Array Technologies(ARRY) - 2024 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 2024, detailing balance sheets, operations, and cash flows, with total assets at $1.63 billion, revenue at $153.4 million, and a net loss of $11.3 million Condensed Consolidated Balance Sheets As of March 31, 2024, total assets decreased to $1.63 billion, total liabilities to $1.03 billion, and stockholders' equity to $231.2 million Balance Sheet Highlights (in thousands) | Balance Sheet Highlights | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $774,423 | $832,281 | | Total Assets | $1,629,283 | $1,706,741 | | Total Current Liabilities | $283,662 | $335,691 | | Total Liabilities | $1,033,297 | $1,096,233 | | Total Stockholders' Equity | $231,224 | $259,248 | Condensed Consolidated Statements of Operations Q1 2024 revenue significantly decreased to $153.4 million, resulting in a net loss attributable to common shareholders of $11.3 million, or ($0.07) per share Statements of Operations Highlights (in thousands) | Statement of Operations | Three Months Ended Mar 31, 2024 (in thousands) | Three Months Ended Mar 31, 2023 (in thousands) | | :--- | :--- | :--- | | Revenue | $153,403 | $376,773 | | Gross Profit | $55,090 | $97,540 | | Income from Operations | $8,414 | $47,458 | | Net Income | $2,165 | $29,635 | | Net (Loss) Income to Common Shareholders | $(11,337) | $17,151 | | Diluted (Loss) Income Per Share | $(0.07) | $0.11 | Condensed Consolidated Statements of Cash Flows In Q1 2024, the company generated $47.5 million in operating cash flow, ending the quarter with $287.6 million in cash and cash equivalents Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2024 (in thousands) | Three Months Ended Mar 31, 2023 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $47,502 | $45,816 | | Net cash used in investing activities | $(2,386) | $(3,883) | | Net cash used in financing activities | $(4,575) | $(23,762) | | Net change in cash and cash equivalents | $38,540 | $13,855 | | Cash and cash equivalents, end of period | $287,620 | $147,756 | Notes to Condensed Consolidated Financial Statements These notes detail accounting policies, IRA impact with $57.1 million in vendor rebates, $396.9 million in remaining performance obligations, debt structure, segment revenue declines, and legal proceedings - The company had outstanding Vendor Rebates of $57.1 million as of March 31, 2024, related to the Inflation Reduction Act's 45X Advanced Manufacturing Production Tax Credit[47][48] Revenue Disaggregation (in thousands) | Revenue Disaggregation (Q1 2024 vs Q1 2023) | Three Months Ended Mar 31, 2024 (in thousands) | Three Months Ended Mar 31, 2023 (in thousands) | | :--- | :--- | :--- | | Over-time revenue | $124,336 | $248,219 | | Point in time revenue | $29,067 | $128,554 | | Total revenue | $153,403 | $376,773 | - As of March 31, 2024, the company had $396.9 million of remaining performance obligations, all expected to be recognized as revenue within the next twelve months[107] Segment Performance (in thousands) | Segment Performance (Q1 2024 vs Q1 2023) | Three Months Ended Mar 31, 2024 (in thousands) | Three Months Ended Mar 31, 2023 (in thousands) | | :--- | :--- | :--- | | Revenue | | | | Array Legacy Operations | $114,381 | $305,204 | | STI Operations | $39,022 | $71,569 | | Gross Profit | | | | Array Legacy Operations | $49,086 | $79,835 | | STI Operations | $6,004 | $17,705 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 59% Q1 2024 revenue decline to lower volumes and prices, while gross margin improved to 36% due to cost enhancements and 45X tax credits, maintaining a strong liquidity position Results of Operations Q1 2024 consolidated revenue declined 59% to $153.4 million, driven by lower volumes in both segments, though gross profit margin improved to 36% due to cost enhancements and 45X benefits Key Financial Metrics (in thousands) | Key Metrics | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $153,403 | $376,773 | (59)% | | Array Legacy Ops | $114,381 | $305,204 | (63)% | | STI Ops | $39,022 | $71,569 | (45)% | | Gross Profit | $55,090 | $97,540 | (44)% | | Gross Margin | 36.0% | 25.9% | +10.1 p.p. | | Net Income | $2,165 | $29,635 | (93)% | - The increase in gross profit as a percentage of revenue was driven by structural cost enhancements, 45X benefits, and a one-time $4.0 million vendor settlement[197][198] Liquidity and Capital Resources As of March 31, 2024, the company maintained strong liquidity with $287.6 million in cash and $490.8 million in net working capital, generating $47.5 million in operating cash flow Liquidity Metrics (in thousands) | Liquidity Metrics | As of March 31, 2024 (in thousands) | | :--- | :--- | | Cash and cash equivalents | $287,620 | | Net working capital | $490,800 | | Availability on Revolving Credit Facility | $179,000 | Cash Flow Summary (in thousands) | Cash Flow Summary | Three Months Ended Mar 31, 2024 (in thousands) | | :--- | :--- | | Net cash provided by operating activities | $47,502 | | Net cash used in investing activities | $(2,386) | | Net cash used in financing activities | $(4,575) | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include steel and aluminum price fluctuations and customer concentrations, with no material changes since the 2023 Annual Report - The company's main market risk exposures are from fluctuations in steel and aluminum prices and customer concentrations[217] - There have been no material changes to the company's market risk disclosures since its 2023 Annual Report[219] Controls and Procedures As of March 31, 2024, disclosure controls were deemed ineffective due to material weaknesses in personnel and IT/accounting controls at the STI subsidiary, with remediation efforts underway - Disclosure controls and procedures were deemed ineffective as of March 31, 2024, due to previously reported material weaknesses[221] - The material weaknesses relate to a lack of sufficient qualified personnel and inadequate IT and accounting controls at the STI subsidiary[221][222] - Remediation efforts include hiring additional qualified resources and implementing a new ERP system for Brazil operations in Q2 2024[224][226] PART II - OTHER INFORMATION Legal Proceedings The company is involved in class action and derivative lawsuits, but management assesses the likelihood of any material loss as remote - The company is a defendant in putative class action and derivative lawsuits alleging securities law violations, with one motion to dismiss granted and now under appeal[112][114][115] - Management believes the likelihood of any material loss related to these legal matters is remote and has not recorded any material loss contingency as of March 31, 2024[118] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K - There were no material changes to the risk factors disclosed in the 2023 Annual Report[230] Other Information (Items 2-6) This section confirms no unregistered equity sales or senior security defaults, notes the CEO's Rule 10b5-1 trading arrangement termination, and lists exhibits - The company reported no unregistered sales of equity securities or defaults upon senior securities[230][231] - On March 21, 2024, CEO Kevin Hostetler terminated his Rule 10b5-1 trading arrangement[232]