Array Technologies(US:ARRY)2025-08-07 21:22PART I - FINANCIAL INFORMATION Item 1. Unaudited Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Array Technologies, Inc. as of June 30, 2025, and for the three and six-month periods then ended, including balance sheets, statements of operations, comprehensive income, changes in equity, and cash flows, along with detailed notes explaining accounting policies and financial details Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $1.54 billion from $1.43 billion at year-end 2024, driven by higher accounts receivable and goodwill, while total liabilities rose to $1.18 billion from $1.14 billion, and stockholders' equity remained at a deficit of $70.9 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $377,271 | $362,992 | | Accounts receivable, net | $367,175 | $275,838 | | Inventories, net | $177,966 | $200,818 | | Total current assets | $1,038,454 | $998,724 | | Goodwill | $172,608 | $160,189 | | Total assets | $1,542,158 | $1,425,999 | | Liabilities & Equity | | | | Accounts payable | $161,248 | $172,368 | | Deferred revenue | $151,758 | $119,775 | | Total current liabilities | $468,335 | $437,814 | | Long-term debt, net | $657,591 | $646,570 | | Total liabilities | $1,176,863 | $1,137,164 | | Total stockholders' equity | ($70,867) | ($118,096) | Condensed Consolidated Statements of Operations For the three months ended June 30, 2025, revenue grew 41.6% year-over-year to $362.2 million, and net income increased 68.4% to $43.3 million, while for the six-month period, revenue grew 62.4% to $664.6 million, and net income more than doubled to $60.0 million, boosted by a $14.2 million gain on debt extinguishment Statement of Operations Summary (in thousands, except per share amounts) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $362,243 | $255,766 | $664,606 | $409,169 | | Gross Profit | $97,124 | $85,953 | $173,552 | $141,043 | | Income from Operations | $46,376 | $39,602 | $73,660 | $48,016 | | Gain on extinguishment of debts, net | $14,207 | $— | $14,207 | $— | | Net Income | $43,262 | $25,698 | $60,008 | $27,863 | | Diluted EPS | $0.19 | $0.08 | $0.20 | $— | Condensed Consolidated Statements of Comprehensive Income (Loss) Comprehensive income for Q2 2025 was $64.7 million, a significant turnaround from a loss of $18.1 million in Q2 2024, driven by higher net income and a positive foreign currency translation adjustment of $21.4 million Comprehensive Income (Loss) (in thousands) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $43,262 | $25,698 | $60,008 | $27,863 | | Foreign currency translation | $21,439 | ($43,768) | $36,716 | ($63,010) | | Comprehensive income (loss) | $64,701 | ($18,070) | $96,724 | ($35,147) | Condensed Consolidated Statements of Changes in Redeemable Perpetual Preferred Stock and Stockholders' Equity For the six months ended June 30, 2025, total stockholders' equity improved from a deficit of $118.1 million to $70.9 million, primarily due to $60.0 million net income and a $36.7 million positive foreign currency translation, partially offset by $29.2 million in preferred dividends and accretion and $26.7 million for Capped Calls - The accumulated deficit decreased from $370.6 million at the end of 2024 to $310.6 million as of June 30, 2025, due to the $60.0 million net income for the period21 - Accumulated other comprehensive loss improved significantly from ($45.4) million to ($8.7) million, driven by a $36.7 million positive foreign currency translation adjustment21 Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities was $30.8 million, a decrease from $51.5 million in the prior-year period, mainly due to changes in working capital, while net cash used in financing activities was $12.8 million, reflecting significant debt restructuring, and the company's total cash position increased by $14.6 million Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $30,782 | $51,459 | | Net cash used in investing activities | ($8,983) | ($4,488) | | Net cash used in financing activities | ($12,776) | ($4,144) | | Net change in cash | $14,629 | $33,240 | - Financing activities in H1 2025 included proceeds from new convertible notes ($345 million), repayment of the term loan facility ($233.9 million), and repurchase of other convertible notes ($78.4 million)26 Notes to Condensed Consolidated Financial Statements This section provides detailed explanations for the line items in the financial statements, covering the company's two-segment structure, accounting for IRA vendor rebates and tax credits, debt restructuring including new convertible notes, revenue recognition policies, and updates on legal proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for the three and six months ended June 30, 2025, highlighting strong year-over-year revenue and net income growth driven by increased volume in the Array Legacy Operations segment, and covering key operational factors, including the impact of the OBBB Act, Section 45X tax credits, trade policies, recent debt refinancing, and the planned acquisition of APA Solar - Consolidated revenue for Q2 2025 increased 42% year-over-year to $362.2 million, and for H1 2025 increased 62% year-over-year to $664.6 million212 - The company completed a private placement of $345 million in 2.875% Convertible Senior Notes due 2031, using proceeds to repay its Term Loan Facility and repurchase $100 million of its 2028 Convertible Notes165241 - On June 17, 2025, the company entered into a definitive agreement to acquire APA Solar, LLC, a manufacturer of solar racking systems, with the transaction expected to close in Q3 2025164 - The company is navigating regulatory changes, including the One Big Beautiful Bill Act (OBBB), which alters the solar ITC and imposes new foreign entity limitations, and new AD/CVD tariffs on solar components172185 Results of Operations For Q2 2025, revenue increased 42% year-over-year, driven by an 81% volume