Array Technologies Inc.
11/09/2026 | Press release | Distributed by Public on 11/09/2026 13:40
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and other financial information included in Part I, "Item 1. Financial Statements" of this Quarterly Report on Form 10-Q (this "Quarterly Report"), as well as our audited financial statements and notes thereto as of and for the year ended December 31, 2025, and the related Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025 ("2025 Annual Report"). Each of the terms the "Company," "Array," "we," or "us" as used herein refers collectively to Array Technologies, Inc. and its wholly owned subsidiaries, unless otherwise stated. Capitalized terms used herein are used as defined in the Notes to the Condensed Consolidated Financial Statements unless otherwise indicated. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under the sections captioned "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" in this Quarterly Report, our 2025 Annual Report, and our other documents filed with the U.S. Securities and Exchange Commission (the "SEC").
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 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 possible or assumed future results of operations; liquidity and capital resources; business strategies, including with respect to completed or potential strategic transactions; the timing and closing of the Merger (as defined below); whether Array stockholder approval, Shoals stockholder approval and government and regulatory approvals relating to the Merger are obtained; whether the Merger occurs on the expected timeline, or at all; the impact of the Merger on our business; technology or product developments; financing and investment plans; dividend policy, including with respect to the Series A Shares, including the timing, amount and price of any redemption of Series A Shares pursuant to the Preferred Stock Agreement; competitive position; industry and regulatory environment, including potential regulatory reform related to energy credits and the reduction or elimination of certain government incentives; uncertainty relating to the implementation and impacts of tariffs and changes in trade policy; ability to provide 100% domestic content trackers; expectations regarding the macroeconomic environment and geopolitical developments; the expected benefits of, and our ability to integrate, APA and AWM; the amount, timing and form of payment of the APA Earnout Consideration, the APA Deferred Consideration, the AWM Earnout Consideration and the AWM Deferred Consideration; the expected impact of tax legislation on our cash taxes; the expected sufficiency of our liquidity; potential growth opportunities; and the effects of competition. 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," "positioned," "designed to" or similar expressions and the negatives of those terms.
Our 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: risks associated with the Merger, including (i) the completion of the Merger on the anticipated terms and timing, including obtaining stockholder and regulatory approvals, the anticipated tax treatment, redemption of the Series A Shares, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies, expansion and growth of Array's and Shoals' businesses and the satisfaction of other conditions to the completion of the Merger, (ii) the risk that governmental or regulatory approvals required for the Merger may not be obtained or may result in the imposition of conditions that could adversely affect the combined company or the anticipated benefits of the Merger, (iii) the risk that a condition to closing may not be satisfied, that an event, change or other circumstance could give rise to the termination of the Merger, or that the Merger may not be completed on the expected timeline or at all, (iv) failure to realize the anticipated benefits of the
Merger, including because of a delay in completing the transaction or because the businesses of Array and Shoals are not integrated successfully on the anticipated timeline, or at all, or integration is more costly or difficult than expected, (v) the risk that anticipated cost savings and other synergies may not be fully realized or may take longer to realize than expected, (vi) Array's and Shoals' ability to implement their respective business strategies, (vii) pricing trends, (viii) potential litigation relating to the Merger that could be instituted against Array, Shoals or their respective directors and officers, (ix) the risk that disruptions from the Merger will harm Array's or Shoals' businesses, including their current plans and operations, or divert management's attention from ongoing business operations and opportunities, (x) the ability of Array or Shoals to retain and hire key personnel, (xi) potential adverse reactions or changes to business, employee, customer or supplier relationships resulting from the announcement, pendency or completion of the proposed transaction, (xii) the risk that the announcement, pendency or completion of the Merger could adversely affect the market price or long-term value of Array's or Shoals' common stock, (xiii) legislative, regulatory and economic developments affecting Array's and Shoals' businesses, (xiv) general economic and market developments and conditions, including changes in the solar industry, interest rates and access to capital, (xv) the evolving legal, regulatory and tax regimes under which Array and Shoals operate, (xvi) potential business uncertainty, including changes to existing business relationships, during the pendency of the proposed transaction that could affect Array's or Shoals' financial performance, (xvii) restrictions during the pendency of the Merger that may impact Array's or Shoals' ability to pursue certain business opportunities or strategic transactions, (xviii) the unpredictability and severity of catastrophic events, including acts of terrorism or the outbreak of war or hostilities, as well as Array's and Shoals' responses to any of the foregoing, and (xix) failure to receive the approval of the stockholders of Array and Shoals; changes in growth or the rate of growth in demand for solar energy projects; factors outside of our control affecting the variability and demand for solar energy, 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 solar energy production systems, which makes it difficult to predict our future prospects; competitive pressures within our industry; competition from conventional and renewable energy sources; a loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment; a drop in the price of electricity derived from the utility grid or from alternative energy sources; fluctuations in our results of operations across fiscal periods, which could make our future performance difficult to predict and could cause our results of operations for a particular period to fall below expectations; any 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 reduce the demand for our products; existing electric utility industry policies and regulations, and any subsequent changes or new related policies and regulations, including as a result of the One Big Beautiful Bill Act ("OBBB"), which may present technical, regulatory and economic barriers to the purchase and use of solar energy systems and may significantly reduce demand for our products or harm our ability to compete; termination of the Federal Investment Tax Credit ("ITC") for solar facilities placed in service after December 31, 2027 (other than facilities that began construction before July 4, 2026), the foreign entity of concern and material assistance limitations under the OBBB, and related guidance issued by Treasury and the IRS, including with respect to the beginning of construction; our ability to realize the anticipated benefits of the 45X advanced manufacturing production tax credit ("45X Credit") established as part of the IRA, including the amount, timing and collectability of Vendor Rebates; the interruption of the flow of materials from international vendors, which could disrupt our supply chain, including as a result of the imposition of new and/or additional duties, tariffs and other charges or restrictions on imports and exports; changes in the global trade environment, including the continuation or imposition of import tariffs or other import restrictions, including under Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974, and the timing and amount of any refunds of tariffs previously paid under the International Emergency Economic Powers Act ("IEEPA"); the outcome of pending and future antidumping and countervailing duty ("AD/CVD") and anti-circumvention proceedings, the Section 232 investigation of polysilicon and its derivatives, and the U.S. International Trade Commission ("USITC") Section 337 investigation relating to tunnel oxide passivated contact ("TOPCon") solar cells and modules, and their effect on the cost and availability of modules for our customers' projects; geopolitical, macroeconomic and other market conditions unrelated to our operating performance including but not limited to a pandemic, the Russia-Ukraine war, attacks on shipping in the Red Sea and Strait of Hormuz, conflict in the Middle East (including, but not limited to, the war in Iran), changing trade policies, inflation and interest rates; fluctuations in foreign currency exchange rates, including the Brazilian Real, and
the phase-out of tax incentives in Brazil; our ability to convert our orders in backlog into revenue; the reduction, elimination or expiration, or our failure to optimize the benefits of government incentives for, of regulations mandating the use of renewable energy and solar energy, particularly in relation to our competitors, which could reduce demand for solar energy systems; failure to, or incurrence of significant costs in order to, obtain, maintain, protect, defend or enforce, our intellectual property and other proprietary rights; delays in construction projects and any failure to manage our inventory; significant changes in the cost of raw materials, including steel and aluminum; disruptions to transportation and logistics, including increases in shipping costs; defects or performance problems in our products, which could result in loss of customers, reputational damage and decreased revenue; delays, disruptions or quality control problems in our product development operations; the development, deployment and commercialization of new products, including DuraTrack D2STM, OmniTrack 2.0, the 60 degree variant of DuraTrack, and our ARRAY AtlasTM suite of foundation-to-tracker solutions; our ability to retain our key personnel or failure to attract additional qualified personnel; additional business, financial, regulatory and competitive risks due to our continued planned expansion into new markets; cybersecurity or other data incidents, including unauthorized disclosure of personal or sensitive data or theft of confidential information and the use of artificial intelligence by cyber threat actors; a failure to maintain an effective system of integrated internal controls over financial reporting, including following the completion of our strategic transactions, which may impair our ability to report our financial results accurately; our substantial indebtedness, including our ability to repay, refinance or settle the Convertible Notes at or prior to maturity; our ability to pay cash dividends on the Series A Shares, the increases in the dividend rate applicable to the Series A Shares, and the potential issuance of shares of our Common Stock in respect of any Default Accrued Dividends; the amount, timing and form of payment of the APA Earnout Consideration, the APA Deferred Consideration, the AWM Earnout Consideration and the AWM Deferred Consideration, including any dilution resulting from the issuance of shares of our Common Stock in satisfaction thereof; risks related to actual or threatened public health epidemics, pandemics, outbreaks or crises; changes to laws and regulations, including changes to tax laws and regulations, that are applied adversely to us or our customers; our ability to successfully integrate APA and AWM into our existing operations, realize the anticipated benefits or synergies of our strategic transactions and achieve strategic and other objectives relating to our strategic transactions; risks related to any unforeseen liabilities of APA or AWM; and other factors listed and described in more detail in the section captioned "Risk Factors" in this Quarterly Report, our 2025 Annual Report, and our other documents filed with the SEC.
Given these uncertainties, you should not place undue reliance on forward-looking statements. Also, forward-looking statements represent our management's beliefs and assumptions only as of the date of this Quarterly Report. You should read this Quarterly Report with the understanding that our actual future results may be materially different from what we expect.
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.
Overview
We are a leading global provider of solar tracking technology and fixed-tilt systems to utility-scale and distributed generation customers who construct, develop, and operate solar photovoltaic ("PV") sites. With solutions engineered to withstand harsh weather conditions, Array's high-quality solar trackers, fixed-tilt systems, software platforms, foundation and other balance-of-system solutions, and field services combine to maximize energy production and deliver value to our customers for the entire lifecycle of a project.
Trackers move solar panels throughout the day to maintain an optimal orientation to the sun, which significantly increases energy production. Solar energy projects that use trackers typically generate more energy and deliver a lower levelized cost of energy than projects that use "fixed tilt" mounting systems, which do not move. Hybrid sites utilizing trackers and fixed-tilt can be utilized to optimize productivity based on the topography, geography, and environment. The vast majority of ground mounted solar systems in the U.S. use trackers.
