 16,466 | |||||||||
| Derivative assets | 64,014 | — | |||||||||
| Other assets | 33,076 | 32,655 | |||||||||
| Total assets | $ | 1,852,784 | $ | 1,706,052 | |||||||
| LIABILITIES, REDEEMABLE PERPETUAL PREFERRED STOCK AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 188,633 | $ | 170,430 | |||||||
| Accrued expenses and other | 61,156 | 54,895 | |||||||||
| Accrued warranty reserve | 1,540 | 3,690 | |||||||||
| Income tax payable | 16,711 | 6,881 | |||||||||
| Deferred revenue | 114,810 | 178,922 | |||||||||
| Current portion of contingent consideration | 1,809 | 1,200 | |||||||||
| Current portion of debt | 37,450 | 38,691 | |||||||||
| Other current liabilities | 12,844 | 10,553 | |||||||||
| Total current liabilities | 434,953 | 465,262 | |||||||||
| Deferred income tax liabilities | 74,902 | 72,606 | |||||||||
| Contingent consideration, net of current portion | 7,620 | 7,387 | |||||||||
| Other long-term liabilities | 16,117 | 14,808 | |||||||||
| Long-term warranty | 4,415 | 1,786 | |||||||||
| Long-term debt, net of current portion | 702,485 | 720,352 | |||||||||
| Total liabilities | 1,240,492 | 1,282,201 | |||||||||
| Commitments and contingencies (Note 11) | |||||||||||
| Series A Redeemable Perpetual Preferred Stock of $0.001 par value - 500,000 authorized; 419,259 and 406,389 shares issued as of June 30, 2023 and December 31, 2022, respectively; liquidation preference of $419.3 million and $406.4 million at respective dates | 324,838 | 299,570 | |||||||||
| Stockholders’ equity: | |||||||||||
6
Array Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets (unaudited)
(in thousands, except per share and share amounts)
| June 30, 2023 | December 31, 2022 | ||||||||||
| Preferred stock of $0.001 par value - 4,500,000 shares authorized; none issued at respective dates | — | — | |||||||||
| Common stock of $0.001 par value - 1,000,000,000 shares authorized; 151,048,790 and 150,513,104 shares issued at respective dates | 151 | 150 | |||||||||
| Additional paid-in capital | 417,624 | 383,176 | |||||||||
| Accumulated deficit | (176,530) | (267,470) | |||||||||
| Accumulated other comprehensive income | 46,209 | 8,425 | |||||||||
| Total stockholders’ equity | 287,454 | 124,281 | |||||||||
| Total liabilities, redeemable perpetual preferred stock and stockholders’ equity | $ | 1,852,784 | $ | 1,706,052 | |||||||
7
Array Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations (unaudited)
(in thousands, except per share amounts)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Revenue | $ | 507,725 | $ | 419,865 | $ | 884,498 | $ | 720,451 | |||||||||||||||
| Cost of revenue | 357,683 | 379,919 | 633,277 | 653,918 | |||||||||||||||||||
| Gross profit | 150,042 | 39,946 | 251,221 | 66,533 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| General and administrative | 40,250 | 28,936 | 78,392 | 74,361 | |||||||||||||||||||
| Change in fair value of contingent consideration | 705 | (1,678) | 2,043 | (5,409) | |||||||||||||||||||
| Depreciation and amortization | 12,846 | 26,020 | 27,087 | 49,257 | |||||||||||||||||||
| Total operating expenses | 53,801 | 53,278 | 107,522 | 118,209 | |||||||||||||||||||
| Income (loss) from operations | 96,241 | (13,332) | 143,699 | (51,676) | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Other income (expense), net | 125 | (371) | 319 | 372 | |||||||||||||||||||
| Foreign currency gain (loss) | 260 | (1,736) | 66 | 2,127 | |||||||||||||||||||
| Change in fair value of derivative assets | 694 | — | (1,256) | — | |||||||||||||||||||
| Interest expense | (10,109) | (8,021) | (19,609) | (14,963) | |||||||||||||||||||
| Total other (expense) | (9,030) | (10,128) | (20,480) | (12,464) | |||||||||||||||||||
| Income (loss) before income tax (benefit) expense | 87,211 | (23,460) | 123,219 | (64,140) | |||||||||||||||||||
