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 third quarter ended September 30, 2023.
“Despite the near-term secular challenges which
impacted our volume when compared to the prior year, Array again
delivered another strong quarter across all of our key metrics.
Revenue for the quarter was $350.4 million which was in-line with
our expectations, and adjusted EBITDA was $57.4 million, which
exceeded our expectations as we once again delivered better than
anticipated gross margin of 26.0% on an adjusted basis. We also
continued to deliver positive free cash flow, generating
$69.4 million in the quarter, bringing our year-to-date total
to $126.4 million, which puts us well on track to achieve our
full-year target of between $150 million and $200 million. On the
back of this cash flow generation, we elected to make a $50 million
prepayment on our term loan as we begin to execute on the
deleveraging we discussed in previous quarters,” said Kevin
Hostetler, Chief Executive Officer.
Mr. Hostetler continued, “On the demand side, we
continue to see positive momentum heading into 2024. We are seeing
a steady increase in our domestic pipeline, which has more than
doubled from the second quarter. This increase is a key early
indicator of the expected momentum in our orderbook. That said, we
have continued to be impacted by short-term delays in project
timing driven by customer pushouts, which has reduced our revenue
outlook for the full year. However, despite these project timing
challenges, we continue to be encouraged by our operational
execution, in particular our efforts to expand our non-tracker
offerings which will drive better than anticipated margins for the
second half of the year. Accordingly, we expect our Adjusted EBITDA
and Adjusted EPS outlook to remain largely unchanged,” Mr.
Hostetler concluded.
Third Quarter 2023 Financial
Results
Revenue decreased 32% to $350.4 million,
compared to $515.0 million for the prior-year period resulting from
a 22% reduction in the total number of MWs shipped and a decrease
in ASP of 12% driven by lower input costs.
Gross profit increased 14% to $87.4 million
compared to $76.6 million in the prior year period, driven by an
increase in gross profit as a percent of revenue, partly offset by
decreased volume. Gross margin increased to 24.9% from 14.9% driven
by an improvement in pass-through pricing to customers and
cost-saving opportunities in freight and material purchases.
Operating expenses decreased to $47.2 million
compared to $59.4 million during the same period in the prior year.
The decrease is primarily related to $12.0 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 $10.1
million compared to a net income of $28.4 million during the same
period in the prior year, and basic and diluted income per share
was $0.07 compared to basic and diluted income per share of $0.19
during the same period in the prior year. The reduction in net
income from the prior year was driven by the $42.8 million legal
settlement received by the Company during the third quarter of 2022
of which there was no comparable amount in the third quarter of
2023.
Adjusted EBITDA increased to $57.4 million,
compared to $55.4 million for the prior-year period.
Adjusted net income was $31.4 million compared
to adjusted net income of $28.9 million during the same period in
the prior year and adjusted basic and diluted adjusted net income
per share was $0.21 compared to adjusted diluted net income per
share of $0.19 during the same period in the prior year.
Executed Contracts and Awarded
Orders
Total executed contracts and awarded orders at
September 30, 2023 were $1.6 billion, with $1.4 billion from our
Array Legacy Operations segment and $0.2 billion from STI Norland.
It is important to note that our orderbook at STI Norland was
negatively impacted by approximately $80 million of orders that
were cancelled due to Brazilian “forgiveness day” established by
the Normative Resolution (REN) 1065/2023. Forgiveness day granted
amnesty for renewable energy projects that had a generation grant
and a signed Contract for the Use of the Transition System (“CUST”)
but were never entered into commercial operation and/or could not
be executed on the time planned by the project owner. The amnesty
allowed the grants to be revoked and the CUST terminated without
payment of fines.
Full Year 2023 Guidance
For the year ending December 31, 2023, the
Company expects:
- Revenue to be in the range of
$1,525 million to $1,575 million
- Adjusted EBITDA(3) to be in the
range of $280 million to $290 million
- Adjusted net income per share(3) to
be in the range of $1.00 to $1.05
(3) 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.