Our flagship tracker, DuraTrack®, uses a patented design that allows one motor to drive multiple rows of solar panels through articulated driveline joints. To avoid infringing on our U.S. patent, our competitors must use designs that we believe are inherently less efficient and reliable. For example, our largest competitor's design requires one motor for each row of solar panels. As a result, we believe our products have greater reliability, lower installation costs, reduced maintenance requirements and competitive manufacturing costs. Our core U.S. patent is on a linked-row, single-driving apparatus that rotates multiple tracker rows connected by an articulating drive shaft. This patent does not expire until February 5, 2030.
With our acquisition of Soluciones Técnicas Integrales Norland, S.L.U. and its subsidiaries (collectively, "STI") in January 2022, we added a dual-row tracker design to our product portfolio, the Array STI H250. This tracker uses one motor to drive two connected rows and is ideally suited for sites with irregular and highly angled boundaries or fragmented project areas.
Our third tracker product, OmniTrack®, which was introduced in September 2022, requires significantly less grading and civil works permitting prior to installation in addition to accommodating uneven terrain.
With the APA Acquisition (as defined below) in August 2025, we added a portfolio of fixed-tilt and foundation solutions, including the APA Titan and APA Titan Duo™ racking systems and the APA A-Frame™ Interface foundation. These products deliver adaptable designs for utility-scale projects, offering flexibility for challenging terrain, high snow loads, and large-format modules while streamlining installation and reducing material costs.
In May 2026, we introduced DuraTrack D2S™, which is our next-generation dual-row tracker designed for key international markets, which combines patented passive wind stow technology, the terrain adaptability of OmniTrack®, and optimized control through SmarTrack® into a single flexible platform. In July 2026, we introduced Atlas™, a new suite of foundation-to-tracker solutions designed exclusively for ARRAY trackers and APA foundations to enhance their technical interoperability.
In August 2026, we consummated the AWM Acquisition (as defined below), which broadens our portfolio of complementary balance-of-system solutions, strengthens our ability to serve utility-scale solar and distributed generation customers, and is expected to create new growth opportunities in battery energy storage and datacenter infrastructure.
In September 2026, we announced the opening of a new manufacturing facility, which also serves as our corporate headquarters, in Albuquerque, New Mexico. We sell our products to solar developers, independent power producers, utilities, and engineering, procurement and construction companies ("EPCs") that build solar energy projects, often under master supply agreements or multi-year procurement contracts. During the nine months ended September 30, 2026, we derived 92% and 8% of our revenues from customers in the U.S. and the rest of the world, respectively. From the founding of Array through September 30, 2026, we have shipped approximately 105 gigawatts of trackers to customers worldwide.
Proposed Merger with Shoals
On November 4, 2026, we entered into an Agreement and Plan of Merger and Reorganization (the "Merger Agreement") with Shoals Technologies Group, Inc., a Delaware corporation ("Shoals"), and Pensacola Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Array ("Merger Sub"). The Merger Agreement provides that, subject to the terms and conditions set forth therein, Merger Sub will merge with and into Shoals (the "Merger"), with Shoals surviving the Merger as a direct wholly owned subsidiary of Array.
At the effective time of the Merger (the "Effective Time"), and upon consummation of the Merger, subject to the terms and conditions set forth in the Merger Agreement, each share of Class A common stock, par value $0.00001 per share of Shoals ("Shoals Common Stock") issued and outstanding immediately prior to the Effective Time (other than certain excluded shares) will be converted into the right to receive 1.6931 shares of Array's common stock, par value $0.001 per share of the Company ("Common Stock") and, if applicable, cash in lieu of fractional shares. Upon closing of the Merger, legacy Array stockholders will own approximately 35% of the combined company.
The closing of the Merger is subject to the satisfaction of closing conditions, including receipt of required government and regulatory approvals and approval by Array stockholders and Shoals stockholders. If completed, the Merger is expected to have a material impact on our business, results of operations and financial condition. The Merger Agreement has been approved by each of the Board of Directors of Array and Shoals.
Preferred Stock Agreement
In connection with the execution of the Merger Agreement, on November 4, 2026, Array Technologies, Inc., BCP Helios Aggregator L.P. ("Aggregator"), BEFIP III - ESC Helios Holdco L.P. (together with Aggregator, "Blackstone") and VP Helios Investments LLC ("VP Helios") entered into a letter agreement (the "Preferred Stock Agreement") relating to the Series A Shares, pursuant to which, among other things, Blackstone and VP Helios agreed to deliver the requisite consent of the holders of a majority of the outstanding voting power of the Series A Shares approving, and we agreed to file with the Secretary of State of the State of Delaware on the closing date following the Effective Time, an amendment and restatement of Array's Series A Perpetual Preferred Stock Certificate of Designations, effective August 11, 2021 (the "Original Certificate"), governing the Series A Shares (as amended and restated, the "A&R Certificate").
Upon the effectiveness thereof, the A&R Certificate would amend and restate the Original Certificate by, among other matters, providing that within 90 days of the closing of the Merger, Array will redeem $150 million of Series A Shares at a price per share equal to 93% of the then-applicable liquidation preference, plus accrued and unpaid dividends thereon through but not including the redemption date, whether or not declared (the "Initial Mandatory Redemption"); on or prior to each of the first, second and third anniversaries of the date that is 90 days after the closing of the Merger, Array will redeem not less than $50 million of Series A Shares at a price per share equal to 96% of the then-applicable liquidation preference, plus accrued and unpaid dividends thereon through but not including the applicable redemption date, whether or not declared, subject to certain conditions (together with the Initial Mandatory Redemption, the "Mandatory Redemptions"); Array will have the option to redeem additional Series A Shares in excess of the Mandatory Redemptions at a price equal to 96% of the then-applicable liquidation preference, plus accrued and unpaid dividends thereon through but not including the applicable redemption date, whether or not declared, provided that such redemption occurs within 48 months of the closing of the Merger; the Cash Regular Dividend Rate will be increased by 300 basis points on the fifth anniversary of the Closing Date (in addition to prior-scheduled step ups); and the minimum increments in which redemptions may be effected will be reduced from $200 million to $50 million.
Acquisition of AWM
On August 31, 2026 (the "AWM Closing Date"), Array and STINorland USA, Inc., (with respect to the AWM Acquisition, the "AWM Buyer"), completed the acquisition of Affordable Wire Management, LLC ("AWM," and such acquisition the "AWM Acquisition"), pursuant to the terms of the Equity Purchase Agreement, dated as of July 16, 2026, by and among the Company, the AWM Buyer, AWM, DS Equity Holdings LLC, a Delaware limited liability company ("AWM Seller"), Scott R. Rand and Daniel R. Smith (as amended, the "AWM Purchase Agreement"). The cash consideration paid on the AWM Closing Date was approximately $166.9 million. The
AWM Purchase Agreement also includes a performance-based earnout provision estimated to have a fair value of approximately $17.3 million as of the AWM Closing Date (the "AWM Earnout Consideration"). The AWM Purchase Agreement includes a performance-based earnout provision pursuant to which the AWM Seller may receive aggregate earnout payments of up to $40.0 million based on the achievement of specified EBITDA targets and thresholds with maximum payment amounts of $8.0 million, $16.0 million and $16.0 million for the earnout periods ending December 31, 2026, December 31, 2027 and December 31, 2028, respectively.
Subject to the terms and conditions set forth in the AWM Purchase Agreement, we have also agreed to make deferred consideration payments totaling $10.0 million, consisting of a $5.0 million payment due on the first anniversary of the AWM Closing Date and a $5.0 million payment due on the second anniversary of the AWM Closing Date (the "AWM Deferred Consideration"). The AWM Earnout Consideration and the AWM Deferred Consideration are described in more detail in Note 3 - Acquisitions. We are currently finalizing the valuation of the acquired assets and liabilities assumed, and therefore the preliminary allocation of purchase consideration is subject to change.
AWM designs, manufactures, markets and sells wire management products for the utility-scale photovoltaic and battery storage system industries. AWM's products complement our existing product offerings and expand our portfolio of balance-of-system solutions serving utility-scale solar and distributed generation customers.
Acquisition of APA Solar
On August 14, 2025 (the "APA Closing Date"), Array, through our indirect wholly owned subsidiary STINorland USA, Inc., a California corporation ("APA Buyer"), completed the acquisition of 100% of the issued and outstanding equity interests of APA (such acquisition, the "APA Acquisition"), pursuant to the terms of the Equity Purchase Agreement, dated as of June 17, 2025, by and among the Company, APA Buyer, APA, SunHoldings, LLC, an Ohio limited liability company ("APA Seller") and the guarantors party thereto (as amended, the "APA Purchase Agreement"). The cash consideration paid on the APA Closing Date was $159.9 million, net of $10.1 million in preliminary and customary purchase price adjustments, which includes $6.2 million to retire debt. For U.S. GAAP purposes, the aggregate cash consideration paid was approximately $166.1 million. The APA Purchase Agreement also includes an earnout provision estimated to have a fair value of approximately $19.3 million as of the APA Closing Date (the "APA Earnout Consideration"), which is included in the purchase consideration, under which the APA Seller may receive shares of our common stock, par value $0.001 per share, or equivalent cash value at our discretion, based upon APA's achievement of certain financial performance targets during the three-year period ending on September 30, 2028. As a result, the aggregate purchase consideration for the APA Acquisition totaled approximately $185.4 million. Subject to the terms and conditions set forth in the APA Purchase Agreement, we have also agreed to pay aggregate deferred purchase price consideration of approximately $40.0 million in three installments over a two-year period based on service within five business days after the first and second anniversaries from the APA Closing Date and as set forth in Note 3 - Acquisitions (the "APA Deferred Consideration"). Each of the APA Earnout Consideration and the APA Deferred Consideration is described in more detail below. We finalized the valuation of the acquired assets and liabilities and concluded the purchase accounting during the three months ended September 30, 2026.
In connection with the APA Acquisition, we have lease agreements for offices, manufacturing facilities and warehouses located in Ohio and Connecticut. Of these lease agreements, four are for properties owned by certain members of APA's management team.
Expenses related to these operating lease agreements are allocated based on usage to Cost of product and service revenue or General and administrative expenses in the consolidated statements of operations. Total costs related to these operating lease agreements were $0.7 million and $2.1 million for the three and nine months ended September 30, 2026, respectively.
