Array Technologies Inc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
ARRY$5.86+10.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0001820721-24-000049
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001820721-24-000062
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 151 previous paragraphs and 154 current paragraphs.
87 unchanged; 27 reworded; 37 added; 35 removed; 2 previous and 3 current paragraphs rearranged.
Tables are not compared: 3 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (37)
Current report
•Macroeconomic factors. There has been a rapid depreciation of the Brazilian Real in conjunction with existing pricing pressures on energy in the Brazilian market. Due to these dynamics, the economic cases for the power purchase agreements, or PPAs, for many solar projects have become less attractive for our customers. Many of the developers of these projects are now signaling delays as they renegotiate the pricing of these PPAs.
Current report
45X Credit
Current report
During the six months ended June 30, 2024, we entered into vendor rebate agreements pertaining to additional parts we concluded qualify as structural fasteners in accordance with the IRC 45X Advanced Manufacturing Production Credit. We are pursuing initiatives to obtain further clarity regarding the eligibility of additional parts that qualify for the 45X Manufacturing Credit in conjunction with negotiating the split of the 45X benefits with suppliers for parts we do not manufacture internally.
Current report
Domestic Content Safe Harbor Guidance
Current report
The IRS issued Notice 2023-38 in May of 2023 setting forth guidance on the domestic content bonus tax credits under the IRA. Uncertainties still exist under this guidance, like whose costs would be used (the manufacturer’s cost, a vendor’s cost to acquire, etc.) and how to define manufactured product components associated with trackers. In May of 2024, the IRS issued Notice 2024-41 setting forth further guidance on the domestic content bonus tax credits, including a safe harbor method for calculating domestic content percentages. Notice 2024-41 and the elective safe harbor described therein has clarified some pre-existing uncertainty in the industry from Notice 2023-38, , but it has also introduced uncertainty of its own regarding issues such as what qualifies as a “fastener.” These uncertainties have and could continue to cause our customers to delay projects as they navigate the existing guidance in qualifying for the tax credit and possibly wait for further clarity.
Current report
The disruption of container shipping traffic through the Red Sea has created port congestion, especially in Asia, affecting transit times, capacity, and shipping costs for routes connecting the rest of the world with Asia. To address the challenges arising from prolonged transit times, we have increased our local sourcing efforts where feasible within certain regions. These measures aim to reduce delays to get the product to project sites on time. There is still uncertainty on how long these disruptions and the severity of their impact on our operations will last, but we continue to monitor the situation and evaluate our procurement and supply chain strategies, as to reduce any negative impact on our business, financial condition, and results of operations.
Current report
The United States currently imposes antidumping and countervailing duties (“AD/CVD”) on certain imported crystalline silicon PV(“CSPV”) cells and modules from China and Taiwan. Such AD/CVD can change over time pursuant to annual reviews conducted by the U.S. Department of Commerce (“USDOC”). In August 2023, the USDOC issued final affirmative circumvention rulings, finding that solar panels completed in Cambodia, Malaysia, Thailand, and Vietnam using parts and components produced in China circumvent the pre-existing AD/CVD orders on China. While we do not sell solar modules, the degree of our exposure is dependent on, among other things, the impact of the AD/CVD orders on the projects that are also intended to use our products, with such impact being largely out of our control. We have seen a number of projects in our order book delayed as a result of the USDOC investigation, and effective enforcement of the AD/CVD orders could negatively impact our results of operations.
Current report
Inflation Reduction Act 45X Credits
Current report
During the three months ended June 30, 2024, the Company concluded that certain parts manufactured by the Company qualify for the 45X Advanced Manufacturing Production Credits. As a result, the Company recorded it an immaterial cumulative catch-up for 45X Advanced Manufacturing Production Credits related to torque tubes manufactured by the Company and sold from January 1, 2023 through March 31, 2024.
Current report
Consolidated revenue decreased $252.0 million, or 50%, driven by a decrease in Array Legacy Operations of 46% and STI Operations of 57%.
Current report
The $160.1 million, or 46%, revenue decrease in Array Legacy Operations was driven by a decrease in the number of megawatts shipped, due primarily to project delays from our customers and an ASP decrease on lower input costs per watt.
Current report
The $91.9 million, or 57%, revenue decrease in STI Operations was driven by a decrease in the number of megawatts shipped, largely due to a year-over-year shift from larger utility-scale projects to smaller distributed generation projects and an ASP decrease due to a smaller percentage of projects with construction services.