| Income tax (benefit) expense | 22,403 | (18,436) | 32,279 | (33,179) | |||||||||||||||||||
| Net income (loss) | 64,808 | (5,024) | 90,940 | (30,961) | |||||||||||||||||||
| Preferred dividends and accretion | 12,784 | 12,182 | 25,268 | 23,788 | |||||||||||||||||||
| Net income (loss) to common shareholders | $ | 52,024 | $ | (17,206) | $ | 65,672 | $ | (54,749) | |||||||||||||||
| Income (loss) per common share | |||||||||||||||||||||||
| Basic | $ | 0.34 | $ | (0.11) | $ | 0.44 | $ | (0.37) | |||||||||||||||
| Diluted | $ | 0.34 | $ | (0.11) | $ | 0.43 | $ | (0.37) | |||||||||||||||
| Weighted average number of common shares outstanding | |||||||||||||||||||||||
| Basic | 150,919 | 150,203 | 150,763 | 149,246 | |||||||||||||||||||
| Diluted | 152,129 | 150,203 | 151,970 | 149,246 | |||||||||||||||||||
8
Array Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Operating activities: | |||||||||||||||||||||||
| Net income (loss) | $ | 64,808 | (5,024) | $ | 90,940 | $ | (30,961) | ||||||||||||||||
| Adjustments to net income (loss): | |||||||||||||||||||||||
| Provision for bad debts | (374) | 365 | (141) | 510 | |||||||||||||||||||
| Deferred tax expense | (3,739) | (28,259) | 816 | (23,910) | |||||||||||||||||||
| Depreciation and amortization | 13,159 | 26,187 | 27,692 | 49,795 | |||||||||||||||||||
| Amortization of debt discount and issuance costs | 2,172 | 1,576 | 4,998 | 3,286 | |||||||||||||||||||
| Equity-based compensation | 4,945 | 2,964 | 8,311 | 7,472 | |||||||||||||||||||
| Contingent consideration | 705 | (1,678) | 2,043 | (5,409) | |||||||||||||||||||
| Warranty provision | 43 | 621 | 479 | 1,215 | |||||||||||||||||||
| Write-down of inventories | 1,611 | — | 3,458 | 409 | |||||||||||||||||||
| Change in fair value of derivative assets | (694) | — | 1,256 | — | |||||||||||||||||||
| Changes in operating assets and liabilities, net of business acquisition: | |||||||||||||||||||||||
| Accounts receivable | (87,277) | (62,280) | (81,039) | (106,548) | |||||||||||||||||||
| Inventories | 46,156 | (30,941) | 22,844 | (77,191) | |||||||||||||||||||
| Income tax receivables | 2,851 | 14,862 | 3,220 | (7,062) | |||||||||||||||||||
| Prepaid expenses and other | 3,655 | (6,543) | (3,292) | 5,015 | |||||||||||||||||||
| Accounts payable | 387 | 15,094 | 30,542 | 74,513 | |||||||||||||||||||
| Accrued expenses and other | 3,197 | (3,671) | 7,097 | 3,356 | |||||||||||||||||||
| Income tax payable | 4,878 | 1,543 | 9,830 | (7,217) | |||||||||||||||||||
| Lease liabilities | 590 | (1,385) | 1,414 | 4,700 | |||||||||||||||||||
| Deferred revenue | (36,533) | 65,902 | (64,112) | 47,263 | |||||||||||||||||||
| Net cash provided by (used in) operating activities | 20,540 | (10,667) | 66,356 | (60,764) | |||||||||||||||||||
| Investing activities: | |||||||||||||||||||||||
| Purchase of property, plant and equipment | (5,541) | (1,538) | (9,424) | (3,895) | |||||||||||||||||||
| Acquisition of STI, net of cash acquired | — | (2) | — | (373,818) | |||||||||||||||||||
| Net cash used in investing activities | (5,541) | (1,540) | (9,424) | (377,713) | |||||||||||||||||||
| Financing activities: | |||||||||||||||||||||||
| Proceeds from Series A issuance | — | — | — | 33,098 | |||||||||||||||||||
| Proceeds from common stock issuance | — | — | — | 15,885 | |||||||||||||||||||
| Series A equity issuance costs | (758) | (400) | (1,508) | (575) | |||||||||||||||||||
| Common stock issuance costs | — | — | — | (450) | |||||||||||||||||||
| Payments on revolving credit facility | — | (33,000) | — | (33,000) | |||||||||||||||||||
| Proceeds from revolving credit facility | — | 49,000 | — | 101,000 | |||||||||||||||||||
| Proceeds from issuance of other debt | 17,332 | 24,370 | 23,801 | 30,599 | |||||||||||||||||||
9