increase in Array Legacy Operations, though partially offset by a 13% ASP decrease, while gross profit rose 13% to $97.1 million, but gross margin fell to 26.8% from 33.6% due to lower ASPs and higher costs in the Legacy segment, and operating expenses increased 9% in Q2 Revenue by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Array Legacy Operations | $291,886 | $185,160 | 58% | | STI Operations | $70,357 | $70,606 | (0.4)% | | Total | $362,243 | $255,766 | 42% | Gross Profit by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Array Legacy Operations | $84,005 | $77,306 | 9% | | STI Operations | $13,119 | $8,647 | 52% | | Total | $97,124 | $85,953 | 13% | - Array Legacy Operations' Q2 revenue growth was driven by an 81% increase in volume, partially offset by a 13% decrease in ASPs215 - Consolidated gross margin decreased to 26.8% in Q2 2025 from 33.6% in Q2 2024, primarily due to lower ASPs and higher costs in the Array Legacy segment221222 Liquidity and Capital Resources As of June 30, 2025, the company had a cash balance of $377.3 million and $133.7 million available under its revolving credit facility, with cash from operations for H1 2025 at $30.8 million, and executed significant debt restructuring, including issuing $345 million in new 2031 convertible notes and repaying its Term Loan Facility - Cash balance was $377.3 million as of June 30, 2025, with $133.7 million available under the revolving credit facility238 - In H1 2025, the company generated $30.8 million in cash from operations, down from $51.5 million in H1 2024237244 - The company completed a major debt refinancing in June 2025, issuing new notes to extinguish its Term Loan and partially repurchase existing notes, resulting in a $20.1 million gain on extinguishment241 - The company has a commitment to acquire APA Solar for a base price of $210 million, with 80% paid in cash at closing and 20% deferred, plus a potential earnout of up to $40 million in stock250251 Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no material changes to its market risk disclosures since its 2024 Annual Report, with key exposures remaining fluctuations in steel and aluminum prices and customer concentrations, and no use of financial instruments for trading purposes - There have been no material changes to the market risk information previously provided in the 2024 Annual Report261 - Primary market risks include fluctuations in steel and aluminum prices and customer concentrations260 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of June 30, 2025, and concluded they were effective at a reasonable assurance level, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level263264 - No material changes to the internal control over financial reporting occurred during the three months ended June 30, 2025265 PART II - OTHER INFORMATION Legal Proceedings The company is involved in a putative class action lawsuit (the Plymouth Action) and related derivative complaints, with the Plymouth Action dismissed by the district court but currently under appeal, and the derivative actions stayed pending the appeal outcome, while the company believes the claims are without merit and has not recorded a material loss contingency - The company is defending against the Plymouth Action, a class action lawsuit alleging misstatements related to its 2020 and 2021 offerings, which was dismissed but is now on appeal119121122 - Related derivative complaints filed in New York and Delaware are currently stayed pending the outcome of the Plymouth Action appeal125127 Risk Factors This section highlights material business risks, focusing on recent developments such as geopolitical instability, macroeconomic conditions like inflation, significant changes in U.S. trade policy including new and potential tariffs, and risks related to the reduction or elimination of government incentives for solar energy, and potential competitive disadvantage if products do not meet domestic content requirements - Geopolitical conflicts, such as the Russia-Ukraine war and Middle East instability, could disrupt business operations, impact global economic conditions, and restrict access to certain suppliers269 - The company faces significant risk from escalating trade tensions and new tariffs imposed in 2025 on imports from China, Canada, Mexico, and other countries, which could increase costs and create market uncertainty271273 - The reduction, elimination, or changes to government incentives like the solar ITC, particularly under the new OBBB legislation, could reduce demand for solar energy systems and harm the business286288 - Failure to meet foreign entity of concern or domestic content requirements for tax credits could put the company at a competitive disadvantage and adversely impact U.S. sales289 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities during the period - None292 Other Information On August 4, 2025, the company amended the separation agreement with its former CFO, Kurt Wood, to make a one-time cash payment of $20,000 in exchange for the cancellation of all his outstanding and unvested RSU and PSU awards, and no directors or officers adopted, amended, or terminated any 10b5-1 trading plans during the quarter - The company amended its separation agreement with former CFO Kurt Wood, providing a $20,000 cash payment to cancel all his unvested equity awards295 - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the three months ended June 30, 2025296 Exhibits This section lists the exhibits filed with the Form 10-Q, including the Equity Purchase Agreement for the APA Solar acquisition, the indenture for the new 2031 Convertible Notes, an amendment to a separation agreement, and various officer certifications and XBRL data files - Key exhibits filed include the Equity Purchase Agreement for APA Solar, the indenture for the 2.875% Convertible Senior Notes due 2031, and certifications by the CEO and CFO297298