Transition of Chief Financial
Officer
Today the Company also announced that Kurt Wood
has been named Chief Financial Officer effective November 13, 2023.
Mr. Wood replaces Nipul Patel, who will continue in his current
role as Chief Financial Officer until Mr. Wood begins employment
and thereafter will assist in the transition in an advisory role
until Mr. Patel’s expected departure from the Company at the end of
the year.
“Nipul has played a critical role over the last
few years, helping to significantly reduce Array’s debt, improve
our financial and operating performance, and build the strategy and
execution against a volatile market backdrop,” said Array CEO Kevin
Hostetler. “Importantly, under Nipul’s leadership, Array’s finance
teams have become stronger operational partners to our business,
creating insights to drive performance while deepening our focus on
free cash flow. We are also grateful that Nipul will remain with us
for the rest of the year to ensure a smooth transition.”
Kevin continued, “I am also extremely excited to
welcome Kurt on board. He has a demonstrated history of financial
leadership across companies of many sizes that will be critical as
we continue to build upon the foundation Nipul began. Further, his
background in business and corporate development will be
instrumental in driving our next phase of growth.”
Prior to his appointment as Chief Financial
Officer of Array, Mr. Wood had served as an advisor to Brunswick
Corporation since April 2022. Prior to his role with Brunswick, Mr.
Wood served as Chief Financial Officer of Berkeley Lights, Inc.
from March 2021 to April 2022 after having served as VP of Business
Development from October 2020. Prior to joining Berkeley Lights,
Mr. Wood served as Corporate VP of Finance and Treasury for Micron
Technology from February 2019 to October 2020. Mr. Wood also served
as Chief Financial Officer and Treasurer at DriveTime from February
2014 to September 2018. Prior to DriveTime, Mr. Wood was Chief
Financial Officer and a Partner at True North Venture Partners,
where he sat on the firm’s investment committee. Mr. Wood has also
held finance and business development roles with First Solar,
KLA-Tencor, Vendio Services, Inc., and Intel Corporation. Mr. Wood
holds a B.B.A. in Finance from the Kelley School of Business at
Indiana University, Bloomington.
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)-869-3847 (domestic) or (201)-689-8261
(international). A telephonic replay will be available
approximately three hours after the call by dialing (877)-660-6853,
or for international callers, (201)-612-7415. The passcode for the
live call and the replay is 13741372. The replay will be available
until 11:59 p.m. (ET) on November 21, 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
505-437-0010investors@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 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 InformationThis press
release includes certain financial measures that are not presented
in accordance with U.S. generally accepted accounting principles
(“GAAP”), including Adjusted Gross Profit, Adjusted EBITDA,
Adjusted Net Income and Adjusted Net Income per share. We define
Adjusted Gross Profit as gross profit plus (i) developed technology
amortization and (ii) other costs. 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 Gross Profit,
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
Gross Profit, Adjusted EBITDA and Adjusted Net Income differently
than we do, which limits their usefulness as comparative measures.
Because of these limitations, Adjusted Gross Profit, 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 Gross
Profit, Adjusted EBITDA and Adjusted Net Income on a supplemental
basis. You should review the reconciliation of gross profit to
Adjusted Gross Profit and net income (loss) to Adjusted EBITDA and
Adjusted Net Income below and not rely on any single financial
measure to evaluate our business.