Current report
Consolidated cost of revenue decreased by $191.5 million, or 53%, driven primarily by a reduction in revenue combined with lower input costs per watt resulting from commodities coupled with supply chain and engineering cost out initiatives and the realization of 45X benefits associated with torque tubes and structural fasteners.
Current report
Consolidated gross profit decreased by $60.4 million, or 41%. As a percentage of revenue, consolidated gross profit increased to 34% for the three months ended June 30, 2024, as compared to 29% during the same period in the prior year.
Current report
Array Legacy Operations gross profit decreased by $25.6 million, or 25%. As a percentage of revenue, gross profit increased to 42% from 30% for the three months ended June 30, 2024 and 2023, respectively. The increase in gross profit as a percent of revenue was driven by continued performance of our core gross margins, enhanced by the realization of 45X benefits associated with torque tubes and structural fasteners.
Current report
Consolidated depreciation and amortization decreased by $0.3 million or 4%, effectively flat when compared to the same period in the prior year.
Current report
Comparison of the six months ended June 30, 2024 and 2023
Current report
Revenue
Current report
The $124.4 million, or 53%, revenue decrease at STI Operations was driven by a decrease in the number of megawatts shipped, largely due to a year-over-year shift from larger utility-scale projects to smaller distributed generation projects and an ASP decrease due to a smaller percentage of projects with construction services.
Current report
Consolidated cost of revenue decreased by $372.4 million, or 58%, driven primarily by a reduction in revenue combined with lower input costs per watt resulting from commodities coupled with supply chain and engineering cost out initiatives and the realization of 45X benefits associated with torque tubes and structural fasteners.
Current report
Consolidated gross profit decreased by $102.9 million, or 42%. As a percentage of revenue, consolidated gross profit increased to 34% for the six months ended June 30, 2024, as compared to 28% during the same period in the prior year.
Current report
STI Operations gross profit decreased by $46.5 million, or 76%. As a percentage of revenue, gross profit for STI Operations decreased to 13% from 26% for the six months ended June 30, 2024 and 2023, respectively, driven primarily by higher costs of locally sourced material to support on-time delivery for customers.
Current report
Consolidated general and administrative expenses decreased by $3.6 million, or 5%. The decrease was primarily due to a change in estimate related to performance-based equity compensation and lower professional and consulting fees as a result of our initiative to reduce fees and internalize activities that were historically outsourced, more than offsetting incremental recruiting costs, and incremental severance costs.
Current report
Interest Income
Current report
Consolidated interest income increased by $5.8 million, or 214%, due to higher cash on hand during the six months ended June 30, 2024, coupled with higher interest rates.
Current report
Interest Expense
Current report
Income Tax Expense
Current report
Divestiture of Investment in Equity Securities
Current report
In June 2024, we divested 100 percent of our equity investment in preferred stock of a private company we purchased in 2021. We received $12.0 million in proceeds for the divestiture. The proceeds were received in July 2024, therefore we recorded a receivable in the amount of $12.0 million in Prepaid expenses and other on the condensed consolidated balance sheet at June 30, 2024. No gain or loss resulted from the transaction.
Current report
Goodwill
Current report
Our goodwill represents the excess of the purchase price of business combinations over the fair value of the net assets acquired. Goodwill impairment testing requires significant judgment and management estimates, including, but not limited to, the determination of (i) the number of reporting units, (ii) the goodwill and other assets and liabilities to be allocated to the reporting units and (iii) the fair values of the reporting units. The estimates and assumptions described above, along with other factors such as discount rates, will significantly affect the outcome of the impairment tests and the amounts of any resulting impairment losses. We may use either a qualitative or quantitative approach when testing a reporting unit’s goodwill for impairment on an annual basis during the fourth quarter of each year, and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Current report
If we use a qualitative approach and determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we would then perform the first step of the goodwill impairment test, which would consist primarily of a discounted cash flow (“DCF”) analysis compared to a guideline publicly-traded companies (“GPC”) analysis to determine the fair value of the reporting unit.
Current report
During the second quarter of 2024, we noted facts and circumstances around our STI Operations reporting unit Goodwill, were indicative that the fair value could be less than its carrying value. Accordingly, with the assistance of a third-party specialist, we performed the first step of the goodwill impairment test (“Step One”).
