Array Technologies, Inc. (ARRY) stock prices were up by a marginal 0.28% as of the market closing on May 11th, 2021, bringing the price per share up to USD$24.95 at the end of the trading day.
Revenue Reports
In their recently disclosed financial reports for the first quarter of the fiscal year 2021, ARRY reported a significant reduction in revenue compared to Q1 2020. Revenue for Q1 2021 was down to USD$245.9 million from the USD$437.7 million reported for the first quarter of the fiscal year 2020, representing a substantial 44% decrease. The massive dip in performance is largely attributable to a reduction in the amount of ITC safe harbor-related shipments.
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Gross Profits and Margins Affected
As a result of lower volume during Q1 2021, gross profits were reported to have decreased from USD$118.4 million in Q1 2020 down to USD$43.9 million, representing a 63% decrease. Gross margin was also down from 27% in the prior-year period to 18%, attributable to lower revenue having been generated to absorb fixed costs and higher margins on the 2020 safe harbor shipments. Further exacerbating the situation, increased input costs because of the rapid increase in commodity prices and greater freight costs also resulted in the lowered gross margin. Freight costs were higher because of winter storm disruptions in Texas as well as port closures and congestions.
Rising Costs
Operating expenses were up to USD$30.8 million from the USD$17.1 million reported for the same period of the prior year, primarily driven by the USD$6.2 million increase in equity-based compensations relating to the transition to becoming a public company. Also facilitating the increase was a one-time cost of USD$2.4 million related to the company’s stock follow-on offerings, and increases expenses associated with being a public company. Expenses were also up due to an increase in headcount to support the company’s product development and global growth initiatives.
Troubling Balance Sheet
Net income took a massive hit, falling from the USD$73.7 during Q1 of the fiscal year 2020 to USD$2.9 million in Q1 2021. Diluted income per share fell to USD$0.02 per share down from USD$0.61 per share in the same period of the prior year. Adjusted EBITDA also reported a decrease, from USD$110.7 million in the prior-year period to USD$34.5 million, representing a 69% decrease.
Holding Out for the End of the Pandemic
The company has iterated its belief that the current volatility being experienced in steel prices and shipping costs is temporary and does not reflect a permanent change in the company’s cost structure, margins, or market opportunity. ARRY hopes for a normalizing after the regulations and restrictions enforced because of the global Covid-19 pandemic are entirely lifted. In the meantime, the company is allocating its resources to aggressively push for the mitigation of adverse effects while looking for opportunities.
Future Outlook for ARRY
Despite the troubling financial reports disclosed by the company for the start of the fiscal year 2021, they still have high hopes for the future. With the world hurtling towards universalized immunizations, the end of the arduous progression of the global pandemic seems to be in sight. Current and potential investors are hopeful for market conditions to swing back in ARRY’s favor so the company can leverage its resources to ensure significant and sustained increases in shareholder value.