Array Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited) (continued)
(in thousands)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Principal payments on term loan facility | (11,075) | 4,368 | (22,150) | — | |||||||||||||||||||
| Principal payments on other debt | (21,051) | (22,377) | (38,257) | (22,377) | |||||||||||||||||||
| Contingent consideration payments | — | — | (1,200) | (1,483) | |||||||||||||||||||
| Net cash provided by (used in) financing activities | (15,552) | 21,961 | (39,314) | 122,697 | |||||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalent balances | 8,763 | (8,199) | 4,447 | (844) | |||||||||||||||||||
| Net change in cash and cash equivalents | 8,210 | 1,555 | 22,065 | (316,624) | |||||||||||||||||||
| Cash and cash equivalents, beginning of period | 147,756 | 49,491 | 133,901 | 367,670 | |||||||||||||||||||
| Cash and cash equivalents, end of period | $ | 155,966 | $ | 51,046 | $ | 155,966 | $ | 51,046 | |||||||||||||||
| Supplemental Cash Flow Information | |||||||||||||||||||||||
| Cash paid for interest | $ | 7,900 | $ | 4,389 | $ | 15,880 | $ | 7,428 | |||||||||||||||
| Cash paid for income taxes | $ | 15,962 | $ | (230) | $ | 18,484 | $ | (230) | |||||||||||||||
| Non-cash Investing and Financing Activities | |||||||||||||||||||||||
| Dividends accrued on Series A Preferred | $ | 6,521 | $ | 6,417 | $ | 12,871 | $ | 12,606 | |||||||||||||||
| Stock consideration paid for acquisition of STI | $ | — | $ | — | $ | — | $ | 200,224 | |||||||||||||||
10
Array Technologies, Inc.
Adjusted EBITDA and Adjusted Net Income Reconciliation (unaudited)
(in thousands, except per share amounts)
The following table reconciles net income (loss) to Adjusted EBITDA:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net income (loss) | $ | 64,808 | $ | (5,024) | $ | 90,940 | $ | (30,961) | |||||||||||||||
| Preferred dividends and accretion | 12,784 | 12,182 | 25,268 | 23,788 | |||||||||||||||||||
| Net income (loss) to common shareholders | $ | 52,024 | $ | (17,206) | $ | 65,672 | $ | (54,749) | |||||||||||||||
| Other expense, net | (125) | 371 | (319) | (372) | |||||||||||||||||||
| Foreign currency (gain) loss | (260) | 1,736 | (66) | (2,127) | |||||||||||||||||||
| Preferred dividends and accretion | 12,784 | 12,182 | 25,268 | 23,788 | |||||||||||||||||||
| Interest expense | 10,109 | 8,021 | 19,609 | 14,963 | |||||||||||||||||||
| Income tax (benefit) expense | 22,403 | (18,436) | 32,279 | (33,179) | |||||||||||||||||||
| Depreciation expense | 721 | 616 | 1,466 | 1,204 | |||||||||||||||||||
| Amortization of intangibles | 12,437 | 25,794 | 26,225 | 48,932 | |||||||||||||||||||
| Equity-based compensation | 5,240 | 2,971 | 8,580 | 7,479 | |||||||||||||||||||
| Change in fair value of derivative assets | (694) | — | 1,256 | — | |||||||||||||||||||
| Change in fair value of contingent consideration | 705 | (1,678) | 2,043 | (5,409) | |||||||||||||||||||
Legal expense(a) | 248 | 1,733 | 552 | 2,779 | |||||||||||||||||||
M&A(b) | — | (206) | — | 10,977 | |||||||||||||||||||
Other costs (c) | — | 4,981 | — | 7,327 | |||||||||||||||||||
| Adjusted EBITDA | $ | 115,592 | $ | 20,879 | $ | 182,565 | $ | 21,613 | |||||||||||||||
(a) Represents certain legal fees and other related costs associated with (i) action against a competitor in connection with violation of a non-competition agreement and misappropriation of trade secrets for which a judgement has been entered in our favor, (ii) actions filed against the company and certain officers and directors alleging violations of the Securities Exchange Acts of 1934 and 1933, which litigation was dismissed with prejudice by the Court on May 19, 2023, and (iii) other litigation. We consider these costs not representative of legal costs that we will incur from time to time in the ordinary course of our business.