APA designs, engineers, and manufactures solar racking, mounting and foundation systems. Integrating such systems into our business model through the acquisition of APA has expanded our product portfolio to better serve the evolving needs of the solar industry and our customers.
2.875% Convertible Senior Notes due 2031
On June 27, 2025, we completed a private placement of $345 million in aggregate principal amount of 2.875% Convertible Senior Notes due 2031 (the "2031 Convertible Notes"), resulting in net proceeds of $334.6 million after deducting initial purchasers' discounts and offering expenses. The 2031 Convertible Notes were issued pursuant to an indenture, dated June 27, 2025, between the Company and U.S. Bank Trust Company, National Association, as trustee.
The 2031 Convertible Notes are senior unsecured obligations of the Company and will mature on July 1, 2031, unless earlier converted, redeemed or repurchased. Interest is payable semiannually in arrears at a rate of 2.875% per year on January 1 and July 1 of each year, beginning on January 1, 2026.
Research and Development
We incur research and development ("R&D") costs during our process of researching and developing new products and significant enhancements to existing products. R&D costs consist primarily of personnel-related costs associated with our internal engineers, third-party consultants, materials and overhead. We expense these costs as incurred prior to a respective product being ready for commercial production. R&D expense was $4.2 million and $2.3 million during the three months ended September 30, 2026 and 2025, respectively, and $12.2 million and $7.2 million during the nine months ended September 30, 2026 and 2025, respectively.
Factors Affecting Results of Operations
Project Timing
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 can be affected by a number of factors including:
•Weather. Inclement weather can affect our customers' ability to install their systems, particularly in the northeastern U.S., Europe and Brazil. In addition, weather delays can adversely affect our logistics and operations by causing delays in the shipping and delivery of our materials.
•The U.S. interest rate environment. We have had customers delay planned installations or seek to renegotiate power purchase agreements ("PPAs") to improve project returns based on various interest rate environments. Although the Federal Reserve lowered interest rates during 2024 and 2025, interest rates remained an important consideration for customers evaluating project economics during the third quarter of 2026. In September 2026, the Federal Reserve increased the target federal funds rate by 0.25%, which may affect the cost and availability of financing for certain customers and projects. Customers must weigh these considerations in conjunction with other macroeconomic factors when assessing the returns and timing of relevant projects.
•Availability of necessary equipment. We have a broad portfolio of customer relationships including presence with Tier 1 utilities in the U.S. Each utility has unique specifications for access to its grid, which is generally not consistent across the industry. As the supply of renewables projects has increased, shortages and long lead-times in the supply of switches, transformers and high voltage
breakers used in the interconnection of utility scale solar power plants to the grid, have historically affected the timing and completion of these projects, including for some of our customers.
•Macroeconomic factors. There had been a rapid depreciation of the Brazilian Real in prior periods; however, in 2026 there has been significant appreciation of the Brazilian Real compared to the U.S. Dollar. Exchange rate volatility can have a significant impact on the economic cases for the PPAs for many solar projects. In addition, our results will also be impacted by tax incentives we can recognize, for example the Brazil value-added tax benefit, Imposto sobre Circulação de Mercadorias e Servicos, which will be fully phased out in 2033. As a result, we are focused on reducing costs and better aligning our organization, including the size thereof, in Brazil with the current market conditions.
It is uncertain what impact new or existing tariffs, trade restrictions or retaliatory actions may have on us, the solar industry and our customers. An escalation in trade tensions or the implementation of broader tariffs, trade restrictions or retaliatory measures on our products or components originating from countries outside the U.S. could adversely impact our ability to source necessary components, manufacture products at competitive cost, or sell our products at prices customers are willing to pay. Any such developments could materially and adversely affect our business operations, results of operations and cash flows.
•Local permitting. If our customers cannot receive permits for their projects, they are unable to begin and ultimately complete them in a timely manner. A dramatic increase in solar and battery storage sites has increased the average permitting time in many geographies in which our customers operate.
Impact of OBBB
While solar power is cost-competitive with conventional forms of generation in many U.S. states even without the ITC, we believe previous step-downs in the ITC in past years have influenced the timing and quantity of some customers' orders. On July 4, 2025, President Trump signed into law the OBBB, which includes changes to the energy tax credits. Specifically, the solar ITC now terminates for facilities that are placed in service after December 31, 2027, but that termination does not apply if the taxpayer begins construction on the facility before July 4, 2026. In addition, the OBBB imposes new foreign entity of concern limitations on the ITC before it expires, which could impact the ability of solar facilities to claim the ITC. Specifically, taxpayers cannot claim the credit in taxable years beginning after enactment of the OBBB if they are prohibited foreign entities (which are generally entities that are formed in or controlled by covered nations, including China, Russia, Iran, and North Korea, as well as entities determined to be under effective control as a result of contracts entered into with such entities). The credit is also disallowed for solar facilities that begin construction after December 31, 2025 that receive material assistance from a prohibited foreign entity. On February 13, 2026, guidance from the U.S. Department of the Treasury ("Treasury") was released clarifying methods for calculating material assistance from a prohibited foreign entity and requesting comments.
On August 15, 2025, Treasury and the Internal Revenue Service (the "IRS") issued Notice 2025-42 which eliminates the 5% safe harbor for utility-scale solar projects and only allows the physical work test to determine when a project begins construction. If solar developers are unable to satisfy the physical work test, our business, financial condition, and results of operations could be adversely affected.
The Company expects certain tax provisions of the OBBB, including the reinstatement of 100% bonus depreciation for qualified property and the immediate expensing of U.S.-based R&D activities, to reduce our 2026 taxable income. These accelerated deductions are expected to lower current-year cash taxes and improve near-term operating cash flows. The favorable impact primarily represents a timing difference. As assets subject to bonus depreciation become fully depreciated and as expensed R&D activities normalize, we expect cash taxes to increase in future periods. The Company continues to evaluate additional guidance expected to be issued by Treasury related to the OBBB.
Section 45X Credit
The 45X Credit applies to eligible components, including torque tube and structural fasteners. We have determined that the statutory definitions for these components (which are reiterated in final regulations) apply to our tracker components. We have successfully negotiated, and we continue to successfully negotiate, agreements with key suppliers around sharing the economic benefits of 45X Credits associated with torque tube and structural fasteners. We continue to pursue additional agreements for splitting the economic benefits of 45X Credits with suppliers for parts we do not manufacture internally. In addition, during the second quarter of 2024, we concluded that certain parts manufactured by the Company qualify for the 45X Credit advanced production credits. Refer to Note 2 - Summary of Significant Accounting Policies in the accompanying notes to our condensed consolidated financial statements included in this Quarterly Report for a discussion on how we account for these incentives and amounts recognized for the periods presented. If these financial benefits vary significantly from our assumptions, our business, financial condition, and results of operations could be adversely affected.
The OBBB did not modify the phase-out of the 45X Credit or the definitions of eligible components relating to solar trackers; however, the OBBB did impose foreign entity of concern limitations on taxpayers claiming the 45X Credit. Specifically, taxpayers cannot claim the credit in taxable years beginning after enactment of the OBBB if they are prohibited foreign entities (which are generally entities that are formed in or controlled by covered nations, including China, Russia, Iran, and North Korea, as well as entities determined to be under effective control as a result of contracts entered into with such entities). The credit is also disallowed in taxable years beginning after enactment of the OBBB for eligible components that receive material assistance from a prohibited foreign entity. On February 13, 2026, Treasury guidance was released that further clarified methods for calculating material assistance, and included a request for comments by March 30, 2026. We anticipate forthcoming Treasury proposed rules will further clarify the potential impact that the foreign entity of concern limitations may have for credits claimed in 2026 and future years.
Domestic Content Safe Harbor Guidance
The IRS issued Notice 2023-38 in May 2023 setting forth guidance on the domestic content bonus tax credits under the IRA. Uncertainties existed 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 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. On January 16, 2025, the IRS released Notice 2025-08, which modified Notice 2023-38 and Notice 2024-41, as well as introduced an updated elective safe harbor method for use in lieu of provisions of the adjusted percentage rule provided in Notice 2023-38 for calculating the domestic content bonus credit amounts applicable for certain qualified facilities and energy projects. Notice 2024-41 and Notice 2025-08 and the updated definitions described therein clarified certain pre-existing uncertainty in the industry, but also introduced new uncertainties. 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. If these financial benefits vary significantly from our assumptions, our business, financial condition, and results of operations could be adversely affected.
The OBBB increased the domestic content threshold for solar facilities that begin construction after June 16, 2025 to claim the domestic content bonus credit, however, the OBBB did not otherwise amend the requirements for claiming a domestic content bonus credit or the guidance previously issued by the government. As domestic content guidance is not a final rule, it could be further modified by the Trump Administration.
Structured Cost Management
We actively manage the risk from certain types of customer contracts, including, for example, multi-year contracts that require fixed pricing or pricing tied to certain commodity indices. Depending on the totality of the circumstances and our ability to mitigate risk, we may or may not pursue such contractual arrangements. Where we decline, this may have the effect of driving certain customers or projects to our competitors. We believe this is the right way to manage a high-quality portfolio and drive consistent margins over time.
Impact of the Ongoing Russian-Ukraine War
The ongoing Russia-Ukraine war has reduced the availability of material that can be sourced in Europe and, as a result, increased logistics costs for the procurement of certain inputs and materials used in our products. We do not know the ultimate severity or duration of the conflict, but we continue to monitor the situation and evaluate our procurement strategy and supply chain to reduce any negative impact on our business, financial condition, and results of operations.
Impact of the Iran War
In March 2026, the United States and Israel initiated military actions against targets in Iran. In response, Iran retaliated with a series of attacks on key infrastructure in neighboring countries across the Middle East. Further, Iran has committed to utilizing military intervention to close the Strait of Hormuz, which impacts a significant portion of global oil and natural gas supply. An escalation by the United States, Israel, Iran, or other countries, and any retaliatory measures by the United States, Israel, Iran, or other countries, as applicable, in response, such as broader attacks on regional infrastructure, may impact costs, reduce our sales and earnings, or otherwise have an adverse effect on our operations. For example, the disruption of the global oil supply through the Strait of Hormuz and the conflict between the United States and Iran have driven up commodity prices and increased inflationary pressures, potentially affecting our transportation, manufacturing, distribution and other costs. Furthermore, these events may also cause shipping delays, rerouted freight, port congestion, or higher logistics and insurance costs, which could disrupt the movement of, limit the availability of, or increase the cost of sourcing raw materials. We do not know the ultimate severity or duration of the conflict, but we are monitoring developments with respect to the ongoing military conflict with Iran including the impact on global commodity prices and potential shipping and logistics disruptions.