Current report
The Step One impairment test consisted primarily of a DCF analysis compared to a GPC analysis to determine the fair value of the STI reporting unit. The significant assumptions used in determining the fair values primarily related to the selection of EBITDA multiples used in the GPC analysis, and the revenue growth rate, the forecasted EBITDA margin, and the selected discount rate used in the DCF model. As a result of the Step One impairment test performed, we concluded the fair value of Goodwill of the STI reporting unit was greater than its carrying value, thus the STI reporting unit was not impaired as of June 30, 2024.
Current report
Long-lived Assets
Current report
We review long-lived assets, including our finite-lived intangible assets, for impairment whenever events or changes in circumstances, indicate that the carrying value of the long-lived assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset over its fair value.
Current report
During the second quarter of 2024, we noted facts and circumstances indicated that the STI asset groups may not be recoverable, and that the carrying value may not be recoverable. We performed a recoverability test over our asset groups by comparing the sum of the estimated undiscounted future cash flows of the STI asset groups to the carrying amounts at June 30, 2024. The result of the recoverability test indicated the sum of the expected future undiscounted cash flows was greater than the carrying amount of the STI asset groups. Accordingly, we concluded the long-lived assets of STI were not impaired as of June 30, 2024.
Removed paragraphs (35)
Previous report
Summary Risk Factors
Previous report
Our business is subject to a number of risks that if realized could materially and adversely affect our business, financial conditions, results of operations, cash flows and access to liquidity. These risks are discussed more fully in the “Risk Factors” section of this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Our principal risks include the following:
Previous report
•if demand for solar energy projects does not continue to grow or grows at a slower rate than we anticipate, our business will suffer;
Previous report
•the viability and demand for solar energy are impacted by many factors outside of our control, including but not limited to, the retail price of electricity, availability of in-demand components like high voltage breakers, various policies related to the permitting and interconnection costs of solar plants, and the availability of incentives for solar energy and products, which makes it difficult to predict our future prospects;
Previous report
•competitive pressures within our industry may harm our business, revenues, growth rates and market share;
Previous report
•a loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment, could harm our business and negatively impact revenue, results of operations and cash flow;
Previous report
•a drop in the price of electricity derived from the utility grid or from alternative energy sources may harm our business, financial condition, results of operations and prospects;
Previous report
•a failure to maintain effective internal controls over financial reporting may negatively affect our ability to timely report our financial condition or results of operations, which may adversely affect our business;
Previous report
•a further increase in interest rates, or a reduction in the availability of tax equity or project debt capital in the global financial markets could make it difficult for customers to finance the cost of a solar energy system and could reduce the demand for our products;
Previous report
•electric utility industry policies and regulations, and any subsequent changes, may present technical, regulatory and economic barriers to the purchase and use of solar energy systems, which may significantly reduce demand for our products or harm our ability to compete;
Previous report
•the interruption of the flow of materials from international vendors could disrupt our supply chain, including as a result of the imposition of additional duties, tariffs and other charges or restrictions on imports and exports;
Previous report
•geopolitical, macroeconomic and other market conditions unrelated to our operating performance including the COVID-19 pandemic, the military conflict in Ukraine and Russia, the Israel-Hamas war, attacks on shipping in the Red Sea and rising inflation and interest rates;
Previous report
•we may not be able to convert our orders in backlog into revenue;
Previous report
•our results of operations fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause our results of operations for a particular period to fall below expectations;
Previous report
•the reduction, elimination or expiration, or our failure to optimize the benefits of government incentives for, or regulations mandating the use of, renewable energy and solar energy, particularly in relation to our competitors, could reduce demand for solar energy systems and harm our business;
Previous report
•if we fail to, or incur significant costs in order to obtain, maintain, protect, defend or enforce, our intellectual property and other proprietary rights, our business and results of operations could be materially harmed;
Previous report
•significant changes in the cost of raw materials could adversely affect our financial performance;
Previous report
•defects or performance problems in our products could result in loss of customers, reputational damage and decreased revenue, and we may experience delays, disruptions or quality control problems in our product development operations;
Previous report
•if we fail to retain our key personnel or if we fail to attract additional qualified personnel, we may not be able to achieve our anticipated level of growth and our business could suffer;
Previous report
•our continued planned expansion into new markets could subject us to additional business, financial, regulatory and competitive risks;
Previous report
•cybersecurity or other data incidents, including unauthorized disclosure of personal or sensitive data or theft of confidential information could harm our business;
Previous report
•internal control deficiencies have been identified that constituted material weaknesses in our internal control over financial reporting. If we fail to implement and maintain effective internal controls over financial reporting, we may be unable to accurately or timely report our financial condition or results of operations, which may adversely affect our business
Previous report
•our substantial indebtedness could adversely affect our financial condition;
Previous report
•we face risks related to actual or threatened public health epidemics, pandemics, outbreaks or crises, such as the COVID-19 pandemic, which could have a material and adverse effect on our business, results of operations and financial condition; and
Previous report
•changes to tax laws and regulations that are applied adversely to us or our customers could materially adversely affect our business, financial condition, results of operations and prospects, including our ability to optimize those changes brought about by the passage of the Inflation Reduction Act.