(b) Represents fees related to the acquisition of STI Norland.
(c) For the three months ended June 30, 2022, other costs represent (i) $2.8 million in remediation and damages incurred because of a shutdown of a key supplier due to a severe weather event, (ii) $1.3 million associated with the transition of CEOs as well as other one-time payroll related costs that we do not anticipate repeating in the future, and (iii) $0.8 million related to certain professional fees incurred related to the integration of STI Norland. For the six months ended June 30, 2022, other costs represent (i) $2.8 million in remediation and damages incurred because of a shutdown of a key supplier due to a severe weather event, (ii) $3.6 million associated with the transition of CEOs as well as other one-time payroll related costs that we do not anticipate repeating in the future, and (iii) $0.9 million related to certain professional fees incurred related to the integration of STI Norland.
11
Array Technologies, Inc.
Adjusted EBITDA and Adjusted Net Income Reconciliation (unaudited)
(in thousands, except per share amounts)
The following table reconciles net income (loss) to Adjusted Net Income:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net income (loss) | $ | 64,808 | $ | (5,024) | $ | 90,940 | $ | (30,961) | |||||||||||||||
| Preferred dividends and accretion | 12,784 | 12,182 | 25,268 | 23,788 | |||||||||||||||||||
| Net income (loss) to common shareholders | $ | 52,024 | $ | (17,206) | $ | 65,672 | $ | (54,749) | |||||||||||||||
| Amortization of intangibles | 12,437 | 25,794 | 26,225 | 48,932 | |||||||||||||||||||
| Amortization of debt discount and issuance costs | 2,172 | 1,576 | 4,998 | 3,286 | |||||||||||||||||||
| Preferred accretion | 6,263 | 5,765 | 12,398 | 11,118 | |||||||||||||||||||
| Equity based compensation | 5,240 | 2,971 | 8,580 | 7,479 | |||||||||||||||||||
| Change in fair value of derivative assets | (694) | — | 1,256 | — | |||||||||||||||||||
| Change in fair value of contingent consideration | 705 | (1,678) | 2,043 | (5,409) | |||||||||||||||||||
Legal expense(a) | 248 | 1,733 | 552 | 2,779 | |||||||||||||||||||
M&A (b) | — | (206) | — | 10,977 | |||||||||||||||||||
Other costs(c) | — | 4,981 | — | 7,327 | |||||||||||||||||||
Income tax expense of adjustments(d) | (7,251) | (10,852) | (13,295) | (18,403) | |||||||||||||||||||
| Adjusted Net Income | $ | 71,144 | $ | 12,878 | $ | 108,429 | $ | 13,337 | |||||||||||||||
| Income (loss) per common share | |||||||||||||||||||||||
| Basic | $ | 0.34 | $ | (0.11) | $ | 0.44 | $ | (0.37) | |||||||||||||||
| Diluted | $ | 0.34 | $ | (0.11) | $ | 0.43 | $ | (0.37) | |||||||||||||||
| Weighted average number of common shares outstanding | |||||||||||||||||||||||
| Basic | 150,919 | 150,203 | 150,763 | 149,246 | |||||||||||||||||||
| Diluted | 152,129 | 150,203 | 151,970 | 149,246 | |||||||||||||||||||
| Adjusted net income (loss) per common share | |||||||||||||||||||||||
| Basic | $ | 0.47 | $ | 0.09 | $ | 0.72 | $ | 0.09 | |||||||||||||||
| Diluted | $ | 0.47 | $ | 0.09 | $ | 0.71 | $ | 0.09 | |||||||||||||||
| Weighted average number of common shares outstanding | |||||||||||||||||||||||
| Basic | 150,919 | 150,203 | 150,763 | 149,246 | |||||||||||||||||||
| Diluted | 152,129 | 150,420 | 151,970 | 149,397 | |||||||||||||||||||
(a) Represents certain legal fees and other related costs associated with (i) action against a competitor in connection with violation of a non-competition agreement and misappropriation of trade secrets for which a judgement has been entered in our favor, (ii) actions filed against the company and certain officers and directors alleging violations of the Securities Exchange Acts of 1934 and 1933, which litigation was dismissed with prejudice by the Court on May 19, 2023, and (iii) other litigation. We consider these costs not representative of legal costs that we will incur from time to time in the ordinary course of our business.