Impact of Disruption of Key Shipping Lanes
We have seen disruptions of container shipping traffic through the Red Sea create port congestion, especially in Asia, and cause many shipping companies to pause shipments through the Suez Canal and the Red Sea as a result of attacks against commercial vessels in the area, affecting transit times, capacity, and shipping costs for routes connecting the rest of the world with Asia. To address the persisting 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 disruptions and the severity of their impact on our operations may last, but we continue to monitor such situations and evaluate our procurement and supply chain strategies, to reduce any negative impact on our business, financial condition, and results of operations.
Inflation
Inflationary pressure may continue to negatively impact our results of operations in the near-term. To mitigate these pressures on our business, and the volatility in steel and aluminum prices, we have continued to accelerate our productivity initiatives, expand our supplier base, and execute on our overhead cost-containment practices.
Impact of AD/CVD Petitions and Determinations
On July 17, 2025, the Alliance for American Solar Manufacturing and Trade, a coalition of U.S.-based solar manufacturers, filed a petition with the U.S. Department of Commerce ("USDOC") and USITC seeking the imposition of AD/CVD tariffs on imports of crystalline solar photovoltaic ("CSPV") cells and modules from India, Indonesia, and Laos. In February 2026, USDOC issued preliminary affirmative CVD determinations and in April 2026, USDOC announced preliminary AD determinations. When combined, total preliminary AD/CVD rates now stand at approximately 234% for India, 121% to 178% for Indonesia, and 103% for Laos. Final USDOC determinations were issued in September 2026, and final USITC determinations were issued in October 2026.
On May 12, 2026, a group of U.S. solar manufacturers filed a petition with USDOC for an anti-circumvention investigation regarding cells and modules from Ethiopia. On June 18, 2026, a group of U.S. solar manufacturers filed a petition with USDOC for an anti-circumvention investigation regarding imports of CSPV cells from Korea.
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. Successive rounds of AD/CVD and anti-circumvention actions have the potential to constrain the supply of solar cells and modules available to U.S. project developers, contribute to rising module prices, and create an increasingly complex procurement environment for our customers. To the extent that trade actions lead to project delays, cancellations, or reductions in the pace of U.S. solar installations, demand for our tracker systems could be adversely impacted.
Section 232 Polysilicon Investigation
On July 1, 2025, USDOC initiated an investigation under Section 232 of the Trade Expansion Act of 1962 into the effects on national security of imports of polysilicon and its derivatives. On August 6, 2026, President Trump issued a proclamation that, effective December 4, 2026, establishes minimum import prices of $21/kg for polysilicon, $100/kg for ingots and wafers, $0.22/W for solar cells and $0.38/W for solar modules, and imposes an additional 15% duty on imports of polysilicon derivatives, with reduced rates for certain countries.
While we do not manufacture or sell polysilicon, wafers, cells, or modules, the scope of any action taken could affect the cost and availability of solar components used on projects that are also intended to use our products. Any such action would be layered on top of existing AD/CVD orders, Section 301 tariffs, and pending anti-circumvention proceedings, further increasing the cost and complexity of procurement for U.S. project developers. To the extent that these measures lead to project delays, cancellations, or reductions in the pace of U.S. solar installations, demand for our tracker systems could be adversely impacted.
U.S. Trade Policy and Executive Orders
On February 20, 2026, the U.S. Supreme Court ruled in Learning Resources, Inc. v. Trump that the IEEPA does not authorize the President to impose tariffs. The Court only ruled on IEEPA tariffs and did not invalidate or address tariffs imposed under other statutory authorities. Following the ruling, the U.S. Court of International Trade issued an order directing U.S. Customs and Border Protection ("CBP") to formalize a process for refunds. On April 20, 2026, CBP launched an online portal ("CAPE") that can be used to submit IEEPA tariff refund requests and began issuing refunds in mid-May. All requests will be reviewed by CBP to determine validity prior to the issuance of refunds. Although, CAPE is now available for most entries and refunds are issuing, CBP and the Department of Justice appealed the Court of International Trade's order as applied to a subset of entries. That appeal is currently pending. As the situation continues to develop, we will continue to monitor developments regarding any remaining unrefunded entries.
After the Supreme Court's ruling, the Trump Administration implemented various tariffs, invoking other statutory authorities. On February 20, 2026, President Trump imposed a 10% ad valorem import surcharge under Section 122 of the Trade Act of 1974 that became effective on February 24, 2026. That tariff was limited by statute to 150 days and expired on July 24, 2026. After an accelerated investigation under Section 301 of the Trade Act of 1974, targeting forced labor practices across dozens of economies, the U.S. Trade Representative ("USTR") announced new Section 301 tariffs targeting forced labor practices of 10% or 12.5% on the majority of imports from 59 countries and the European Union, effective July 24, 2026. Other Section 301 investigations that could lead to further tariffs remain ongoing.
Separately, on April 2, 2026, the President issued a proclamation significantly restructuring how Section 232 tariffs on steel, aluminum, and copper products are assessed. Effective April 6, 2026, the prior methodology, through which Section 232 duties on derivative articles were calculated based on the value of the metal content within a product, was replaced with a framework in which duties apply to the full customs value of the imported article. Under the new structure, articles made entirely or predominantly of steel, aluminum, or copper, with limited exceptions, are subject to a 50% duty on their full customs value, while derivative articles with significant metal content are subject to a 25% duty on their full customs value. Products in which the applicable metal content constitutes less than 15% of the aggregate weight of the imported product are no longer subject to Section 232 duties.
We are continuing to evaluate the potential impact of the imposition of the announced tariffs, the new classification and duty treatment scheme, and any additional or retaliatory tariffs, to our business and financial condition. While we do not believe that the tariffs announced by the United States in 2025 and through the date of filing this Quarterly Report in 2026 will have a material adverse effect upon our results of operations, financial condition, or liquidity, the actual impact of new tariffs is subject to a number of factors, including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any countermeasures that the target countries may take and any mitigating actions that may become available.
Foreign Currency Translation
For non-U.S. subsidiaries that operate in a local currency environment, assets and liabilities are translated into U.S. dollars at period-end exchange rates. Income, expense, and cash flow items are translated at average exchange rates prevailing during the period. For non-U.S. subsidiaries that operate in a U.S. dollar functional currency, local currency inventories and property, plant and equipment are translated into U.S. dollars at rates prevailing when acquired, and all other assets and liabilities are translated at period-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the period. Gains and losses which result from remeasurement are included in earnings.
Performance Measures
In managing our business and assessing financial performance, we supplement the information provided by the financial statements with other operating metrics. These operating metrics are utilized by our management to evaluate our business, measure our performance, identify trends affecting our business, and formulate projections. The primary operating metric we use to evaluate our sales performance and to track market acceptance of our products is megawatts ("MWs") shipped and specifically the change in MWs shipped from period to period. MWs are measured for each individual project and are calculated based on the respective project's expected megawatt output once installed and fully operational.
We also utilize metrics related to price and cost of goods sold per MW, including average selling price ("ASP") and cost per watt ("CPW"). ASP is calculated by dividing total applicable revenues by total applicable MWs, whereas CPW is calculated by dividing total applicable costs of goods sold by total applicable MWs. These metrics enable us to evaluate trends in pricing, manufacturing cost, and customer profitability.
Key Components of Our Results of Operations
The following discussion describes certain line items in our condensed consolidated statements of operations.
Revenue
We primarily generate revenue from the sale of solar tracking systems, fixed tilt systems, foundation solutions, parts, software, balance-of-system solutions and services. Our customers include EPCs, utilities, solar developers, and independent power producers. Generally for each individual solar project, we enter into a contract with our customers covering the price, specifications, delivery dates, and warranty for the products being purchased, among other things. Our contractual delivery period for the tracker system and parts can vary from days to several months. Contracts can range in value from hundreds of thousands to tens of millions of dollars.
Our revenue is affected by changes in the volume and ASPs of solar tracking systems purchased by our customers. The quarterly volume and ASP of our systems is driven by the supply of, and demand for, our products, changes in project mix between module type and wattage, geographic mix of our customers, strength of competitors' product offerings, commodity prices and availability of government incentives to the end-users of our products.
Our revenue growth is dependent on continued growth in the size and number of solar energy projects installed each year, as well as our ability to maintain market share in each geography where we compete, expand our global footprint to new and evolving markets, grow our production capabilities to satisfy demand, and continue to develop and introduce new innovative products that integrate emerging technologies and the performance requirements of our customers.
A majority of our revenue is recognized over time as work progresses, and for single performance obligations, we use an input measure, the cost-to-cost method, to determine progress. We review and update the contract-related estimates on an ongoing basis and recognize adjustments for any project-specific facts and circumstances that could impact the measurement of the extent of progress, such as the total costs to complete the contracts, under the cumulative catch-up method. Due to the relatively short duration of our outstanding performance obligations, and our ability to estimate the remaining costs to be incurred, which are substantially all material costs covered under our material supply agreements with our suppliers, we have not recorded any material catch-up adjustments for the periods presented that would have impacted revenues or earnings per share related to revisions in measurement of remaining progress of our performance obligations.
Cost of Revenue and Gross Profit
Cost of product and service revenue consists primarily of product costs, including raw materials, purchased components, net of any incentives or rebates earned from our suppliers, salaries, wages and benefits of manufacturing personnel, freight, tariffs, customer support, product warranty, amortization of developed technology and backlog, and depreciation of manufacturing and testing equipment. Our product costs are affected by: (i) the underlying cost of raw materials, including steel and aluminum; (ii) component costs, including electric motors and gearboxes; (iii) technological innovation; and (iv) economies of scale and improvements in production processes and automation. We may experience disruptions to our supply chain and increased material and freight costs. When possible, we modify our production schedules and processes to mitigate the impact of these disruptions and cost increases on our margins. We do not currently hedge against changes in the price of our raw materials.
Gross profit may vary from quarter to quarter and is primarily affected by our volume, ASPs, product costs, project mix, customer mix, geographical mix, commodity prices, logistics rates, warranty costs, and seasonality.