Previous report
The 45X proposed regulations published in December did not further clarify what would be considered a structural fastener; however, we do continue to expect that there will be additional credits we can monetize for a number of our components under the existing law and proposed regulations. We are actively working on multiple initiatives to obtain additional clarity regarding the eligibility and in parallel are negotiating the split of the 45X benefits with our suppliers for parts we do not manufacture internally.
Previous report
Houthi rebels in Yemen have significantly stepped-up attacks against commercial vessels in the Bab-el-Mandeb strait between the Arabian peninsula and the Horn of Africa since late November 2023, which has led many shipping companies to pause shipments through the Suez Canal and the Red Sea. Many of these shipments are being redirected around the Cape of Good Hope in South Africa, adding between 3,000 to 3,500 nautical miles to routes connecting Europe with Asia. As an additional result of the reroute, certain ports could see crowding and delays in unloading shipments. We do not yet know the duration of these disruptions or the severity of their impact on our operations, but we continue to monitor the situation and evaluate our procurement strategy and supply chain as to reduce any negative impact on our business, financial condition and results of operations.
Previous report
In June 2022, the U.S. President authorized the U.S. Secretary of Commerce to provide a 24-month AD/CVD tariff exemption for imported solar modules from certain Southeast Asian countries. The USDOC previously issued regulations implementing the AD/CVD moratorium in the event that it found circumvention with respect to such Southeast Asian countries. In August 2023, the USDOC issued final affirmative circumvention rulings, finding that solar modules completed in Cambodia, Malaysia, Thailand, and Vietnam using parts and components produced in China circumvent pre-existing AD/CVD orders on China. At this time, it is expected that duties will apply to such solar modules unless they are imported, used, and installed by June 2024.
Previous report
Cost of Revenue and Gross Profit
Previous report
Operating Expenses
Previous report
The $32.5 million, or 45%, revenue decrease at STI Operations was driven by a volume decrease of 41% and an ASP decrease on lower input costs of 4%.
Previous report
Cost of Revenue and Gross Profit
Previous report
Consolidated cost of revenue decreased by $180.9 million, or 65%, driven primarily by the reduction in volume combined with a decrease in input costs.
Previous report
Operating Expenses
Previous report
Consolidated interest income increased by $2.4 million, or 199%, as compared to the prior year, due to higher
Reworded paragraphs (27)
Previous wording
We sell our products to engineering, procurement and construction firms (“EPCs”) that build solar energy projects and to large solar developers, independent power producers and utilities, often under master supply agreements or multi-year procurement contracts. During the three months ended March 31, 2024, we derived 73% and 27% of our revenues from customers in the U.S. and the rest of the world, respectively. As of March 31, 2024, we had shipped more than 74.8 gigawatts of trackers to customers worldwide.
Current wording
We sell our products to engineering, procurement and construction firms (“EPCs”) that build solar energy projects and to large solar developers, independent power producers and utilities, often under master supply agreements or multi-year procurement contracts. During the six months ended June 30, 2024, we derived 72% and 28% of our revenues from customers in the U.S. and the rest of the world, respectively. As of June 30, 2024, we had shipped more than 77.4 gigawatts of trackers to customers worldwide.
Previous wording
Our corporate headquarters are located in Albuquerque, New Mexico. As of March 31, 2024, we had 975 full-time employees.
Current wording
Our corporate headquarters are located in Albuquerque, New Mexico. As of June 30, 2024, we had 1,013 full-time employees.
Previous wording
The Company incurs research and development (“R&D”) costs during its process of researching and developing new products and significant enhancements to existing products. R&D costs are a subset of our total engineering spend and consist primarily of personnel-related costs associated with our team of internal engineers, third-party consultants, materials and overhead. The Company expenses these costs as incurred prior to a respective product being ready for commercial production. Total engineering expense was $4.3 million and $3.9 million during the three months ended March 31, 2024 and 2023, respectively, of which $1.9 million and $2.1 million were related to R&D activities performed by the Company during the three months ended March 31, 2024 and 2023, respectively.