12
(b) Represents fees related to the acquisition of STI Norland.
(c) For the three months ended June 30, 2022, other costs represent (i) $2.8 million in remediation and damages incurred because of a shutdown of a key supplier due to a severe weather event, (ii) $1.3 million associated with the transition of CEOs as well as other one-time payroll related costs that we do not anticipate repeating in the future, and (iii) $0.8 million related to certain professional fees incurred related to the integration of STI Norland. For the six months ended June 30, 2022, other costs represent (i) $2.8 million in remediation and damages incurred because of a shutdown of a key supplier due to a severe weather event, (ii) $3.6 million associated with the transition of CEOs as well as other one-time payroll related costs that we do not anticipate repeating in the future, and (iii) $0.9 million related to certain professional fees incurred related to the integration of STI Norland.
(d) Represents the estimated tax impact of all Adjusted Net Income add-backs, excluding those which represent permanent differences between book versus tax.
13
0 Array Technologies 2Q 2023 Earnings Call August 8, 2023
1 Disclaimer Forward-Looking Statements and Other Information This presentation 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 projected future results of operations, business strategies and industry and regulatory environment. 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. Array’s actual results and the timing of events could materially differ from those anticipated in such forward-looking statements as a result of certain risks, uncertainties and other factors, including without limitation: changes in the demand for solar energy projects; a loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment; failure to retain key personnel or failure to attract additional qualified personnel; defects or performance problems in our products that could result in loss of customers, reputational damage, a loss of revenue, and warranty, indemnity and product liability claims; a drop in the price of electricity derived from the utility grid or from alternative energy sources; challenges in our ability to consolidate the financial reporting of our acquired foreign subsidiaries; delays, disruptions or quality control problems in our product development operations; the effects of a further increase in interest rates, or a reduction in the availability of tax equity or project debt capital in the global financial markets, which could make it difficult for customers to finance the cost of a solar energy system and could reduce the demand for our products; changes to tax laws and regulations that are applied adversely to us or our customers; existing electric utility industry policies and regulations, and any subsequent changes, that may present technical, regulatory and economic barriers to the purchase and use of solar energy systems; the interruption of the flow of materials from international vendors, including as a result of the imposition of additional duties, tariffs and other charges or restrictions on imports and exports; changes in the global trade environment, including the imposition of import tariffs; economic, political and market conditions, including the Russian-Ukraine conflict, uncertain credit and global financial markets resulting from increasing inflation and interest rates along with recent bank failures, and the COVID-19 pandemic; the reduction, elimination or expiration of government incentives for, or regulations mandating the use of, renewable energy and solar energy specifically; our ability to, obtain, maintain, protect, defend or enforce, our intellectual property and other proprietary rights; significant changes in the costs of raw materials; the implementation of the IRA may not deliver as much growth as we are anticipating; our ability to remediate our material weaknesses on a timely basis or at all; the effect of our substantial indebtedness on our financial condition; the occurrence of cybersecurity incidents, including unauthorized disclosure of personal or sensitive data or theft of confidential information; and the other risks and uncertainties described in more detail in the Company’s most recent Annual Report on Form 10-K and other documents on file with the SEC, each of which can be found on our website www.arraytechinc.comThese forward-looking statements are only predictions. They relate to future events, performance, and variables, and involve risks and uncertainties both known and unknown. It is possible that levels of activity, performance or achievements will materially differ from what is implied by the forward-looking statements contained within this presentation and associated materials and explication. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as guarantees of future events, or implications of certainty. The forward- looking statements in this presentation represent our expectations as of the date the presentation was created. We anticipate that subsequent events and developments will cause our expectations to change. We undertake no obligation to update any forward-looking statement to reflect events or developments after the date on which the statement is made or to reflect the occurrence of unanticipated events except to the extent required by applicable law. You should, therefore, not rely on these forward- looking statements as representing our views as of any date after the date of this presentation. 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. Non-GAAP Financial Information This presentation includes certain financial measures that are not presented in accordance with U.S. generally accepted accounting principles (“GAAP”), including Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share. We define Adjusted EBITDA as net income (loss) to common shareholders plus (i) other (income) expense, (ii)foreign currency (gain) loss, (iii) preferred dividends and accretion, (iv) interest expense, (v) income tax (benefit) expense, (vi) depreciation expense, (vii) amortization of intangibles, (viii) equity-based compensation, (ix) change in fair value of derivative assets, (x) change in fair value of contingent consideration, (xi) certain legal expense, (xii) certain acquisition costs, and (xiii) other costs. We define Adjusted Net Income as net income (loss) to common shareholders plus (i) amortization of intangibles, (ii) amortization of debt discount and issuance costs (iii) preferred accretion, (iv) equity-based compensation, (v) change in fair value of derivative assets, (vi) change in fair value of contingent consideration, (vii) certain legal expense, (viii) certain acquisition related costs, (ix) other costs, and (x) income tax (expense) benefit of adjustments. A detailed reconciliation between GAAP results and results excluding special items (“non- GAAP”) is included within this presentation. We calculate net income (loss) per share as net income (loss) to common shareholders divided by the basic and diluted weighted average number of shares outstanding for the applicable period and we define Adjusted Net Income per share as Adjusted Net Income (as detailed above) divided by the basic and diluted weighted average number of shares outstanding for the applicable period. We present non-GAAP measures when we believe that the additional information is useful and meaningful to investors. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP financial measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP. See the Appendix for the reconciliations of certain non-GAAP financial measures to the comparable GAAP measures. Market and Industry Data This presentation also contains information regarding our market and our industry that is derived from third-party research and publications. That information may rely upon a number of assumptions and limitations, and we have not independently verified its accuracy or completeness.
2 Business Update Kevin Hostetler, CEO
3 Executive Summary Total revenue growth of 21% to $507.7 million Gross Margin of 29.6%, an expansion of 2010 bps from Q2 2022 Adjusted EBITDA(1) increased 453% to $115.6 million, from $20.9 million in Q2 2022 Ending orderbook of $1.7 billion following bookings of ~$600 million in the quarter Highlights (1) See Appendix for reconciliation of non-GAAP measures to the closest GAAP measure $20.9 $115.6 Q2 Adjusted EBITDA(1) Adjusted EBITDA % 2022 2023 $419.9 $507.7 Q2 Revenue 2022 2023 5.0% 22.8% ($M) Selected Financials
4 Market Dynamics Market & Industry Update Array’s Market Approach Focus on long-term strategic initiatives while delivering on current year commitments Maintain pricing and product discipline in the short-term to drive longer-term success Deploy the most efficient use of capital to provide shareholder returns Opportunistically strengthen balance sheet and lower leverage ratio Utility-Scale growth is not linear and can have large short-term swings Increased project delays and pushouts have impacted quarterly volatility in revenue and bookings IRA final guidance a gating item for $320 million of high probability pipeline orders Long-term growth remains stable as solar energy is a clear leader in electricity generation