Operating Expenses
General and administrative expense consists primarily of salaries, benefits, and equity-based compensation related to our executive, sales, engineering, finance, human resources, information technology, and legal personnel, as well as travel, facility costs, marketing, provision for credit losses, professional fees, and third-party services. The majority of our sales during the nine months ended September 30, 2026 and 2025, were in the United States; however, we also have a sales presence in Spain, Brazil, and Australia. We intend to continue to expand our sales presence and marketing efforts to additional countries.
Contingent consideration consists of changes in the fair value of the tax receivable agreement (the "TRA") with the former majority stockholder of Array Tech, Inc., as well as the APA Earnout Consideration associated with the APA Purchase Agreement and the AWM Earnout Consideration associated with the AWM Purchase Agreement. The TRA liability, APA Earnout Consideration and AWM Earnout Consideration were recorded at fair value and subsequent changes in the fair values are recognized in earnings. Refer to Note 12 - Commitments and Contingencies for discussion and analysis of the TRA, the APA Earnout Consideration and the AWM Earnout Consideration.
Depreciation consists of costs associated with property, plant and equipment not used in manufacturing of our products. We expect that as we continue to grow both our revenue and our general and administrative personnel, we may require some additional property, plant and equipment to support this growth resulting in additional depreciation expense.
Amortization consists of the expense recognized over the expected period of use of our Customer relationships, Trade name, and Computer software and other intangible assets. Amortization related to certain acquired intangible assets is recorded as Total cost of revenue under Amortization of developed technology and backlog.
Non-Operating Expenses
Interest income consists of interest earned on our cash and cash equivalents balance.
Interest expense consists of interest and other charges paid in connection with our senior secured credit facility (the "Senior Secured Credit Facility"), which included a $575.0 million term loan (the "Term Loan Facility") and includes a $370.0 million revolving credit facility (the "Revolving Credit Facility"); the 1.00% Convertible Senior Notes due 2028 (the "2028 Convertible Notes" and, together with the 2031 Convertible Notes, the "Convertible Notes"); the 2031 Convertible Notes; and other debt held by our STI Operations ("Other Debt").
Gain on extinguishment of debts, net consists of the difference between the cash paid and the carrying value of repurchased 2028 Convertible Notes and the fully repaid Term Loan Facility. We repurchased $100.0 million aggregate principal amount of the 2028 Convertible Notes and repaid the Term Loan Facility during the second quarter of 2025.
We are subject to U.S. federal, state and non-U.S. income taxes. As we expand into additional foreign markets, we may be subject to additional foreign tax.
Reportable Segments
We report our results of operations in two segments: the Array Legacy Operations segment and the acquired STI Operations segment. The segment amounts included in this Item 2. Management's Discussion and Analysis are presented on a basis consistent with our internal management reporting. Additional information on our reportable segments is contained in Note 16 - Segment Reporting in the accompanying notes to the condensed consolidated financial statements.
Results of Operations
The following table sets forth our consolidated statement of operations (in thousands, except percentages):
| Three Months Ended September 30, | Increase/(Decrease) | Nine Months Ended September 30, | Increase/(Decrease) | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 330,212 | $ | 393,491 | $ | (63,279) | (16) | % | $ | 895,689 | $ | 1,058,097 | $ | (162,408) | (15) | % | |||||||||||||||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||||||||||||||||||||||||||
| Cost of product and service revenue | 254,849 | 283,386 | (28,537) | (10) | % | 646,489 | 767,161 | (120,672) | (16) | % | |||||||||||||||||||||||||||||||||||||
| Amortization of developed technology and backlog | 6,144 | 4,434 | 1,710 | 39 | % | 17,373 | 11,713 | 5,660 | 48 | % | |||||||||||||||||||||||||||||||||||||
| Total cost of revenue | 260,993 | 287,820 | (26,827) | (9) | % | 663,862 | 778,874 | (115,012) | (15) | % | |||||||||||||||||||||||||||||||||||||
| Gross profit | 69,219 | 105,671 | (36,452) | (34) | % | 231,827 | 279,223 | (47,396) | (17) | % | |||||||||||||||||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | 58,783 | 52,248 | 6,535 | 13 | % | 163,512 | 141,147 | 22,365 | 16 | % | |||||||||||||||||||||||||||||||||||||
| Change in fair value of contingent consideration | (10,293) | 1,014 | (11,307) | (1115) | % | (10,438) | 1,014 | (11,452) | 100 | % | |||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 6,789 | 6,958 | (169) | (2) | % | 22,939 | 17,951 | 4,988 | 28 | % | |||||||||||||||||||||||||||||||||||||
| Total operating expenses | 55,279 | 60,220 | (4,941) | (8) | % | 176,013 | 160,112 | 15,901 | 10 | % | |||||||||||||||||||||||||||||||||||||
|
Income from operations
|
13,940 | 45,451 | (31,511) | (69) | % | 55,814 | 119,111 | (63,297) | (53) | % | |||||||||||||||||||||||||||||||||||||
| Interest income | 2,152 | 2,977 | (825) | (28) | % | 6,941 | 10,096 | (3,155) | (31) | % | |||||||||||||||||||||||||||||||||||||
| Interest expense | (5,810) | (5,046) | (764) | 15 | % | (17,159) | (21,849) | 4,690 | (21) | % | |||||||||||||||||||||||||||||||||||||
| Foreign currency gain (loss), net | 39 | (6) | 45 | (750) | % | 729 | 2,026 | (1,297) | (64) | % | |||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, | Increase/(Decrease) | Nine Months Ended September 30, | Increase/(Decrease) | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| Gain on extinguishment of debts, net | - | - | - | - | % | - | 14,207 | (14,207) | (100) | % | |||||||||||||||||||||||||||||||||||||
| Other (expense) income, net | (473) | 68 | (541) | (796) | % | (629) | 12 | (641) | (5342) | % | |||||||||||||||||||||||||||||||||||||
| Total other (expense) income, net | (4,092) | (2,007) | (2,085) | 104 | % | (10,118) | 4,492 | (14,610) | (325) | % | |||||||||||||||||||||||||||||||||||||
|
Income before income tax expense
|
9,848 | 43,444 | (33,596) | (77) | % | 45,696 | 123,603 | (77,907) | (63) | % | |||||||||||||||||||||||||||||||||||||
|
Income tax expense
|
1,651 | 9,941 | (8,290) | (83) | % | 11,156 | 30,092 | (18,936) | (63) | % | |||||||||||||||||||||||||||||||||||||
|
Net income
|
$ | 8,197 | $ | 33,503 | $ | (25,306) | (76) | % | $ | 34,540 | $ | 93,511 | $ | (58,971) | (63) | % | |||||||||||||||||||||||||||||||
The following table provides details on our operating results by reportable segment for the respective periods (in thousands, except percentages):
| Three Months Ended September 30, | Increase/(Decrease) | Nine Months Ended September 30, | Increase/(Decrease) | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||||||||||||||||||||
| Array Legacy Operations | $ | 296,238 | $ | 353,374 | $ | (57,136) | (16) | % | $ | 833,927 | $ | 858,474 | $ | (24,547) | (3) | % | |||||||||||||||||||||||||||||||
| STI Operations | 33,974 | 40,117 | (6,143) | (15) | % | 61,762 | 199,623 | (137,861) | (69) | % | |||||||||||||||||||||||||||||||||||||
| Total | $ | 330,212 | $ | 393,491 | $ | (63,279) | (16) | % | $ | 895,689 | $ | 1,058,097 | $ | (162,408) | (15) | % | |||||||||||||||||||||||||||||||
|
Gross profit (loss)
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Array Legacy Operations | $ | 70,144 | $ | 102,127 | $ | (31,983) | (31) | % | $ | 233,886 | $ | 251,813 | $ | (17,927) | (7) | % | |||||||||||||||||||||||||||||||
| STI Operations | (925) | 3,544 | (4,469) | (126) | % | (2,059) | 27,410 | (29,469) | (108) | % | |||||||||||||||||||||||||||||||||||||
| Total | $ | 69,219 | $ | 105,671 | $ | (36,452) | (34) | % | $ | 231,827 | $ | 279,223 | $ | (47,396) | (17) | % | |||||||||||||||||||||||||||||||
Comparison of the three and nine months ended September 30, 2026 and 2025
Revenue
Consolidated revenue decreased by $63.3 million, or 16%, for the three months ended September 30, 2026, compared to the three months ended September 30, 2025, driven by decreased revenue from STI Operations of 15% and decreased revenue from Array Legacy Operations of 16%.
Revenue from Array Legacy Operations decreased by $57.1 million, or 16%, for the three months ended September 30, 2026, compared to the three months ended September 30, 2025, primarily driven by a decrease of approximately 25% in volume, offset by an increase of approximately 8% in ASPs and added revenue from the addition of AWM for the last month of the quarter ended September 30, 2026.
Revenue from STI Operations decreased by $6.1 million, or 15%, for the three months ended September 30, 2026, compared to the three months ended September 30, 2025, reflecting an approximately 50% decrease in ASPs, partially offset by an increase of approximately 71% in volume.
Consolidated revenue decreased by $162.4 million, or 15%, for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, primarily driven by decreased revenue from STI Operations of 69% and decreased revenue from Array Legacy Operations of 3%.
Revenue from Array Legacy Operations decreased by $24.5 million, or 3%, for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, primarily driven by a decrease of approximately 14% in volume, offset by an increase of 12% in ASPs and added revenue from the addition of AWM for the last month of the quarter ended September 30, 2026.
Revenue from STI Operations decreased by $137.9 million, or 69%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025, primarily driven by a decrease of approximately 60% in volume, as well as an approximately 22% reduction in ASPs.
Cost of Revenue and Gross Profit
Consolidated cost of revenue decreased by $26.8 million, or 9%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025, primarily due to lower volume, offset by incremental cost of revenue from a full quarter of APA and the addition of AWM, as well as a reserve for a 45X Credit receivable. Warranty costs decreased compared to the prior-year period, primarily reflecting the stabilization of labor warranty claims, which had increased during the third and fourth quarters of 2025 and have remained relatively stable over the most recent three quarters. Although we continue to remediate the claims identified and accrued in prior periods, we do not currently expect the elevated level of warranty claims experienced in 2025 to recur; however, we continue to monitor claims activity and adjust our warranty accruals as appropriate, and future warranty costs may vary based on claims experience.