Current wording
The Company incurs research and development (“R&D”) costs during its process of researching and developing new products and significant enhancements to existing products. R&D costs are a subset of our total engineering spend and consist primarily of personnel-related costs associated with our team of internal engineers, third-party consultants, materials and overhead. The Company expenses these costs as incurred prior to a respective product being ready for commercial production. Total engineering expense was $4.1 million and $4.3 million during the three months ended June 30, 2024 and 2023, respectively, of which $1.8 million and $2.3 million were related to R&D activities performed by the Company during the same period, respectively. Total engineering expense was $8.3 million and $8.2 million during the six months ended June 30, 2024 and 2023, respectively, of which $3.7 million and $4.4 million were related to R&D activities performed by the Company during the same period, respectively.
Previous wording
Reversal of Out-of-Period Adjustment Recorded during the three months ended March 31, 2023
Current wording
Reversal of Out-of-Period Adjustment Recorded During 2023 Interim Periods
Previous wording
Because we recognize revenue on projects as legal title to equipment is transferred from us to the customer, any delays in large projects from one quarter to another for any reason may cause our results of operations for a particular period to fall below expectations. Our end-users’ ability to install solar energy systems has been affected by a number of factors including:
Current wording
Because we recognize revenue on projects as legal title to equipment is transferred from us to the customer, any delays in large projects from one quarter to another for any reason may cause our results of operations for a particular period to fall below expectations and make the timing of revenue difficult to forecast. Our end-users’ ability to install solar energy systems has been affected by a number of factors including:
Previous wording
On April 24, 2024, the American Alliance for Solar Manufacturing Trade Committee, an ad hoc coalition of domestic producers of crystalline silicon photovoltaic (CSPV) solar cells and modules, filed a petition with the USDOC and the U.S. International Trade Commission (the “USITC”) seeking the imposition of AD/CVD tariffs on imports of CSPV cells and modules from Cambodia, Malaysia, Thailand and Vietnam. If the USDOC or USITC make preliminary affirmative determinations, could have an adverse effect on our business, financial condition, and results of operations.
Current wording
•Uncertainty regarding potential tariffs. On April 24, 2024, the American Alliance for Solar Manufacturing Trade Committee, an ad hoc coalition of domestic producers of CSPV cells and modules, filed a petition with the USDOC and the U.S. International Trade Commission (the “USITC”) seeking the imposition of AD/CVD tariffs on imports of CSPV cells and modules from Cambodia, Malaysia, Thailand and Vietnam. The USITC made a preliminary affirmative determination on June 7, 2024, and the USDOC is expected to make its preliminary determination in November of 2024. As a result of these preliminary and expected preliminary determinations, we have had customers determine to pre-emptively change panel selection or plan on project delays in consideration of a potential panel selection change. Once the impact of any potential tariffs is clear, customers can better understand their impact on panel costs and can make relevant timing decisions for specific projects.
Previous wording
Inflationary pressures may continue to impact, at least in the near-term, and may continue to negatively impact our results of operations. To mitigate the inflationary pressures on our business, despite our ASPs decreasing, we have continued to accelerate our productivity initiatives, expanded our supplier base, and continued to execute on our overhead cost containment practices.
Current wording
Inflationary pressures persist and may continue to negatively impact our results of operations. To mitigate the inflationary pressures on our business, despite our ASPs decreasing due to the current deflationary environment for commodities like steel, we have continued to accelerate our productivity initiatives, expanded our supplier base, and continued to execute on our overhead cost containment practices.
Previous wording
While we do not sell solar modules, the degree of our exposure is dependent on, among other things, the impact of the investigation on the projects that are also intended to use our products, with such impact being largely out of our control. We have seen a number of projects in our order book delayed as a result of the USDOC investigation. The repeal of the 24-month exemption, and any affirmative determinations made once the exemption expires in any event, would have an adverse effect on our business, financial condition, and results of operations. More broadly, legislation has been proposed that would make it easier for domestic companies to obtain affirmative determinations in antidumping and countervailing duty investigations. The proposed USICA/America COMPETES Act, if enacted, could result in future successful petitions that limit imports from Asia and other regions.
Current wording
More broadly, legislation has been proposed that would make it easier for domestic companies to obtain affirmative determinations in antidumping and countervailing duty investigations. The proposed USICA/America COMPETES Act, if enacted, could result in future successful petitions that limit imports from Asia and other regions.