Array Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets (unaudited)(in
thousands, except per share and share amounts) |
|
|
September 30, 2023 |
|
December 31, 2022 |
ASSETS |
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
174,010 |
|
|
$ |
133,901 |
|
Accounts receivable, net of allowance of $1,418 and $1,888,
respectively |
|
427,664 |
|
|
|
421,183 |
|
Inventories |
|
216,018 |
|
|
|
233,159 |
|
Income tax receivables |
|
367 |
|
|
|
3,532 |
|
Prepaid expenses and other |
|
45,029 |
|
|
|
39,434 |
|
Total current assets |
|
863,088 |
|
|
|
831,209 |
|
|
|
|
|
Property, plant and equipment,
net |
|
29,521 |
|
|
|
23,174 |
|
Goodwill |
|
426,541 |
|
|
|
416,184 |
|
Other intangible assets,
net |
|
353,923 |
|
|
|
386,364 |
|
Deferred income tax
assets |
|
— |
|
|
|
16,466 |
|
Derivative assets |
|
64,130 |
|
|
|
— |
|
Other assets |
|
41,554 |
|
|
|
32,655 |
|
Total assets |
$ |
1,778,757 |
|
|
$ |
1,706,052 |
|
|
|
|
|
LIABILITIES, REDEEMABLE PERPETUAL PREFERRED STOCK AND
STOCKHOLDERS' EQUITY |
Current liabilities: |
|
|
|
Accounts payable |
$ |
171,730 |
|
|
$ |
170,430 |
|
Accrued expenses and other |
|
72,638 |
|
|
|
54,895 |
|
Accrued warranty reserve |
|
2,506 |
|
|
|
3,690 |
|
Income tax payable |
|
6,143 |
|
|
|
6,881 |
|
Deferred revenue |
|
100,757 |
|
|
|
178,922 |
|
Current portion of contingent consideration |
|
1,814 |
|
|
|
1,200 |
|
Current portion of debt |
|
38,767 |
|
|
|
38,691 |
|
Other current liabilities |
|
6,155 |
|
|
|
10,553 |
|
Total current liabilities |
|
400,510 |
|
|
|
465,262 |
|
|
|
|
|
Deferred income tax liabilities |
|
69,928 |
|
|
|
72,606 |
|
Contingent consideration, net of current portion |
|
7,805 |
|
|
|
7,387 |
|
Other long-term liabilities |
|
21,820 |
|
|
|
14,808 |
|
Long-term warranty |
|
3,421 |
|
|
|
1,786 |
|
Long-term debt, net of current portion |
|
658,879 |
|
|
|
720,352 |
|
Total liabilities |
|
1,162,363 |
|
|
|
1,282,201 |
|
Commitments and contingencies
(Note 11) |
|
|
|
Series A Redeemable Perpetual Preferred Stock of $0.001 par value -
500,000 authorized; 425,956 and 406,389 shares issued as of
September 30, 2023 and December 31, 2022, respectively; liquidation
preference of $493.1 million and $493.1 million at respective
dates |
|
337,929 |
|
|
|
299,570 |
|
Stockholders’ equity: |
|
|
|
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; 151,071,429 and
150,513,104 shares issued at respective dates |
|
151 |
|
|
|
150 |
|
Additional paid-in capital |
|
407,916 |
|
|
|
383,176 |
|
Accumulated deficit |
|
(153,316 |
) |
|
|
(267,470 |
) |
Accumulated other comprehensive income |
|
23,714 |
|
|
|
8,425 |
|
Total stockholders’
equity |
|
278,465 |
|
|
|
124,281 |
|
Total liabilities, redeemable
perpetual preferred stock and stockholders’ equity |
$ |
1,778,757 |
|
|
$ |
1,706,052 |
|
Array Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations (unaudited)