Consolidated gross profit decreased by $36.5 million, or 34%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Gross margin decreased to 21.0% for the three months ended September 30, 2026, as compared to 26.9% during the same period in the prior year, primarily driven by a $10.9 million provision for a 45X Credit receivable.
Array Legacy Operations gross profit decreased by $32.0 million, or 31%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025, while gross margin decreased to 23.7% from 28.9% for the three months ended September 30, 2026 and 2025, respectively. The decrease in gross margin was primarily driven by an increase of 17% in CPW, including a $10.9 million provision for a 45X Credit receivable, partially offset by an 8% increase in ASPs and the contribution from the AWM Acquisition.
STI Operations gross profit decreased by $4.5 million, or 126%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Gross margin for STI Operations decreased to negative 2.7% from 8.8% for the three months ended September 30, 2026 and 2025, respectively, primarily driven by a decrease of approximately 50% in ASPs, partially offset by a 44% decrease in CPW. The reduction in CPW was limited by higher logistics costs.
Consolidated cost of revenue decreased by $115.0 million, or 15%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025, in line with lower volume.
Consolidated gross profit decreased by $47.4 million, or 17%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. Gross margin decreased to 25.9% for the nine months ended September 30, 2026, as compared to 26.4% during the same period in the prior year, primarily driven by a $10.9 million provision for a 45X Credit receivable.
Array Legacy Operations gross profit decreased by $17.9 million, or 7%, for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. Gross margin for Array Legacy Operations decreased to 28.0% from 29.3% for the nine months ended September 30, 2026 and 2025, respectively, primarily driven by a $10.9 million provision for a long-dated 45X Credit receivable.
STI Operations gross profit decreased by $29.5 million, or 108%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. Gross margin for STI Operations decreased to negative 3.3% from 13.7% for the nine months ended September 30, 2026 and 2025, respectively, primarily driven by an approximately 60% decrease in tracker volume and a 22% decrease in ASPs, partially offset by a 7% decrease in CPW. The reduction in CPW was limited by higher logistics costs.
Operating Expenses
Consolidated general and administrative expenses increased by $6.5 million, or 13%, and $22.4 million, or 16%, for the three and nine months ended September 30, 2026, respectively, compared to the three and nine months ended September 30, 2025, respectively. The increase during the three months ended September 30, 2026 compared to the three months ended September 30, 2025 was primarily due to an increase of $2.6 million in legal and other service-related expenses and $2.2 million in bad debt expense, partially offset by reductions primarily related to travel, discretionary items, and marketing of $1.5 million. The increase during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 was due primarily to an increase of $17.0 million in personnel-related expenses and service-related expenses of $4.1 million, partially offset by reductions primarily related to travel, discretionary items, and marketing of $3.0 million and contract service expenses of $0.9 million.
Change in the fair value of contingent consideration resulted in a gain of $11.3 million and a gain of $11.5 million for the three and nine months ended September 30, 2026, respectively, compared to the three and nine months ended September 30, 2025, respectively. The incremental gain recognized during the three months ended September 30, 2026 compared to the three months ended September 30, 2025 was primarily driven by an $11.3 million decrease in the fair value of the APA Earnout Consideration, along with the fair value remeasurements of the TRA liability and the AWM Earnout Consideration, which only impacted the three months ended September 30, 2026. The incremental gain recognized during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 was primarily driven by a $12.0 million decrease in the fair value of the APA Earnout Consideration, along with the fair value remeasurements of the TRA liability and the AWM Earnout Consideration, which only impacted the nine months ended September 30, 2026.
Consolidated depreciation and amortization expense decreased by $0.2 million, or 2%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. There was a $2.1 million decrease in depreciation and amortization due to the full amortization of an intangible asset in the three months ended September 30, 2026, partially offset by the addition of depreciation and amortization from APA and AWM. Consolidated depreciation and amortization expense, inclusive of APA and AWM, increased by $5.0 million, or 28%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025, primarily due to $6.0 million of incremental depreciation and amortization contributed by APA for the nine months ended September 30, 2026, partially offset by the full amortization of an intangible asset in third quarter of 2026.
Interest Income
Consolidated interest income decreased by $0.8 million, or 28%, and $3.2 million, or 31%, for the three and nine months ended September 30, 2026, respectively, compared to the three and nine months ended September 30, 2025, respectively, primarily as a result of lower cash balance and associated lower yield on our cash management program.
Interest Expense
Consolidated interest expense increased by $0.8 million, or 15%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025 primarily due to the new Albuquerque facility lease coming on line in 2026. Consolidated interest expense decreased by $4.7 million, or 21%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 primarily due to refinancing with lower interest debt.
Income Tax Expense
Consolidated income tax expense decreased by $8.3 million, or 83%, and $18.9 million, or 63%, for the three and nine months ended September 30, 2026, respectively, compared to the three and nine months ended September 30, 2025, respectively. The Company recorded Income tax expense of $1.7 million and $11.2 million for the three and nine months ended September 30, 2026, respectively, and $9.9 million and $30.1 million for the three and nine months ended September 30, 2025, respectively. Our effective tax rate was 16.8% and 24.4% for the three and nine months ended September 30, 2026, respectively, and 22.9% and 24.3% for the three and nine months ended September 30, 2025, respectively.
The income tax expense for the three and nine months ended September 30, 2026 was substantially impacted by tax credits recorded during the periods. Discrete tax items for the three and nine months ended September 30, 2026 resulted in a net tax benefit of $0.1 million and net tax expense of $1.7 million, respectively, related to equity-based compensation, tax reserve releases, deferred tax true-ups, and a change in state deferred tax assets.
The income tax expense for the three and nine months ended September 30, 2025 was impacted by tax credits recorded during the periods. Additionally, tax expense of zero for the three months ended September 30, 2025, and $1.2 million related to equity-based compensation was recorded discretely for the nine months ended September 30, 2025.
Liquidity and Capital Resources
Cash Flows (in thousands)
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net cash provided by operating activities | $ | 96,476 | $ | 58,145 | |||||||
|
Net cash used in investing activities
|
(182,713) | (179,412) | |||||||||
| Net cash used in financing activities | (18,288) | (25,518) | |||||||||
| Effect of exchange rate changes on cash and cash equivalent balances | 1,821 | 5,747 | |||||||||
| Net change in cash and cash equivalents and restricted cash | $ | (102,704) | $ | (141,038) | |||||||
Historically, we have financed our operations with the proceeds from operating cash flows, equity offerings and short and long-term borrowings. Our ability to generate positive cash flow from operations is dependent on the strength of our gross margins as well as our ability to quickly turn our working capital. Based on our past performance and current expectations, we believe that our existing cash and cash equivalents, operating cash flows and available borrowing capacity under our Revolving Credit Facility will be sufficient to meet our liquidity needs, including the Merger-related cash requirements described under "-Proposed Merger with Shoals; Series A Mandatory Redemptions" below, in the next 12 months and beyond. We may also seek additional debt or equity financing to fund the Mandatory Redemptions (as defined below), to further reduce the Series A Shares outstanding or to repay, refinance or settle our Convertible Notes at or prior to maturity, and there can be no assurance that such financing will be available on acceptable terms, or at all.
As of September 30, 2026, our cash balance was $143.3 million, of which $12.9 million was held outside the United States, and our net working capital, including cash and cash equivalents, was $281.7 million. We had $322.6 million available to us under our $370.0 million Revolving Credit Facility. The decrease in our cash balance from June 30, 2026 primarily reflects the $160.9 million of cash consideration paid, net of cash acquired, to complete the AWM Acquisition on August 31, 2026.
During the third quarter of 2026, we classified our former manufacturing and office facility in Albuquerque, New Mexico as held for sale. The asset had a carrying value of $3.7 million as of September 30, 2026 and is expected to be sold within one year of September 30, 2026. Refer to Note 2 - Summary of Significant Accounting Policies for additional information.
On February 18, 2026, Array Tech, Inc., our operating subsidiary (the "Borrower"), entered into an amendment to the credit agreement (as amended, the "Credit Agreement") governing our Senior Secured Credit Facility (the "Fifth Amendment"), by and among the Borrower, our wholly-owned subsidiary ATI Investment Sub, Inc., as guarantor, Goldman Sachs Bank USA, as administrative agent and collateral agent, and the Lenders (as defined in the Fifth Amendment). The Fifth Amendment: (i) increases the revolving credit facility commitments under the Fourth Amendment from $166.0 million to $370.0 million; (ii) extends the maturity of the revolving credit facility from October 14, 2028 to February 18, 2031; (iii) removes the credit spread adjustment with respect to Term SOFR (as defined in the Credit Agreement); and (iv) expands the number of currencies under which the Borrower can request revolving credit loans and letters of credit.
In connection with the execution of the Merger Agreement, on November 4, 2026, the Borrower entered into an Amendment No. 6 to Credit Agreement (the "Sixth Amendment"), by and among the Borrower, Holdings, Goldman Sachs Bank USA, as administrative agent and collateral agent, and the Lenders (as defined in the Sixth Amendment), to the Credit Agreement. The Sixth Amendment (i) permits the payment of the Mandatory Redemptions and (ii) permits the Borrower to request a revolving credit borrowing, the proceeds of which may be used to repay the revolving loans outstanding under the existing revolving credit facility of Shoals. We were in compliance with all covenants under the Credit Agreement as of September 30, 2026.
Known Trends and Uncertainties Affecting Our Liquidity
In addition to the factors described under "-Factors Affecting Results of Operations" and "-Impact of OBBB" above, we have identified the following known trends and uncertainties that are reasonably likely to affect our liquidity:
•Project timing and working capital. Because the majority of our contract amounts are billed as work progresses under contractual terms that generally coincide with shipment, our operating cash flows can vary from quarter to quarter with the timing of project deliveries, billings and collections. Delays in large projects from one quarter to another for any reason can cause our operating cash flows for a particular
period to fall below expectations and increase our reliance on cash on hand and the Revolving Credit Facility.
•Section 45X Vendor Rebates. Collection of our Vendor Rebate receivables depends on the timing of our suppliers' realization of Section 45X Credits and is subject to supplier credit risk and to our suppliers' continued eligibility for such credits under the foreign entity of concern and material assistance rules. Delays in collection, or Section 45X benefits lower than we anticipate, would reduce our operating cash flows and to the extent we conclude that a Vendor Rebate receivable is not fully collectible, we would record a reserve against it, which would reduce our gross profit and results of operations.