Previous wording
The possibility of additional tariffs and duties in the future like those described above have created uncertainty in the industry. If the price of solar systems in the U.S. increases, the use of solar systems could become less economically feasible and could reduce our gross margins or reduce the demand of solar systems manufactured and sold, which in turn may decrease demand for our products. Additionally, existing or future tariffs may negatively affect key customers, suppliers, and manufacturing partners. Such outcomes could adversely affect the amount or timing of our revenues, results of operations or cash flows, and continuing uncertainty could cause sales volatility, price fluctuations or supply shortages or cause our customers to advance or delay their purchase of our products. It is difficult to predict what further trade-related actions governments may take, which may include additional or increased tariffs and trade restrictions, and we may be unable to quickly and effectively react to such actions.
Current wording
The possibility of additional tariffs and duties in the future like those described above has created uncertainty in the industry. If the price of solar systems in the U.S. increases, the use of solar systems could become less economically feasible and could reduce our gross margins or reduce the demand of solar systems manufactured and sold, which in turn may decrease demand for our products. Additionally, existing or future tariffs may negatively affect key customers, suppliers, and manufacturing partners. Such outcomes could adversely affect the amount or timing of our revenues, results of operations or cash flows, and continuing uncertainty could cause sales volatility, price fluctuations or supply shortages or cause our customers to advance or delay their purchase of our products. It is difficult to predict what further trade-related actions governments may take, which may include additional or increased tariffs and trade restrictions, and we may be unable to quickly and effectively react to such actions.
Previous wording
STI Operations gross profit decreased by $11.7 million, or 66%. As a percentage of revenue, gross profit for STI Operations decreased to 15% from 25% for the three months ended March 31, 2024 and 2023, respectively, driven primarily by changes in statutory reductions from incentive tax credits in Brazil, as well as expedite fees we incurred to meet customer delivery schedules.
Current wording
STI Operations gross profit decreased by $34.8 million, or 80%. As a percentage of revenue, gross profit for STI Operations decreased to 12% from 27% for the three months ended June 30, 2024 and 2023, respectively, driven primarily by higher costs of locally sourced material to support on-time delivery for customers.
Previous wording
Consolidated general and administrative expenses decreased by $0.4 million, or 1%. The decrease was was primarily due to lower professional and consulting fees primarily driven by our initiative to internalize activities that were historically outsourced in an effort to reduce fees.
Current wording
Consolidated general and administrative expenses decreased by $3.3 million, or 8%. The decrease was primarily due to a change in estimate related to performance-based equity compensation and lower professional and consulting fees as a result of our initiative to reduce fees and internalize activities that were historically outsourced, more than offsetting incremental recruiting costs, and incremental severance costs
Previous wording
Change in the fair value of contingent consideration resulted in a gain of $0.7 million, for the three months ended March 31, 2024, due to the fair value remeasurement of the TRA liability, primarily driven by an increase in the discount rate used in the valuation.
Current wording
Change in the fair value of contingent consideration resulted in a loss of $0.5 million.
Previous wording
cash on hand during the first quarter of 2024, coupled with higher interest rates.
Current wording
Consolidated interest income increased by $3.3 million, or 226%, due to higher cash on hand during the second quarter of 2024, coupled with higher interest rates.
Previous wording
Consolidated income tax decreased by $7.0 million, or 84%. The Company recorded income tax expense of $1.3 million for the three months ended March 31, 2024, compared to an expense of $8.3 million for the three months ended March 31, 2023. Our effective tax rate was 37.6% and 21.9% for the three months ended March 31, 2024 and 2023, respectively. The income tax expense for the three months ended March 31, 2024, was impacted by legislation in Brazil which resulted in a local tax incentive no longer being exempt from federal income tax beginning in 2024. Additionally, tax expense of $0.4 million was recorded discretely during the quarter related to equity-based compensation. The tax expense for the three months ended March 31, 2023, was unfavorably impacted by higher income reported in non-U.S. jurisdictions, offset by a tax benefit of $0.4 million related to excess equity-based compensation deductions recorded discretely during the quarter.
