Array Technologies: Navigating Turbulence with Innovation and Strategic Acquisitions

In the volatile landscape of renewable energy, Array Technologies (ARRY) stands as a case study in resilience. The company's second-quarter 2025 results—$362.2 million in revenue, 27.8% adjusted gross margin, and $63.6 million in Adjusted EBITDA—underscore its ability to deliver growth even amid regulatory headwinds and margin pressures. Yet, the path forward is not without challenges. From legal appeals to shifting trade policies, Array must balance short-term uncertainties with long-term strategic bets. For investors, the question is whether these moves position the company to outperform in a sector poised for decades of expansion.

Regulatory and Legal Headwinds: A Test of Resilience

Array's recent legal battles, including an appealed securities lawsuit dismissed in 2023, highlight the risks of operating in a capital-intensive, policy-sensitive industry. While the company has classified these costs as non-recurring, the lingering uncertainty could weigh on investor sentiment. Similarly, the Inflation Reduction Act (IRA) and potential tariff adjustments pose indirect risks. For instance, the IRA's domestic content incentives require Array to align its supply chain with U.S. manufacturing, a challenge it's addressing through strategic reconfiguration of low-margin projects.

However, Array's proactive approach to capital structure—issuing $345 million in convertible notes, repaying debt, and repurchasing $100 million of 2028 notes at a 20% discount—demonstrates financial discipline. These actions, combined with a robust orderbook of $1.8 billion in executed contracts, suggest the company is well-positioned to weather regulatory turbulence.

Product Innovation: Hail XP™ as a Game-Changer

Array's launch of the Hail XP™ solar tracker is a masterstroke in addressing a critical industry pain point. Engineered to withstand extreme weather, the product features a 77-degree stow capability, AC-powered control, and reinforced components. By eliminating reliance on batteries, Hail XP™ reduces maintenance costs and enhances reliability—a compelling value proposition in regions prone to hailstorms.

The product's integration with Array's existing Hail Alert Response system creates a sticky ecosystem, increasing customer switching costs. While first shipments are slated for early 2026, the company has already begun building a sales pipeline, signaling confidence in market adoption. For investors, the key metric will be how quickly Hail XP™ contributes to revenue growth and margin expansion.

Strategic Acquisition of APA Solar: Expanding the Addressable Market

The $179 million acquisition of APA Solar is a strategic pillar in Array's growth narrative. APA's engineered foundation solutions and fixed-tilt mounting systems, manufactured in Ohio, align perfectly with IRA-driven domestic content demands. By integrating APA's technology, Array can now offer a “tracker + foundation” system tailored for challenging soil conditions—a $40 billion market opportunity.

Financially, the deal is accretive, with APA's 2024 EBITDA of $25 million (excluding 45X credits) projected to boost Array's Adjusted EPS by high-single digits in year one. The performance-based earnout structure—tying $40 million in stock to EBITDA targets—aligns incentives and signals management's confidence in APA's long-term contribution.

Margin Pressures and the Path to Sustained Growth

Despite strong Q2 results, Array's gross margin of 26.8% (vs. 27.8% adjusted) reflects ongoing cost pressures. The company's decision to de-scope low-margin projects and reconfigure legacy contracts is a short-term pain point but a necessary step to improve orderbook quality. Investors should monitor how these adjustments impact 2025 guidance, which now projects revenue of $1.18–$1.215 billion and Adjusted EBITDA of $185–$200 million.

The acquisition of APA Solar and the Hail XP™ launch are designed to offset these pressures by expanding high-margin offerings. With APA's Ohio-based manufacturing and Array's global commercial platform, the combined entity can scale efficiently while leveraging IRA incentives.

Investment Thesis: Balancing Risks and Rewards

Array's long-term potential hinges on its ability to execute on three fronts:
1. Product Adoption: Hail XP™ must gain traction in hail-prone markets, particularly in the U.S. Midwest and Texas.
2. Regulatory Navigation: The company must continue aligning with IRA requirements while mitigating tariff risks.
3. Integration Success: The APA Solar acquisition's $40 million earnout and EBITDA targets will test Array's operational capabilities.

For investors, the stock's valuation—trading at a forward P/E of 12x and a P/EBITDA of 8x—appears attractive given its growth trajectory. However, near-term volatility is likely due to the pending legal appeal and regulatory uncertainties. A diversified portfolio approach, with a focus on Array's structural advantages in solar tracking and domestic content, could mitigate these risks.

Conclusion: A High-Conviction Play in a Transformative Sector

Array Technologies is navigating a complex environment with a blend of innovation, strategic acquisitions, and financial prudence. While regulatory and legal challenges persist, the company's product roadmap and APA Solar integration offer a clear path to margin expansion and market share growth. For investors with a 3–5 year horizon, Array represents a compelling opportunity to capitalize on the solar industry's long-term tailwinds—provided they're prepared to weather near-term volatility.

In the end, the question isn't whether Array can survive the turbulence, but whether it can leverage it to redefine its leadership in a sector where the sun never sets.