•Tariffs and trade policy. Section 232 and Section 301 duties on imported steel, aluminum and components are payable at import, in advance of our collections from customers, and pending trade actions affecting modules may delay customer projects and, in turn, our deliveries and collections. Refunds of IEEPA tariffs previously paid would be a source of cash if and when received the timing and amount of any refunds is uncertain.
•Series A cash dividends. Since August 10, 2026, dividends on the Series A Shares are payable only in cash, at a Cash Regular Dividend Rate that increased to 6.25% per annum on that date and is scheduled to increase annually thereafter. The Liquidation Preference of the Series A Shares was $510.0 million as of September 30, 2026, and we paid $4.3 million of cash dividends on the Series A Shares during the three months ended September 30, 2026.
•Merger-related cash requirements and debt maturities. If the Merger is completed, the Initial Mandatory Redemption ($150.0 million, plus accrued and unpaid dividends, within 90 days after closing), the Annual Mandatory Redemptions (not less than $50.0 million, plus accrued and unpaid dividends, on each of the first, second and third anniversaries of the date that is 90 days after the closing of the Merger), the repayment at closing of Shoals' revolving credit facility, and transaction, severance and integration costs will substantially reduce our cash and available borrowing capacity and increase our interest expense. Our 2028 Convertible Notes ($325.0 million aggregate principal amount) mature on December 1, 2028, within the period in which the Annual Mandatory Redemptions are scheduled, and we may need to refinance them. See "-Proposed Merger with Shoals; Series A Mandatory Redemptions" below.
Convertible Notes
On December 3, 2021 and December 9, 2021, we completed a $425.0 million private offering ($375.0 million and $50.0 million, respectively), of the 2028 Convertible Notes, resulting in net proceeds of $413.3 million ($364.7 million and $48.6 million, respectively), after deducting the original issue discount of 2.75% but before deducting initial purchasers' discounts and offering expenses. The 2028 Convertible Notes were issued pursuant to an indenture, dated December 3, 2021, between the Company and U.S. Bank National Association, as trustee. The 2028 Convertible Notes are senior unsecured obligations of the Company and will mature on December 1, 2028, unless earlier converted, redeemed, or repurchased. Interest is payable semiannually in arrears at a rate of 1.00% per year on June 1 and December 1 of each year, beginning on June 1, 2022.
On June 27, 2025, we issued aggregate principal amount of $345.0 million of the 2031 Convertible Notes in a private placement. We used approximately $78.4 million of the proceeds from the 2031 Convertible Notes to repurchase $100.0 million aggregate principal amount of the 2028 Convertible Notes. The Company incurred $10.4 million of initial purchasers' discounts and offering expenses, resulting in net proceeds of $334.6 million. As of September 30, 2026, there was $321.8 million and $336.7 million outstanding on the 2028 Convertible Notes and 2031 Convertible Notes, respectively, net of unamortized issuance costs.
The 2028 Convertible Notes and 2031 Convertible Notes are senior unsecured obligations and will mature on December 1, 2028, and July 1, 2031, respectively, unless earlier converted, redeemed or repurchased. Upon conversion, the Company will pay cash up to the aggregate principal amount of the 2028 Convertible Notes or the 2031 Convertible Notes being converted and pay or deliver, at its election, cash, shares of Common Stock or a combination thereof for any conversion value in excess of such principal amount. Interest on the 2028 Convertible Notes is payable semiannually in arrears at a rate of 1.00% per year on June 1 and December 1 of each year, beginning on June 1, 2022. Interest on the 2031 Convertible Notes is payable semiannually in arrears at a rate of 2.875% per year on January 1 and July 1 of each year, beginning on January 1, 2026.
We continually monitor and review our liquidity position and funding needs, including in light of the proposed Merger. Our management believes that our ability to generate operating cash flows in the future and available borrowing capacity under our Senior Secured Credit Facility will be sufficient to meet our liquidity needs for at least the next 12 months and beyond, including the Annual Mandatory Redemptions and the repayment, refinancing our settlement of our Convertible Notes at or prior to maturity.
Operating Activities
For the nine months ended September 30, 2026, cash provided by operating activities was $96.5 million, compared to $58.1 million for the nine months ended September 30, 2025. The $38.3 million increase was primarily driven by a $75.7 million improvement in operating assets and liabilities, offset by a $37.4 million decrease in net income and non-cash adjustments.
The improvement in operating assets and liabilities was primarily driven by approximately $37.2 million of higher prepaid expenses, driven by 45X Credit vendor rebate collections and approximately $44.9 million of higher deferred revenue, partially offset by increased inventory to support anticipated fourth-quarter demand and other working capital movements. Higher 45X Credit vendor rebate collections reflected the timing of vendors' tax filings and related refunds, which may cause collections to fluctuate between periods. Higher customer deposits reflected increased contracting activity ahead of anticipated second-half revenue, including peak volume expected in the fourth quarter. The increase in inventory primarily reflected purchases to support the higher anticipated fourth-quarter demand. The decrease in net income and non-cash adjustments primarily reflected lower revenue during the first nine months of 2026, consistent with the greater weighting of anticipated 2026 revenue toward the second half of the year.
For the nine months ended September 30, 2025, cash provided by operating activities was $58.1 million, consisting of net income of $93.5 million and $53.6 million of non-cash adjustments, mainly consisting of depreciation and amortization expense and equity-based compensation, partially offset by a net cash outflow of $88.9 million from changes in our operating assets and liabilities.
Investing Activities
For the nine months ended September 30, 2026 and 2025, net cash used in investing activities was $182.7 million and $179.4 million, respectively, due to the AWM Acquisition and APA Acquisition, respectively, and due to the purchase of property, plant and equipment related to the build out of our new Albuquerque facility.
Financing Activities
For the nine months ended September 30, 2026, cash used in financing activities was $18.3 million. This was primarily driven by a net $9.4 million repayment of Other Debt associated with our international operations and $2.6 million in TRA payments issued.
For the nine months ended September 30, 2025, cash used in financing activities was $25.5 million. This was primarily driven by a $233.9 million repayment on our Term Loan Facility, $119.2 million repayment of Other Debt, $78.4 million repurchase of 2028 Convertible Notes, and $35.1 million premium paid in connection with the purchase of the 2031 Capped Calls, partially offset by an increase of $334.6 million and $108.7 million from net proceeds from the issuance of 2031 Convertible Notes and proceeds from the issuance of Other Debt, respectively, after deducting initial purchasers' discounts and offering expenses.
Contractual Obligations and Commitments
Information regarding our debt obligations, lease commitments and other commitments is provided in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2025 Annual Report. Other than as set forth below, there were no material changes in our contractual obligations and commitments as of September 30, 2026.
AWM Acquisition Earnout Consideration and AWM Deferred Consideration
As discussed in Note 3 - Acquisitions in the accompanying notes to the condensed consolidated financial statements, the AWM Purchase Agreement includes provisions providing for the AWM Earnout Consideration up to $40.0 million and the payment of the AWM Deferred Consideration of approximately $10.0 million. Each of the AWM Deferred Consideration and the AWM Earnout Consideration is described in more detail below.
AWM Earnout Consideration
The AWM Purchase Agreement includes a performance-based earnout provision pursuant to which the AWM Seller may receive aggregate earnout payments of up to $40.0 million based on the achievement of specified EBITDA targets and thresholds with maximum payment amounts of $8.0 million, $16.0 million and $16.0 million for the earnout periods ending December 31, 2026, December 31, 2027 and December 31, 2028, respectively. For a discussion of the accounting of the AWM Earnout Consideration, refer to "- Business Combinations" below.
AWM Deferred Consideration
The AWM Deferred Consideration is payable in two installments of $5.0 million, each payable on the first and second anniversaries of the AWM Closing Date. Pursuant to the AWM Purchase Agreement, the amount of any unpaid AWM Deferred Consideration installment may be reduced if certain equity holders of AWM Seller cease to be employees under specified circumstances. Each AWM Deferred Consideration installment may be paid, at our election, in cash, shares of our Common Stock, or a combination thereof. Because the AWM Deferred Consideration installments are tied to future service to the Company, they are considered compensatory and not included in purchase consideration.
APA Earnout Consideration and APA Deferred Consideration
As discussed in Note 3 - Acquisitions in the accompanying notes to the condensed consolidated financial statements, the APA Purchase Agreement includes provisions providing for the APA Earnout Consideration and the payment of the APA Deferred Consideration of approximately $40.0 million. Each of the APA Deferred Consideration and the APA Earnout Consideration is described in more detail below.
APA Earnout Consideration
The APA Purchase Agreement includes an earnout provision pursuant to which APA Seller may be paid shares of our common stock, or equivalent cash value at our discretion, based upon APA's achievement of certain financial performance targets during the three-year period ending September 30, 2028. The maximum number of shares payable as APA Earnout Consideration is 4,686,530, which was determined by dividing $40.0 million
by the volume weighted average price of our common stock for the 10 trading days immediately following the APA Closing Date. The number of shares payable will be subject to reduction if the cumulative value of the APA Earnout Consideration earned (measured on each date such shares are issued) exceeds $90.0 million. The APA Purchase Agreement provides that, to the extent the issuance of any APA Earnout Consideration or APA Deferred Consideration Shares would require stockholder approval under Nasdaq Listing Rule 5635(a), the Company will pay cash in lieu of issuing such shares, unless such stockholder approval has been obtained. The APA Seller continues to assume the managerial responsibilities of APA. For a discussion of the accounting of the APA Earnout Consideration, see "- Business Combinations" below.
APA Deferred Consideration Installments
The APA Deferred Consideration is payable in three installments (each, an "APA Deferred Consideration Installment"): (i) within five business days after the first anniversary of the APA Closing Date, an amount equal to 50% of the APA Deferred Consideration, which was $20.0 million; (ii) on December 31, 2026, an amount equal to (A) 50% of the APA Deferred Consideration multiplied by (B) the proportion of the two-year period from the APA Closing Date to the second anniversary of the APA Closing Date that has elapsed as of December 31, 2026; and (iii) within five business days after the second anniversary of the APA Closing Date, an amount equal to the remaining balance of the APA Deferred Consideration. As more fully described in the APA Purchase Agreement, the APA Deferred Consideration Installments are subject to reduction if certain equity holders of APA Seller cease to be employees of the Company under certain circumstances. Each remaining APA Deferred Consideration Installment will, at our election, be paid; (x) in cash; (y) through the issuance of shares of our Common Stock, valued at the closing price on the trading day immediately preceding the anniversary applicable to the APA Deferred Consideration installment (if any such shares are issued, the "APA Deferred Consideration Shares"); or (z) by any combination of the foregoing. Because the remaining APA Deferred Consideration Installments are tied to future service to Array, they are considered compensatory and not included in purchase consideration.
