Array Technologies, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing; the text does not provide a complete standalone Q4 income statement. Array manufactures utility-scale solar tracking systems and related software and services.
Financial performance
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $1,576.6 million | $1,637.5 million | Down 4% |
| Gross profit / margin | $415.6 million / 26% | $212.7 million / 13% | Gross profit up 95% |
| Operating income (loss) | $214.1 million | $(18.1) million | Improved $232.3 million |
| Net income | $137.2 million | $4.4 million | Up $132.8 million |
| Net income (loss) attributable to common shareholders | $85.5 million | $(43.6) million | Basic EPS: $0.57 vs. $(0.29) |
| Cash from operating activities | $232.0 million | $141.5 million | Up $90.5 million |
| Cash used in investing activities | $(16.8) million | $(384.4) million | 2022 included the STI acquisition |
| Cash used in financing activities | $(101.8) million | $8.4 million | 2023 included debt repayments |
Improved gross margin reflected better pass-through of commodity costs and savings in logistics and raw materials, plus a more favorable revenue mix. Operating expenses fell 13%, mainly because STI acquisition-related backlog amortization had largely run off. The 2022 results included $42.8 million of legal settlement income; there was no comparable settlement in 2023.
- Revenue by segment: Array Legacy Operations revenue declined 7% to $1,172.8 million, principally due to fewer megawatts shipped amid customer project delays. STI Operations revenue increased 9% to $403.7 million, led by Brazil shipments; lower average selling prices partly offset the volume increase.
- Cash and liquidity: Year-end cash was $249.1 million, including $66.8 million held outside the U.S.; net working capital was $496.6 million. The company reported $175.2 million available under its $200 million revolving facility and no revolver borrowings.
- Debt: Principal debt totaled $703.1 million: $238.2 million under the term loan, $425.0 million of 1.00% convertible notes due 2028, and $39.9 million of STI-related other debt. Balance-sheet debt, net of discounts and issuance costs and including current maturities, was approximately $682.4 million. The term-loan rate was 10.15% at year-end, versus 7.94% a year earlier. The company was in compliance with required covenants.
- Other metrics: Year-end remaining performance obligations were $376.9 million, which Array expects to recognize as revenue over the next 12 months. Surety bonds outstanding were $172.9 million. Series A preferred stock had a $493.1 million liquidation preference; 2023 preferred dividends and accretion were $51.7 million.
Material changes and unusual items
- Revenue declined despite stronger margins and profitability; the decline was concentrated in Array Legacy Operations and attributed mainly to delayed customer projects.
- Operating cash flow improved, while cash balances rose to $249.1 million. Investing outflows were substantially lower than in 2022, which included the STI acquisition.
- Array accumulated $49.9 million of supplier rebates associated with IRA Section 45X manufacturing credits from 2023 activity. It recognized $9.3 million as a reduction of cost of revenue; the company said $40.6 million was expected to be recognized in 2024. Additional potential credits remained subject to clarification and supplier agreements.
- After consulting SEC staff, Array reverted to its original equity accounting for capped calls and the preferred-stock put option, reversing fair-value entries recorded in 2023 interim periods. Management said the interim misstatements were not material and planned prospective correction in comparative interim filings; the filing states that previously issued annual financial statements were not restated.
- The 2022 $42.8 million settlement related to trade-secret litigation with Nextracker did not recur in 2023.
Outlook, risks and contingencies
The filing provides no formal 2024 revenue, earnings, margin, or shipment guidance. Management says it believes cash generation and available borrowing capacity will be sufficient to meet future liquidity needs and that it has sufficient liquidity and financing options for current and future commitments. It also describes selective price increases, productivity initiatives, supplier-base expansion, and overhead controls to address inflation.
- Management cited higher interest rates, project-financing negotiations, permitting delays, and shortages of grid-interconnection equipment—including switches, transformers, and high-voltage breakers—as causes of delayed installations and revenue timing.
- Solar-panel trade investigations and tariffs have delayed some projects in Array’s order book. Potential duties on imported aluminum extrusions could also affect tracker components and results. Red Sea shipping disruptions and geopolitical events pose further supply-chain and logistics risks.
- Steel and aluminum price volatility, competition and pricing pressure, customer concentration, project cancellations or delays, and the conversion of backlog into revenue are significant risks. One customer accounted for 13.4% of 2023 revenue; five customers represented 29.6% of year-end accounts receivable.
- The company reported two unremediated material weaknesses in internal control over financial reporting: insufficient qualified finance personnel and deficiencies in STI’s IT and accounting controls. Management planned additional staffing and a new STI accounting system in the first half of 2024. Management concluded disclosure controls and internal control over financial reporting were not effective as of year-end; the auditor issued an adverse opinion on internal control, while expressing an unqualified opinion on the financial statements.
- The securities class action dismissed with prejudice in July 2023 was on appeal at the filing date; related derivative actions remained stayed. Management assessed the likelihood of a material loss as remote and recorded no material loss contingency for these matters.
- Array reported no cybersecurity threats that had materially affected, or were reasonably likely to materially affect, its business, while warning that future incidents could do so.
Important facts for investors to verify
- Whether customer project delays ease and shipments convert into reported revenue, particularly given the $376.9 million of remaining performance obligations.
- Whether the 26% gross margin is sustainable and how much future margin and cash flow depend on Section 45X supplier rebates, including the timing and collectability of the $40.6 million expected for 2024.
- Progress in remediating both material weaknesses, especially implementation and testing of STI’s new accounting system and adequate staffing.
- Debt-service capacity under the variable-rate term loan, convertible-note terms, preferred-stock obligations, and available revolver capacity.
- Developments in solar-panel and aluminum trade cases, interconnection-equipment availability, Red Sea shipping, and customer financing conditions.
- The prospective interim-period corrections for capped-call and put-option accounting, and the status and outcome of the securities-litigation appeal.