(in thousands, except per share amounts) |
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenue |
$ |
350,438 |
|
|
$ |
515,024 |
|
|
$ |
1,234,936 |
|
|
$ |
1,235,475 |
|
Cost of revenue: |
|
|
|
|
|
|
|
Cost of product and service revenue |
|
259,419 |
|
|
|
434,801 |
|
|
|
892,696 |
|
|
|
1,088,719 |
|
Amortization of developed technology |
|
3,640 |
|
|
|
3,640 |
|
|
|
10,918 |
|
|
|
10,918 |
|
Total cost of revenue |
|
263,059 |
|
|
|
438,441 |
|
|
|
903,614 |
|
|
|
1,099,637 |
|
Gross profit |
|
87,379 |
|
|
|
76,583 |
|
|
|
331,322 |
|
|
|
135,838 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
General and
administrative |
|
37,432 |
|
|
|
38,703 |
|
|
|
115,825 |
|
|
|
113,064 |
|
Change in fair value of
contingent consideration |
|
190 |
|
|
|
(572 |
) |
|
|
2,232 |
|
|
|
(5,981 |
) |
Depreciation and
amortization |
|
9,552 |
|
|
|
21,258 |
|
|
|
29,361 |
|
|
|
63,237 |
|
Total operating expenses |
|
47,174 |
|
|
|
59,389 |
|
|
|
147,418 |
|
|
|
170,320 |
|
|
|
|
|
|
|
|
|
Income (loss) from
operations |
|
40,205 |
|
|
|
17,194 |
|
|
|
183,904 |
|
|
|
(34,482 |
) |
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
Other income (expense),
net |
|
2,979 |
|
|
|
(399 |
) |
|
|
5,997 |
|
|
|
(27 |
) |
Legal settlement |
|
— |
|
|
|
42,750 |
|
|
|
— |
|
|
|
42,750 |
|
Foreign currency gain
(loss) |
|
207 |
|
|
|
(159 |
) |
|
|
273 |
|
|
|
1,968 |
|
Change in fair value of
derivative assets |
|
116 |
|
|
|
— |
|
|
|
(1,140 |
) |
|
|
— |
|
Interest expense |
|
(13,064 |
) |
|
|
(8,746 |
) |
|
|
(35,372 |
) |
|
|
(23,709 |
) |
Total other (expense) |
|
(9,762 |
) |
|
|
33,446 |
|
|
|
(30,242 |
) |
|
|
20,982 |
|
|
|
|
|
|
|
|
|
Income (loss) before
taxes |
|
30,443 |
|
|
|
50,640 |
|
|
|
153,662 |
|
|
|
(13,500 |
) |
Income tax expense
(benefit) |
|
7,229 |
|
|
|
9,996 |
|
|
|
39,508 |
|
|
|
(23,183 |
) |
Net income |
|
23,214 |
|
|
|
40,644 |
|
|
|
114,154 |
|
|
|
9,683 |
|
Preferred dividends and
accretion |
|
13,091 |
|
|
|
12,257 |
|
|
|
38,359 |
|
|
|
36,045 |
|
Net income (loss) to common
shareholders |
$ |
10,123 |
|
|
$ |
28,387 |
|
|
$ |
75,795 |
|
|
$ |
(26,362 |
) |
|
|
|
|
|
|
|
|
Income (loss) per common
share |
|
|
|
|
|
|
|
Basic |
$ |
0.07 |
|
|
$ |
0.19 |
|
|
$ |
0.50 |
|
|
$ |
(0.18 |
) |
Diluted |
$ |
0.07 |
|
|
$ |
0.19 |
|
|
$ |
0.50 |
|
|
$ |
(0.18 |
) |
Weighted average number of
common shares outstanding |
|
|
|
|
|
|
|
Basic |
|
151,068 |
|
|
|
150,322 |
|
|
|
150,865 |
|
|
|
149,604 |
|
Diluted |
|
152,323 |
|
|
|
151,382 |
|
|
|
152,083 |
|
|
|
149,604 |
|
Array Technologies, Inc. Consolidated
Statements of Cash Flows (unaudited)(in thousands) |
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Operating
activities: |
|
|
|
|
|
|
|
Net income |
$ |
23,214 |
|
|
|
40,644 |
|
|
$ |
114,154 |
|
|
|
9,683 |
|
Adjustments to net
income: |
|
|
|
|
|
|
|