Current wording
Consolidated income tax decreased by $13.5 million, or 63%. The Company recorded income tax expense of $7.8 million for the three months ended June 30, 2024, compared to income tax expense of $21.4 million for the three months ended June 30, 2023. Our effective tax rate was 23.3% for the three months ended June 30, 2024, and 24.7% for the three months ended June 30, 2023. The tax expense for the three months ended June 30, 2024, was impacted by legislation in Brazil which resulted in a local tax incentive no longer being exempt from federal income tax beginning in 2024. Additionally, tax expense of $0.1 million was recorded discretely related to equity-based compensation. The tax expense for the three months ended June 30, 2023, was unfavorably impacted by higher income reported in non-U.S. jurisdictions, partially offset by benefits related to excess stock compensation deductions of $0.8 million recorded discretely during the quarter.
Previous wording
Consolidated revenue decreased, $223.4 million, or 59%, driven by a decrease at STI Operations of $32.5 million and a decrease at Array Legacy Operations of $190.8 million.
Current wording
Consolidated revenue decreased, $475.3 million, or 54%, driven by a decrease at Array Legacy Operations of $350.9 million and a decrease at STI Operations of $124.4 million.
Previous wording
The $190.8 million, or 63%, revenue decrease at Array Legacy Operations was driven by a volume decrease of 60% and an ASP decrease on lower input costs of 2%.
Current wording
The $350.9 million, or 54%, revenue decrease at Array Legacy Operations was driven by a decrease in the number of megawatts shipped and an ASP decrease due to lower input costs per watt.
Previous wording
Array Legacy Operations gross profit decreased by $30.7 million, or 39%. As a percentage of revenue, gross profit at Array Legacy Operations increased to 43% from 26% for the three months ended March 31, 2024 and 2023, respectively. The increase in gross profit as a percent of revenue was driven by structural cost enhancements and the realization of 45X benefits associated with our torque tube. The Company also recognized a one-time $4.0 million settlement with one of its vendors during the first quarter as a reduction of Cost of revenue.
Current wording
Array Legacy Operations gross profit decreased by $56.4 million, or 31%. As a percentage of revenue, gross profit at Array Legacy Operations increased to 42% from 28% for the six months ended June 30, 2024 and 2023, respectively. The increase in gross profit as a percent of revenue was primarily driven by the realization of 45X benefits associated with torque tubes and structural fasteners. The Company also recognized a one-time $4.0 million settlement with one of our vendors during the first quarter as a reduction of Cost of revenue.
Previous wording
Consolidated depreciation and amortization expense decreased by $1.0 million, or 9%, due to the decrease in the amortization of intangibles of $1.0 million, driven by a subset of intangible assets acquired in January 2022, becoming fully amortized during the first quarter of 2023.
Current wording
Consolidated depreciation and amortization expense decreased by $1.3 million, or 7%, due to the decrease in the amortization of intangibles of $1.8 million, driven by a subset of intangible assets acquired in January 2022, becoming fully amortized during the first quarter of 2023.
Previous wording
Consolidated interest expense decreased by $1.8 million, or 17%, primarily due to $74.3 million of principal pay downs on our Term Loan during 2023, as a result of focused efforts to decrease our outstanding debt balance with free cash flows from operations.
Current wording
Consolidated interest expense decreased by $4.8 million, or 21%, primarily due to $74.3 million of principal pay downs on our Term Loan during 2023. These pay downs were the result of focused efforts to decrease our outstanding debt balance with free cash flows from operations.
Previous wording
As of March 31, 2024, our cash balance was $287.6 million, of which $69.2 million was held outside the U.S., and net working capital was $490.8 million. We had outstanding borrowings of $237.1 million under our $575 million Term Loan Facility and $179.0 million available to us under our $200 million Revolving Credit Facility.
Current wording
As of June 30, 2024, our cash balance was $282.3 million, of which $45.5 million was held outside the U.S., and net working capital was $511.4 million. We had outstanding borrowings of $236.0 million under our $575 million Term Loan Facility and $184.1 million available to us under our $200 million Revolving Credit Facility.
Previous wording
For the three months ended March 31, 2024, cash provided by operating activities was $47.5 million, of which $21.0 million was generated from net income as adjusted for the impact of non-cash expenses, consisting primarily of depreciation and amortization, equity-based compensation, and amortization of developed technology.
Current wording
For the six months ended June 30, 2024, cash provided by operating activities was $51.5 million, of which $61.7 million was generated from net income as adjusted for the impact of non-cash expenses, consisting primarily of depreciation and amortization, amortization of developed technology, and equity-based compensation.
Previous wording
For the three months ended March 31, 2023, cash provided by operating activities was $45.8 million, of which $57.2 million was generated from net income as adjusted for the impact of non-cash expenses, consisting primarily of depreciation and amortization, deferred tax expense and equity-based compensation.