5 Focus Areas: Creating Sustainable Margin Performance Expanding our Target Market Increase Higher Margin Offerings31 Software | Services | Aftermarket sales o Expands our offerings beyond the tracker OmniTrack | STI H250 o Accelerates revenue growth while expanding margins Reducing Installed Cost2 Site design improvements | Pile compatibility | module mounting o Lowers installed cost reducing LCOE while improving margins Operational Efficiencies4 Incentive structures | Process Improvement | Lean Principles | CPQ o Minimizes margin leaks while creating cost saving opportunities
6 Financial Update Nipul Patel, CFO
7 Three Months Ended June 30, 2023 ($ in millions, except EPS Data) 2023 2022 Y/Y Revenue $507.7 $419.9 +$87.8 Gross margin 29.6% 9.5% + 2010 bps Net income (loss) to Common Shareholders $52.0 ($17.2) +$69.2 Diluted EPS $0.34 ($0.11) $0.45 Adjusted EBITDA(1) $115.6 $20.9 +$94.7 Adjusted net income(1) $71.1 $12.9 +$58.2 Adjusted, Diluted EPS(1) $0.47 $0.09 +$0.38 Free Cash Flow(2) $15.0 ($12.2) +$27.2 2Q 2023 Financial Results 2Q Snapshot Y/Y Comparison (1) See Appendix for reconciliation of non-GAAP measures to the closest GAAP measure (2) Free Cash Flow calculated as cash from (used in) operating activities less purchase of property, plant and equipment Revenue up 21% from volume and ASP growth Gross margin increased to 29.6% from 9.5% driven by projects with improved pass-through pricing, freight favorability, and higher-margin non-tracker sales Adjusted EBITDA increased to $115.6 million, compared to $20.9 million for the prior-year period Free cash flow of $15.0 million, a $27.2 million improvement from prior year on better working capital efficiency and improved profitability
8 Updated FY 2023 Guidance Full Year Ending December 31, 2023 Revenue $1.65 billion to $1.725 billion Prior: $1.80 billion to $1.90 billion Adjusted EBITDA(1) $280 million to $295 million Prior: $240 million to $265 million Adjusted net income per common share(1) $1.00 to $1.07 Prior: $0.75 to $0.85 (1) A reconciliation of projected adjusted EBITDA and adjusted net income per share, which are forward-looking measures that are not prepared in accordance with GAAP, to the most directly comparable GAAP financial measures, is not provided because we are unable to provide such reconciliation without unreasonable effort. The inability to provide a quantitative reconciliation is due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the components of the applicable GAAP measures and non-GAAP adjustments may be recognized. The GAAP measures may include the impact of such items as non-cash share-based compensation, revaluation of the fair-value of our contingent consideration, amortization of intangible assets and the tax effect of such items, in addition to other items we have historically excluded from adjusted EBITDA and adjusted net income per share. We expect to continue to exclude these items in future disclosures of these non-GAAP measures and may also exclude other similar items that may arise in the future (collectively, “non-GAAP adjustments”). The decisions and events that typically lead to the recognition of non-GAAP adjustments are inherently unpredictable as to if or when they may occur. As such, for our 2023 outlook, we have not included estimates for these items and are unable to address the probable significance of the unavailable information, which could be material to future results. Segment Specifics Legacy Array STI Norland Revenue $1.20 billion to $1.25 billion Prior: $1.375 billion to $1.425 billion $450 million to $475 million Prior: $425 million to $475 million Gross Margin Mid Twenties Prior: Low Twenties Mid Twenties Prior: Low Twenties
9 Appendix
10 Adjusted EBITDA Reconciliation (a) Represents certain legal fees and other related costs associated with (i) action against a competitor in connection with violation of a non-competition agreement and misappropriation of trade secrets for which a judgement has been entered in our favor, (ii) actions filed against the company and certain officers and directors alleging violations of the Securities Exchange Acts of 1934 and 1933, which litigation was dismissed with prejudice by the court on May 19, 2023, and (iii) other litigation. We consider these costs not representative of legal costs that we will incur from time to time in the ordinary course of our business. (b) Represents fees related to the acquisition of STI Norland. (c) For the three months ended June 30, 2022, other costs represent (i) $2.8 million in remediation and damages incurred because of a shutdown of a key supplier due to a severe weather event, (ii) $1.3 million associated with the transition of CEOs as well as other one-time payroll related costs that we do not anticipate repeating in the future, and (iii) $0.8 million related to certain professional fees incurred related to the integration of STI Norland. For the six months ended June 30, 2022, other costs represent (i) $2.8 million in remediation and damages incurred because of a shutdown of a key supplier due to a severe weather event, (ii) $3.6 million associated with the transition of CEOs as well as other one-time payroll related costs that we do not anticipate repeating in the future, and (iii) $0.9 million related to certain professional fees incurred related to the integration of STI Norland. Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net income (loss) $ 64,808 $ (5,024) $ 90,940 $ (30,961) Preferred dividends and accretion 12,784 12,182 25,268 23,788 Net income (loss) to common shareholders $ 52,024 $ (17,206) $ 65,672 $ (54,749) Other expense, net (125) 371 (319) (372) Foreign currency (gain) loss (260) 1,736 (66) (2,127) Preferred dividends and accretion 12,784 12,182 25,268 23,788 Interest expense 10,109 8,021 19,609 14,963 Income tax (benefit) expense 22,403 (18,436) 32,279 (33,179) Depreciation expense 721 616 1,466 1,204 Amortization of intangibles 12,437 25,794 26,225 48,932 Equity-based compensation 5,240 2,971 8,580 7,479 Change in fair value of derivative assets (694) — 1,256 — Change in fair value of contingent consideration 705 (1,678) 2,043 (5,409) Legal expense(a) 248 1,733 552 2,779 M&A(b) — (206) — 10,977 Other costs (c) — 4,981 — 7,327 Adjusted EBITDA $ 115,592 $ 20,879 $ 182,565 $ 21,613
11 Adjusted Net Income Reconciliation (a) Represents certain legal fees and other related costs associated with (i) action against a competitor in connection with violation of a non-competition agreement and misappropriation of trade secrets for which a judgement has been entered in our favor, (ii) actions filed against the company and certain officers and directors alleging violations of the Securities Exchange Acts of 1934 and 1933, which litigation was dismissed with prejudice by the court on May 19, 2023, and (iii) other litigation. We consider these costs not representative of legal costs that we will incur from time to time in the ordinary course of our business. (b) Represents fees related to the acquisition of STI Norland. (c) For the three months ended June 30, 2022, other costs represent (i) $2.8 million in remediation and damages incurred because of a shutdown of a key supplier due to a severe weather event, (ii) $1.3 million associated with the transition of CEOs as well as other one-time payroll related costs that we do not anticipate repeating in the future, and (iii) $0.8 million related to certain professional fees incurred related to the integration of STI Norland. For the six months ended June 30, 2022, other costs represent (i) $2.8 million in remediation and damages incurred because of a shutdown of a key supplier due to a severe weather event, (ii) $3.6 million associated with the transition of CEOs as well as other one-time payroll related costs that we do not anticipate repeating in the future, and (iii) $0.9 million related to certain professional fees incurred related to the integration of STI Norland. (d) Represents the estimated tax impact of all Adjusted Net Income add-backs, excluding those which represent permanent differences between book versus tax. Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net income (loss) $ 64,808 $ (5,024) $ 90,940 $ (30,961) Preferred dividends and accretion 12,784 12,182 25,268 23,788 Net income (loss) to common shareholders $ 52,024 $ (17,206) $ 65,672 $ (54,749) Amortization of intangibles 12,437 25,794 26,225 48,932 Amortization of debt discount and issuance costs 2,172 1,576 4,998 3,286 Preferred accretion 6,263 5,765 12,398 11,118 Equity based compensation 5,240 2,971 8,580 7,479 Change in fair value of derivative assets (694) — 1,256 — Change in fair value of contingent consideration 705 (1,678) 2,043 (5,409) Legal expense(a) 248 1,733 552 2,779 M&A (b) — (206) — 10,977 Other costs(c) — 4,981 — 7,327 Income tax expense of adjustments(d) (7,251) (10,852) (13,295) (18,403) Adjusted Net Income $ 71,144 $ 12,878 $ 108,429 $ 13,337
12 Adjusted EPS Reconciliation Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Income (loss) per common share Basic $ 0.34 $ (0.11) $ 0.44 $ (0.37) Diluted $ 0.34 $ (0.11) $ 0.43 $ (0.37) Weighted average number of common shares outstanding Basic 150,919 150,203 150,763 149,246 Diluted 152,129 150,203 151,970 149,246 Adjusted net income (loss) per common share Basic $ 0.47 $ 0.09 $ 0.72 $ 0.09 Diluted $ 0.47 $ 0.09 $ 0.71 $ 0.09 Weighted average number of common shares outstanding Basic 150,919 150,203 150,763 149,246 Diluted 152,129 150,420 151,970 149,397