Provision for (recovery of) bad debts |
|
24 |
|
|
|
150 |
|
|
|
(117 |
) |
|
|
660 |
|
Deferred tax expense (benefit) |
|
(532 |
) |
|
|
(12,092 |
) |
|
|
284 |
|
|
|
(36,002 |
) |
Depreciation and amortization |
|
9,906 |
|
|
|
21,524 |
|
|
|
30,318 |
|
|
|
64,039 |
|
Amortization of developed technology |
|
3,638 |
|
|
|
3,638 |
|
|
|
10,918 |
|
|
|
10,918 |
|
Amortization of debt discount and issuance costs |
|
4,125 |
|
|
|
1,717 |
|
|
|
9,123 |
|
|
|
5,003 |
|
Equity-based compensation |
|
3,384 |
|
|
|
4,205 |
|
|
|
11,695 |
|
|
|
11,677 |
|
Contingent consideration |
|
189 |
|
|
|
(572 |
) |
|
|
2,232 |
|
|
|
(5,981 |
) |
Warranty provision |
|
(28 |
) |
|
|
3,126 |
|
|
|
451 |
|
|
|
4,341 |
|
Write-down of inventories |
|
1,129 |
|
|
|
(2,742 |
) |
|
|
4,587 |
|
|
|
(2,333 |
) |
Change in fair value of derivative assets |
|
(116 |
) |
|
|
— |
|
|
|
1,140 |
|
|
|
— |
|
Changes in operating assets and liabilities, net of business
acquisition: |
|
|
|
|
|
|
|
Accounts receivable |
|
74,675 |
|
|
|
(32,488 |
) |
|
|
(6,364 |
) |
|
|
(139,036 |
) |
Inventories |
|
(10,290 |
) |
|
|
62,918 |
|
|
|
12,554 |
|
|
|
(14,273 |
) |
Income tax receivables |
|
(55 |
) |
|
|
3,452 |
|
|
|
3,165 |
|
|
|
(3,610 |
) |
Prepaid expenses and other |
|
1,152 |
|
|
|
11,314 |
|
|
|
(2,140 |
) |
|
|
16,329 |
|
Accounts payable |
|
(16,099 |
) |
|
|
(32,440 |
) |
|
|
14,443 |
|
|
|
42,073 |
|
Accrued expenses and other |
|
11,387 |
|
|
|
37,915 |
|
|
|
18,484 |
|
|
|
41,271 |
|
Warranty payments |
|
— |
|
|
|
(373 |
) |
|
|
— |
|
|
|
(373 |
) |
Income tax payable |
|
(10,568 |
) |
|
|
10,168 |
|
|
|
(738 |
) |
|
|
2,951 |
|
Lease liabilities |
|
(9,464 |
) |
|
|
(2,786 |
) |
|
|
(8,050 |
) |
|
|
1,914 |
|
Deferred revenue |
|
(14,053 |
) |
|
|
(12,491 |
) |
|
|
(78,165 |
) |
|
|
34,772 |
|
Net cash provided by operating activities |
|
71,618 |
|
|
|
104,787 |
|
|
|
137,974 |
|
|
|
44,023 |
|
Investing
activities: |
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
(2,191 |
) |
|
|
(2,795 |
) |
|
|
(11,615 |
) |
|
|
(6,690 |
) |
Acquisition of STI, net of cash acquired |
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
(373,816 |
) |
Net cash provided by (used in) investing activities |
|
(2,191 |
) |
|
|
(2,793 |
) |
|
|
(11,615 |
) |
|
|
(380,506 |
) |
Financing
activities: |
|
|
|
|
|
|
|
Proceeds from Series A issuance |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
33,098 |
|
Proceeds from common stock issuance |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,885 |
|
Series A equity issuance costs |
|
(1 |
) |
|
|
(592 |
) |
|
|
(1,509 |
) |
|
|
(1,167 |
) |
Common stock issuance costs |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(450 |
) |
Dividends on Series A Preferred |
|
— |
|
|
|
(18,670 |
) |
|
|
— |
|
|
|
(18,670 |
) |
Payments on revolving credit facility |
|
— |
|
|
|
(83,000 |
) |
|
|