Current wording
For the six months ended June 30, 2023, cash provided by operating activities was $66.4 million, of which $139.8 million was generated from net income as adjusted for the impact of non-cash expenses, consisting primarily of deferred tax expense, depreciation and amortization, equity-based compensation and both a $30.5 million increase in accounts payable and a $22.8 million decrease in inventory. These increases were partially offset by an $81.0 million increase in accounts receivable and a $64.1 million decrease in deferred revenue.
Previous wording
For the three months ended March 31, 2024, net cash used in investing activities was $2.4 million, all of which was related to the purchase of property, plant and equipment, net of dispositions.
Current wording
For the six months ended June 30, 2024, net cash used in investing activities was $4.5 million, all of which was related to the purchase of property, plant and equipment, net of dispositions.
Previous wording
For the three months ended March 31, 2023, net cash used in investing activities was $3.9 million, all of which was related to the purchase of property, plant and equipment.
Current wording
For the six months ended June 30, 2023, net cash used in investing activities was $9.4 million, all of which was related to the purchase of property, plant and equipment.
Previous wording
For the three months ended March 31, 2024, net cash used in financing activities was $4.6 million, driven primarily by a $3.8 million net reduction of other debt and $1.1 million in payments on our Term Loan, as well as a $1.4 million TRA payment issued during the first quarter of 2024.
Current wording
For the six months ended June 30, 2024, net cash used in financing activities was $4.1 million, driven primarily by a $12.7 million net reduction of other debt and $2.2 million in payments on our Term Loan Facility, as well as $1.4 million in TRA payments issued during the six months ended June 30, 2024.
Previous wording
For the three months ended March 31, 2023, net cash used in financing activities was $23.8 million, driven primarily by $11.1 million in payments on our Term Loan and a $10.7 million net reduction of other debt.
Current wording
For the six months ended June 30, 2023, net cash used in financing activities was $39.3 million, driven primarily by $22.2 million in payments on our Term Loan Facility and a $14.5 million net reduction of other debt.
Previous wording
We are required to provide surety bonds to various parties as required for certain transactions initiated during the ordinary course of business to guarantee our performance in accordance with contractual or legal obligations. As of March 31, 2024, we posted surety bonds in the total amount of approximately $173.5 million. These off-balance sheet arrangements do not adversely impact our liquidity or capital resources.
Current wording
We are required to provide surety bonds to various parties as required for certain transactions initiated during the ordinary course of business to guarantee our performance in accordance with contractual or legal obligations. As of June 30, 2024, we posted surety bonds in the total amount of approximately $197.8 million. These off-balance sheet arrangements do not adversely impact our liquidity or capital resources.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Consolidated interest expense decreased by $3.0 million, or 26%, primarily due to impact of the $74.3 million of principal pay downs on our Term Loan during 2023. These pay downs were the result of focused efforts to decrease our outstanding debt balance with free cash flows from operations.
Current report — wording carried from elsewhere
Change in the fair value of contingent consideration resulted in a gain of $0.2 million.
Current report — wording carried from elsewhere
Consolidated income tax decreased by $20.6 million, or 69%. The Company recorded income tax expense of $9.1 million for the six months ended June 30, 2024, compared to an expense of $29.7 million for the six months ended June 30, 2023. Our effective tax rate was 24.6% and 23.8% for the six months ended June 30, 2024 and 2023, respectively. The income tax expense for the six months ended June 30, 2024, was impacted by legislation in Brazil which resulted in a local tax incentive no longer being exempt from federal income tax beginning in 2024. Additionally, tax expense of $0.5 million was recorded discretely related to equity-based compensation. The tax expense for the six months ended June 30, 2023, was unfavorably impacted by higher income reported in non-U.S. jurisdictions, partially offset by benefits related to excess stock compensation deductions of $1.2 million recorded discretely.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
•changes in the global trade environment, including the imposition of import tariffs or other import restrictions, could adversely affect the amount or timing of our revenues, results of operations or cash flows;
Previous report — wording carried elsewhere
Consolidated gross profit decreased by $42.5 million, or 44%. As a percentage of revenue, consolidated gross profit increased to 36% for the three months ended March 31, 2024, as compared to 26% during the same period in the prior year. The increase in gross profit as a percent of revenue was driven by structural cost enhancements and the realization of 45X benefits associated with our torque tube. The Company also recognized a one-time $4.0 million settlement with one of its vendors during the first quarter as a reduction of Cost of revenue.