Series A Redeemable Perpetual Preferred Stock
On August 10, 2021, we entered into a Securities Purchase Agreement, pursuant to which we issued 400,000 shares of our Series A Redeemable Perpetual Preferred Stock (the "Series A Shares") and 9,000,000 shares of our common stock for an aggregate purchase price of approximately $395.4 million (the "Closing").
Prior to August 10, 2026, the fifth anniversary of the Closing, we had the option to pay dividends on the Series A Shares either in: (i) cash at the then-applicable Cash Regular Dividend Rate; (ii) through accrual to the Liquidation Preference at the Accrued Regular Dividend Rate of 6.25%; or (iii) a combination thereof. Effective August 11, 2026, dividends are payable only in cash. To the extent we do not declare such dividends and pay in cash following August 10, 2026, the dividends accrue to the Liquidation Preference at the then-applicable Cash Regular Dividend Rate plus 200 basis points.
The "Cash Regular Dividend Rate" of the Series A Shares means: (i) initially, 5.75% per annum on the Liquidation Preference; and (ii) increased by (A) 50 basis points on each of the fifth, sixth and seventh anniversaries of the Closing and (B) 100 basis points on each of the eighth, ninth and tenth anniversaries of the Closing. The "Accrued Regular Dividend Rate" on the Series A Shares means 6.25% per annum on the Liquidation Preference. The Cash Regular Dividend Rate was 6.25% during the period from August 11, 2026 through September 30, 2026.
"Liquidation Preference" means, with respect to the Series A Shares, the initial liquidation preference of $1,000 per share, plus accrued non-cash dividends of such share at the time of the determination.
For more information related to the Series A Shares, refer to Note 9 - Redeemable Perpetual Preferred Stock, to the accompanying condensed consolidated financial statements.
Proposed Merger with Shoals; Series A Mandatory Redemptions
The Merger is a stock-for-stock transaction, and we do not expect to incur new indebtedness to complete it other than borrowings under our Revolving Credit Facility as described below. The Merger is currently expected to close in the first quarter of 2027, subject to customary conditions, including approval of the Array stockholders, approval of the Shoals stockholders and regulatory approvals. If the Merger Agreement is terminated in specified circumstances, we would be required to pay Shoals a termination fee of $22.2 million. See also Part II, Item 1A. "Risk Factors" in this Quarterly Report.
Upon its effectiveness at the closing of the Merger, the A&R Certificate will require the Initial Mandatory Redemption of Series A Shares having an aggregate redemption price of $150.0 million at 93% of the Liquidation Preference (approximately $161.3 million of Liquidation Preference) within 90 days after the closing, and Annual Mandatory Redemptions of not less than $50.0 million at 96% of the Liquidation Preference on or prior to each of the first three anniversaries of that date, for an aggregate redemption price of $150.0 million (approximately $156.3 million of Liquidation Preference), in each case plus accrued and unpaid dividends. The A&R Certificate will also permit us to redeem additional Series A Shares at 96% of the Liquidation Preference within 48 months after the closing, reduce the minimum redemption increment from $200.0 million to $50.0 million of Liquidation Preference, and increase the Cash Regular Dividend Rate by an additional 300 basis points on the fifth anniversary of the closing. At the closing, we will pay the holders of the Series A Shares a cash fee equal to 1.00% of the Liquidation Preference plus accrued and unpaid dividends through the closing. If the Merger Agreement is terminated, the Preferred Stock Agreement terminates and the Mandatory Redemptions will not be required.
In the aggregate, the Mandatory Redemptions would require us to pay $300.0 million in cash, plus accrued and unpaid dividends, to redeem approximately $317.6 million of Liquidation Preference within approximately 39 months following the closing. We expect to fund the Initial Mandatory Redemption, the Preferred Stock Agreement fee, transaction, severance and integration costs and the repayment at closing of the revolving loans outstanding under Shoals' revolving credit facility with cash on hand and borrowings under our Revolving Credit Facility, as permitted by the Sixth Amendment, and to fund the Annual Mandatory Redemptions with cash flows from operations, borrowings under our Revolving Credit Facility and, potentially, additional debt or equity financing. These payments will substantially reduce our cash and available borrowing capacity and increase our interest expense following the closing, and our ability to complete the Mandatory Redemptions when required will depend on the combined company's cash flows, availability under and compliance with the covenants of the Credit Agreement, and the availability of other financing on acceptable terms. Pending the closing, the Merger Agreement restricts us, without Shoals' consent, from taking specified actions outside the ordinary course of business, including incurring indebtedness in excess of specified thresholds, which may limit our flexibility to respond to changes in our liquidity needs.
Debt Obligations
For a discussion of our debt obligations, refer to Note 8 - Debt to our condensed consolidated financial statements included in this Quarterly Report.
Surety Bonds
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 September 30, 2026, we posted surety bonds in the total amount of approximately $254.8 million. These off-balance sheet arrangements do not adversely impact our liquidity or capital resources.
Critical Accounting Policies and Significant Management Estimates
In preparing our condensed consolidated financial statements in conformity with U.S. GAAP, we make estimates and assumptions that affect the amounts of reported assets, liabilities, revenues, and expenses, as well as the disclosure of contingent liabilities. Some of our accounting policies require the application of significant judgment in the selection of the appropriate assumptions for making these estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. We base our judgments and estimates on our historical experience, our forecasts, and other available information as appropriate. We believe the judgments and estimates involved in accrued solar module collection and recycling, product warranties, and government grants have the greatest potential impact on our condensed consolidated financial statements. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected. For a description of the accounting policies that require the most significant judgment and estimates in the preparation of our condensed consolidated financial statements, refer to our 2025 Annual Report.
Business Combinations
Acquisition of AWM
We completed one business combination for purchase cash consideration of $166.9 million during the nine months ended September 30, 2026. In accordance with ASC 805, total consideration was first allocated to the fair value of assets acquired and liabilities assumed, with the excess being recorded as Goodwill. We use our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. Intangible assets have been recognized apart from goodwill whenever an acquired intangible asset arises from contractual or other legal rights, or whenever it is capable of being separated or divided from the acquired entity. Determining these fair values required us to make significant estimates and assumptions, particularly with respect to acquired intangible assets. The determination of fair value required considerable judgment and were sensitive to changes in underlying assumptions, estimates and market factors. The preliminary fair value of the identifiable intangible assets has been estimated using the Multi-Period Excess Earnings Method (Customer relationships and Backlog), Relief from Royalty Method (Developed technology and Trade name), and Replacement Cost Method (Developed technology). The significant fair value inputs used to estimate the fair value of the identifiable intangible assets include a discount rate and revenue and expense projections.
AWM Earnout Consideration
The AWM Purchase Agreement includes a performance-based earnout provision pursuant to which the AWM Seller may receive aggregate earnout payments of up to $40.0 million based on the achievement of specified EBITDA targets and thresholds with maximum payment amounts of $8.0 million, $16.0 million and $16.0 million for the earnout periods ending December 31, 2026, December 31, 2027 and December 31, 2028, respectively.
The AWM Earnout Consideration is accounted for as contingent consideration, and the fair value is remeasured at each reporting date. As of the AWM Closing Date, the AWM Earnout Consideration was estimated to have a fair value of approximately $17.3 million, using a Monte-Carlo simulation method. Changes in the fair value of the contingent consideration liability are recognized in Change in fair value of contingent consideration on the condensed consolidated statements of operations. Estimating the amount of payments that may be made under the AWM Earnout Consideration is by nature imprecise. The significant assumptions used to estimate the fair value of the AWM Earnout Consideration include projected EBITDA performance, probability-weighted payment outcomes, and discount rates. As of September 30, 2026, the AWM Earnout Consideration was estimated to have a fair value of $18.0 million.
Acquisition of APA Solar
We completed the APA Acquisition in 2025 for initial cash consideration of $166.1 million, plus up to approximately $19.3 million for the APA Earnout Consideration and approximately $40.0 million for the APA Deferred Consideration. In accordance with Accounting Standards Codification ("ASC") Topic 805 Business Combinations ("ASC 805"), total consideration was first allocated to the fair value of assets acquired and liabilities assumed, with the excess being recorded as Goodwill. We use our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. Intangible assets have been recognized apart from goodwill whenever an acquired intangible asset arises from contractual or other legal rights, or whenever it is capable of being separated or divided from the acquired entity. Determining these fair values required us to make significant estimates and assumptions, particularly with respect to acquired intangible assets. The determination of fair value required considerable judgment and was sensitive to changes in underlying assumptions, estimates and market factors. The preliminary fair value of the identifiable intangible assets has been estimated using the Multi-Period Excess Earnings Method (Customer relationships and Backlog), Relief from Royalty Method (Trade name), and Replacement Cost Method (Developed technology and Computer software and other). The significant fair value inputs used to estimate the fair value of the identifiable intangible assets include a discount rate and revenue and expense projections.
APA Earnout Consideration
As discussed, the APA Purchase Agreement includes a provision for the APA Earnout Consideration. The APA Earnout Consideration is accounted for as contingent consideration, and the fair value is estimated each reporting period. As of September 30, 2026, the APA Earnout Consideration was estimated to have a fair value of $7.1 million using a Monte-Carlo simulation method. Changes in fair value of the contingent liability are recognized in Changes in fair value of contingent consideration in the accompanying consolidated statements of operations. Estimating the amount of payments that may be made under the APA Earnout Consideration is by nature imprecise. The significant fair value inputs used to estimate the future expected APA Earnout Consideration payments to the APA Seller include a discount rate, earnings forecasts, and actual and estimated future volatility in our stock price.
Adoption of New and Recently Issued Accounting Pronouncements
Refer to Note 2 - Summary of Significant Accounting Policies to our condensed consolidated financial statements for a discussion of adoption of new and recently issued accounting pronouncements.
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