— |
|
|
|
(116,000 |
) |
Proceeds from revolving credit facility |
|
— |
|
|
|
15,000 |
|
|
|
— |
|
|
|
116,000 |
|
Proceeds from issuance of other debt |
|
36,715 |
|
|
|
8,620 |
|
|
|
60,516 |
|
|
|
39,219 |
|
Principal payments on term loan facility |
|
(51,075 |
) |
|
|
— |
|
|
|
(73,225 |
) |
|
|
— |
|
Principal payments on other debt |
|
(30,767 |
) |
|
|
(10,909 |
) |
|
|
(69,024 |
) |
|
|
(33,286 |
) |
Contingent consideration payments |
|
— |
|
|
|
— |
|
|
|
(1,200 |
) |
|
|
(1,483 |
) |
Net cash provided by (used in) financing activities |
|
(45,128 |
) |
|
|
(89,551 |
) |
|
|
(84,442 |
) |
|
|
33,146 |
|
Effect of exchange rate changes
on cash and cash equivalent balances |
|
(6,255 |
) |
|
|
(711 |
) |
|
|
(1,808 |
) |
|
|
(1,555 |
) |
Net change in cash and cash
equivalents |
|
18,044 |
|
|
|
11,732 |
|
|
|
40,109 |
|
|
|
(304,892 |
) |
Cash and cash equivalents,
beginning of period |
|
155,966 |
|
|
|
51,046 |
|
|
|
133,901 |
|
|
|
367,670 |
|
Cash and cash equivalents, end of
period |
$ |
174,010 |
|
|
$ |
62,778 |
|
|
$ |
174,010 |
|
|
$ |
62,778 |
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow
Information |
|
|
|
|
|
|
|
Cash paid for interest |
$ |
19,058 |
|
|
$ |
14,798 |
|
|
$ |
34,938 |
|
|
$ |
22,226 |
|
Cash paid for income taxes (net of refunds) |
$ |
18,313 |
|
|
$ |
1,419 |
|
|
$ |
36,797 |
|
|
$ |
1,189 |
|
|
|
|
|
|
|
|
|
Non-cash Investing and
Financing Activities |
|
|
|
|
|
|
|
Dividends accrued on Series A Preferred |
$ |
6,696 |
|
|
$ |
— |
|
|
$ |
19,567 |
|
|
$ |
— |
|
Stock consideration paid for acquisition of STI |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
200,224 |
|
Array Technologies,
Inc.Adjusted Gross Profit, Adjusted EBITDA, and
Adjusted Net Income Reconciliation (unaudited)(in
thousands, except per share amounts)
The following table reconciles Gross profit to
Adjusted Gross Profit:
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenue |
|
350,438 |
|
|
|
515,024 |
|
|
|
1,234,936 |
|
|
|
1,235,475 |
|
Cost of revenue |
|
263,059 |
|
|
|
438,441 |
|
|
|
903,614 |
|
|
|
1,099,637 |
|
Gross profit |
|
87,379 |
|
|
|
76,583 |
|
|
|
331,322 |
|
|
|
135,838 |
|
Amortization of developed
technology |
|
3,640 |
|
|
|
3,640 |
|
|
|
10,918 |
|
|
|
10,918 |
|
Other costs(a) |
|
— |
|
|
|
2,219 |
|
|
|
— |
|
|
|
5,032 |
|
Adjusted Gross
Profit |
|
91,019 |
|
|
|
82,442 |
|
|
|
342,240 |
|
|
|
151,788 |
|
Adjusted Gross Margin |
|
26.0 |
% |
|
|
16.0 |
% |
|
|
27.7 |
% |
|
|
12.3 |
% |
a) For the three months ended September 30,
2022, other costs represent $2.2 million in remediation and damages
incurred because of a shutdown of a key supplier due to a severe
weather event. For the nine months ended September 30, 2022, other
costs represent $5.0 million in remediation and damages incurred
because of a shutdown of a key supplier due to a severe weather
event.
The following table reconciles net income to Adjusted
EBITDA:
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net income |
$ |
23,214 |
|
|
$ |
40,644 |
|
|
$ |
114,154 |
|
|
$ |
9,683 |
|
Preferred dividends and
accretion |
|
13,091 |
|
|
|
12,257 |
|
|
|
38,359 |
|
|
|
36,045 |
|
Net income (loss) to
common shareholders |
$ |
10,123 |
|
|
$ |
28,387 |
|
|
$ |
75,795 |
|
|
$ |
(26,362 |
) |
Other expense, net |
|
(2,979 |
) |
|
|
399 |
|
|
|
(5,997 |
) |
|
|
27 |
|
Legal settlement(a) |
|
— |
|
|
|
(42,750 |
) |
|
|
— |
|
|
|
(42,750 |
) |
Foreign currency (gain)
loss |
|
(207 |
) |
|
|
159 |
|
|
|
(273 |
) |
|
|
(1,968 |
) |
Preferred dividends and
accretion |
|
13,091 |
|
|
|
12,257 |
|
|
|
38,359 |
|
|
|
36,045 |
|
Interest expense |
|
13,064 |
|
|
|
8,746 |
|
|
|
35,372 |
|
|
|
23,709 |
|
Income tax (benefit) expense |
|
7,229 |
|
|
|
9,996 |
|
|
|
39,508 |
|
|
|
(23,183 |
) |
Depreciation expense |
|
956 |
|
|
|
663 |
|
|
|
2,422 |
|
|
|
1,867 |
|
Amortization of intangibles |
|
8,949 |
|
|
|
20,949 |
|
|
|
27,896 |
|
|
|
62,603 |
|
Amortization of developed
technology |
|
3,640 |
|
|
|
3,640 |
|
|
|
10,918 |
|
|
|
10,918 |
|
Equity-based compensation |
|
3,350 |
|
|
|
4,198 |
|
|
|
11,930 |
|
|
|
11,667 |
|
Change in fair value of
derivative assets |
|
(116 |
) |
|
|
— |
|
|
|
1,140 |
|
|
|
— |
|
Change in fair value of
contingent consideration |
|
190 |
|
|
|
(572 |
) |
|
|
2,232 |
|
|
|
(5,981 |
) |
Legal expense(b) |
|
103 |
|
|
|
2,227 |
|
|
|
654 |
|
|
|
5,006 |
|
M&A(c) |
|
— |
|
|
|
(206 |
) |
|
|
— |
|
|
|
10,771 |
|
Other costs(d) |
|
— |
|
|
|
7,328 |
|
|
|
— |
|
|
|
14,655 |
|
Adjusted
EBITDA |
$ |
57,393 |
|
|
$ |
55,421 |
|
|
$ |
239,956 |
|
|
$ |
77,024 |
|
(a) Settlement in our favor resulting from the
action against a competitor in connection with violation of a
non-competition agreement and misappropriation of trade secrets
(b) 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.
(c) Represents fees related to the acquisition
of STI Norland.
(d) For the three months ended September 30,
2022, other costs represent (i) $4.9 million related to certain
professional fees incurred related to the integration of STI
Norland, (ii) $2.2 million in remediation and damages incurred
because of a shutdown of a key supplier due to a severe weather
event, (iii) $0.2 million of certain professional fees &
payroll related costs we do not expect to incur in the future. For
the nine months ended September 30, 2022, other costs represent (i)
$5.8 million related to certain professional fees incurred related
to integration, (ii) $5.0 million in remediation and damages
incurred because of a shutdown of a key supplier due to a severe
weather event, (iii) $3.8 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.
The following table reconciles net income to
Adjusted Net Income:
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net income |
$ |
23,214 |
|
|
$ |
40,644 |
|
|
$ |
114,154 |
|
|
$ |
9,683 |
|
Preferred dividends and
accretion |
|
13,091 |
|
|
|
12,257 |
|
|
|
38,359 |
|
|
|
36,045 |
|
Net income (loss) to
common shareholders |
$ |
10,123 |
|
|
$ |
28,387 |
|
|
$ |
75,795 |
|
|
$ |
(26,362 |
) |
Amortization of
intangibles |
|
8,949 |
|
|
|
20,949 |
|
|
|
27,896 |
|
|
|
62,603 |
|
Amortization of developed
technology |
|
3,640 |
|
|
|
3,640 |
|
|
|
10,918 |
|
|
|
10,918 |
|
Amortization of debt discount
and issuance costs |
|
4,125 |
|
|
|
1,717 |
|
|
|
9,123 |
|
|
|
5,003 |
|
Preferred accretion |
|
6,394 |
|
|
|
6,122 |
|
|
|
18,792 |
|
|
|
17,240 |
|
Equity based compensation |
|
3,350 |
|
|
|
4,198 |
|
|
|
11,930 |
|
|
|
11,667 |
|
Change in fair value of
derivative assets |
|
(116 |
) |
|
|
— |
|
|
|
1,140 |
|
|
|
— |
|
Change in fair value of
contingent consideration |
|
190 |
|
|
|
(572 |
) |
|
|
2,232 |
|
|
|
(5,981 |
) |
Legal expense(a) |
|
103 |
|
|
|
2,227 |
|
|
|
654 |
|
|
|
5,006 |
|
M&A(b) |
|
— |
|
|
|
(206 |
) |
|
|
— |
|
|
|
10,771 |
|
Legal settlement(c) |
|
— |
|
|
|
(42,750 |
) |
|
|
— |
|
|
|
(42,750 |
) |
Other costs(d) |
|
— |
|
|
|
7,328 |
|
|
|
— |
|
|
|
14,655 |
|
Income tax expense of
adjustments(e) |
|
(5,323 |
) |
|
|
(2,166 |
) |
|
|
(18,618 |
) |
|
|
(20,569 |
) |
Adjusted Net
Income |
$ |
31,435 |
|
|
$ |
28,874 |
|
|
$ |
139,862 |
|
|
$ |
42,201 |
|
|
|
|
|
|
|
|
|
Income (loss) per common
share |
|
|
|
|
|
|
|
Basic |
$ |
0.07 |
|
|
$ |
0.19 |
|
|
$ |
0.50 |
|
|
$ |
(0.18 |
) |
Diluted |
$ |
0.07 |
|
|
$ |
0.19 |
|
|
$ |
0.50 |
|
|
$ |
(0.18 |
) |
Weighted average number of
common shares outstanding |
|
|
|
|
|
|
|
Basic |
|
151,068 |
|
|
|
150,322 |
|
|
|
150,865 |
|
|
|
149,604 |
|
Diluted |
|
152,323 |
|
|
|
151,382 |
|
|
|
152,083 |
|
|
|
149,604 |
|
Adjusted net income per common
share |
|
|
|
|
|
|
|
Basic |
$ |
0.21 |
|
|
$ |
0.19 |
|
|
$ |
0.93 |
|
|
$ |
0.28 |
|
Diluted |
$ |
0.21 |
|
|
$ |
0.19 |
|
|
$ |
0.92 |
|
|
$ |
0.28 |
|
Weighted average number of
common shares outstanding |
|
|
|
|
|
|
|
Basic |
|
151,068 |
|
|
|
150,322 |
|
|
|
150,865 |
|
|
|
149,604 |
|
Diluted |
|
152,323 |
|
|
|
151,382 |
|
|
|
152,083 |
|
|
|
150,058 |
|
(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) Settlement in our favor resulting from the
action against a competitor in connection with violation of a
non-competition agreement and misappropriation of trade
secrets.
(d) For the three months ended September 30,
2022, other costs represent (i) $4.9 million related to certain
professional fees incurred related to the integration of STI
Norland, (ii) $2.2 million in remediation and damages incurred
because of a shutdown of a key supplier due to a severe weather
event, (iii) $0.2 million of certain professional fees &
payroll related costs we do not expect to incur in the future. For
the nine months ended September 30, 2022, other costs represent (i)
$5.8 million related to certain professional fees incurred related
to integration, (ii) $5.0 million in remediation and damages
incurred because of a shutdown of a key supplier due to a severe
weather event, (iii) $3.8 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.
(e) Represents the estimated tax impact of all
Adjusted Net Income add-backs, excluding those which represent
permanent differences between book versus tax.
Array Technologies (NASDAQ:ARRY)
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Array Technologies (NASDAQ:ARRY)
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